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Alberta – The cost of innovation just got cheaper

R&D Tax Update, April 2008 (08-4)

After being in the company of only Prince Edward Island, and trailing the rest of Canada in its support of innovation through a scientific research and experimental development (SR&ED) tax credit, Alberta announced that it would introduce a SR&ED tax credit effective January 1, 2009.

The credit will apply to all expenditures eligible for the federal SR&ED credit, up to a maximum of $4,000,000 of expenditures annually. Calculated at 10% of eligible expenditures, this provides a company a maximum credit of $400,000.

While any credit would have been welcome news to businesses doing innovative work in Alberta, this credit provides an additional benefit: it is fully refundable for all companies. The refundable status is expected to provide additional support to start-up and early-stage companies that may not be paying income taxes or that are in a loss position.

By paralleling the expenditure eligibility of the federal government, Alberta has provided for broad eligibility rather than selective, industry-specific credits as have been introduced in other provinces in Canada and jurisdictions around the world.

With an estimated total benefit to companies starting at $60 million annually and growing over time, this new SR&ED credit provides an additional incentive for companies to invest in research and development activities in Alberta. This places Alberta in a more competitive position to attract SR&ED activities compared to its provincial neighbours, including British Columbia, which has a 10% tax credit (refundable in certain scenarios), and Saskatchewan, which has a 15% non-refundable credit.

More details will be released in the coming weeks, including specific legislation that will outline the mechanics of applying the credit. For more information on the changes announced in the Alberta budget, or regarding the SR&ED program in general, please contact Bruce Swan at (403) 267-1733, Jelena Pludowski at (403) 503-1374, or Mark Bernard at (780) 421-3732.

About R&D Tax
Opportunities, issues and developments affecting the federal and provincial scientific research and experimental development tax incentive programs.

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