SR&ED (Scientific Research and Experimental Development) is Canada’s federal tax incentive for research and development, the largest single program of its kind in the country. It rewards eligible work, experimental development, applied and basic research, with investment tax credits on qualifying expenditures (salaries, materials, some contractor costs). A Canadian-controlled private corporation earns an enhanced rate that is refundable up to an annual expenditure limit, meaning the credit is paid in cash even when the company owes no tax; other claimants earn a lower, generally non-refundable rate. Most provinces add their own SR&ED-linked credits on top.
The exact rates and limits are set in legislation and have been substantially reformed recently (the enhanced-rate expenditure limit and the phase-out thresholds were raised, and eligibility was extended to some public corporations), so a live claim must be sized against the current year’s rules, not a remembered number. What does not change is the operator reality. The credit is claimed with the corporate tax return after the fiscal year ends, then reviewed, so the cash lands months after the spend, a lag that must be modelled honestly in the runway. The claim quality depends on contemporaneous documentation: what was attempted, what technological uncertainty existed, what experiments were run. Thin documentation invites review and reduces the claim.
2 further points matter for deep tech. First, stacking: other government assistance (an IRAP contribution, certain grants) reduces the SR&ED-eligible base, so the credits interact and cannot simply be added. Second, financing: because the refund is a predictable receivable, specialist lenders advance against it, letting a company convert next year’s refund into this quarter’s runway, at a cost. SR&ED is foundational to the Canadian deep tech capital stack, but it is a reimbursement engine, not a grant that arrives when the bills do.