Saskatchewan Research and Development Tax Credit

Saskatchewan is an an exceptionally business-friendly province. Targeted, strategic investment in Saskatchewan’s most promising economic sectors allow businesses and entrepreneurs to test new ideas while mitigating financial risk.

The Saskatchewan government offers a wide range of specialized tax incentives and funding programs targeted to specific industries. It also offers a more generalized Research and Development Tax Credit.

This is the focus of today’s article. Many businesses fail to leverage tax credits to their full advantage. Through this broadly applicable tax utility, businesses could save up to $1 million on eligible expenses, while growing their business capacity and ensuring their ability to compete in an ever-changing global market. Goodman Steel is your trusted partner in industrial R&D through our deep experience in developing innovative products and our combined engineering and fabrication capabilities.

We’ll explain the tax credit in simple terms, define activities that may be counted as R&D, and demonstrate how we can support your R&D engineering and fabrication needs.

Saskatchewan Research and Development Tax Credit overview

The program offers a 10% refundable tax credit for Saskatchewan-based, Canadian-controlled private corporations on their first $1 million investment in R&D projects. Further expenditures receive a 10% non-refundable tax credit. The maximum total credit (combined refundable and non-refundable) that may be claimed is $1 million.

Corporations that are not Canadian-owned private corporations may claim up to $1 million in non-refundable credits, but are not eligible for the 10% refundable credit.

This tax credit is in addition to Federal government R&D programs that may discount your federal corporate tax paid by as much as 15%.

Example tax credit usage

An agri-business sees an opportunity to process its crop into a value-added product that will increase its demand and profit margin. It requires unique or highly specialized equipment to do so. In total, they invest $8 million in researching and developing the new equipment and associated processes. Through the Saskatchewan Research and Development Tax Credit, they receive $100,000 in refundable tax credit and $700,000 in non-refundable credit, for a total tax offset of $800,000. This effectively lowers their $8 million investment by 10%, a significant savings. Additional savings through federal programs add even more value.

What counts as research and development?

One reason many businesses do not take full advantage of tax incentives is that they do not believe they are eligible. This is particularly true of small businesses whose accounting and legal teams may not actively seek out and seize such opportunities.

Fortunately, research and development is a broad enough concept that many capital expenditures can be included under its umbrella. Here are some of the primary requirements:

• The process, tool, material, or component to be developed has a specific objective, hypothesis, and methodology for its development. Basically, you have a clear plan and rationale for its development.
• Whatever you’re researching or developing must solve a problem that an existing technology does not. That may include improving the efficiency or reducing the environmental impact of a process through new and novel means, or it may mean creating a new process or technology entirely.
• The process or technology must offer economic value. That is, it must be a viable and valuable advancement in technology.

Typically, only research, prototyping, and product development expenses may be eligible for the tax credit. That is, once a solution has been finalized, the cost of installation and use of the new technology is not eligible for the credit. There are cases where this is not true. For example, if the technology is installed in a pilot plant meant to demonstrate the product’s feasibility, installation and operating costs may still be eligible.

The Government of Canada offers a tool for evaluating whether your capital expenditure counts as SR&ED. This tool will also work for evaluating eligibility for the provincial program, as the requirements are the same. Find it here!

How we can support R&D projects

Often, businesses have big ideas but lack the resources and expertise to explore them. That’s where we can help. Our facility is unique due to its combination of metal fabrication, surface treatment, and engineering capabilities. We can assist in every stage of industrial R&D, from engineering support through to prototyping and production.

In fact, we’ve done it before! We work with potash mining clients to develop specialized drilling equipment that reduces labour overhead and facility downtime, thus increasing profitability. If you think your business can benefit from new technology, give us a call. As a Saskatchewan based R&D partner, we can help you take advantage of generous provincial and federal funding.