The Canada Revenue Agency reimburses 50–64% of eligible R&D spend through the Scientific Research and Experimental Development (SR&ED) program — Canada’s largest federal tax incentive for R&D. Your work qualifies for the SR&ED tax credit if it meets three SR&ED eligibility criteria: technological uncertainty, systematic investigation, and technological advancement. Here’s what SR&ED eligibility actually means in practice, and which expenditures you can claim.
A technical problem whose solution wasn’t obvious to a competent professional in the field — even one with full access to the public body of knowledge.
A performance bottleneck no existing library solves, or a manufacturing tolerance no off-the-shelf process hits.
A structured process — hypothesis, experiment, measurement, iteration — rather than trial-and-error or routine engineering.
Prototype cycles, A/B benchmarking, controlled testing, documented trade-offs between approaches.
Work that attempted to advance the underlying technology, even if it didn’t succeed. Failed experiments are still SR&ED-eligible.
New algorithms, novel architectures, improved materials, more efficient processes.
If your work meets the three SR&ED eligibility criteria above, these are the eligible expenditures you can claim on your SR&ED return:
Yes — 80% of fees paid to Canadian-resident subcontractors for eligible work is claimable. Non-Canadian contractors don’t qualify.
No. SR&ED salary expenditures must be paid to Canadian-resident employees for work performed in Canada.
Yes. SR&ED eligibility is based on the attempt to advance technology, not the outcome. Failed experiments are among the strongest signals of genuine R&D.
Year-round technical documentation — project plans, experiment logs, meeting notes, code commits tied to experimental work, and payroll records. The CRA wants evidence of systematic investigation, not just a tax form.
