Also called RS&DE, R&D tax credit
What is the SR&ED tax credit?
Canada’s research and development tax credit, which pays back a share of what you spent solving a technical problem.
What else it is called
- Other names
- RS&DE, R&D tax credit
- In French
- crédit d’impôt pour la RS&DE
Related entries
Understanding scientific Research and Experimental Development tax credit
The largest single support for innovation in Canada, and the one most under-claimed by manufacturers who assume it is for research laboratories. The test is whether you faced a technological uncertainty that could not be resolved by standard practice, and worked through it systematically. Developing a process to hold a tolerance nobody had held before, or making a material behave on your equipment when the supplier said it would not, routinely qualifies.
A Canadian-controlled private corporation earns an enhanced 35 per cent credit that is refundable, so it pays out even when the company has no tax to offset. Other corporations earn a lower, non-refundable rate. Legislation enacted in March 2026 doubled the annual expenditure limit for the enhanced rate from $3 million to $6 million, restored eligibility for capital expenditures, and extended the enhanced credit to some Canadian public corporations. Provincial credits stack on top, and British Columbia has said it intends to follow the federal change.
The thing that decides a claim is contemporaneous documentation. Notes, trial records, failed attempts and time spent, recorded as the work happens, are what the Canada Revenue Agency asks for. Reconstructing them a year later is how good claims get denied.
In practice
If an engineer and two operators spent six weeks getting a new alloy to run without cracking, and kept records of what they tried, that is very likely a claim. Most plants do this work and throw the notes away.
Frequently asked
Does shop floor work qualify?
Often, yes. The test is technological uncertainty resolved by systematic investigation, not where the work happened. Process development, tooling trials and materials work on the floor are among the most commonly accepted activities, provided the records exist.
What records does the Canada Revenue Agency want?
Evidence created while the work was done: trial logs, test results, design iterations, emails showing the problem and the attempts, and time records tying people to the project. Documents written afterwards to support a claim carry far less weight.
What changed in 2026?
Legislation that received Royal Assent on 26 March 2026 doubled the enhanced-rate expenditure limit to $6 million, made capital expenditures eligible again, and extended the enhanced credit to eligible Canadian public corporations. Confirm the effective dates for your own fiscal year, since they are tied to tax years beginning after mid-December 2024.