Canadian SR&ED
A practical overview of eligibility, evidence, expenditures, forms, deadlines and CRA review.
For April 2025 through March 2026, the CRA reports 24,160 claims filed and $4.6 billion in investment tax credits allowed. Businesses with gross income below $4 million accounted for 65% of processed claims.
The credit can be substantial, but the claim is built from ordinary project records: what the team did, what it learned and how the costs were calculated. This guide follows that record from eligibility through filing and a possible CRA review.
Start with the work, not the company label
SR&ED is a federal tax incentive administered by the Canada Revenue Agency (CRA) for eligible scientific research and experimental development conducted in Canada. It is not limited to a particular industry, company size or product category.
The basic investment tax credit rate is 15%. Most Canadian-controlled private corporations can earn the enhanced 35% rate on qualified expenditures up to their calculated expenditure limit; eligible Canadian public corporations can also earn that rate for tax years beginning after December 15, 2024. For those tax years, the maximum expenditure limit is $6 million. The actual limit and refundability depend on the claimant, group structure, tax year and expenditure type.
Review the expenditure categories
Depending on the facts and calculation method, allowable current expenditures may include salary or wages, consumed or transformed materials, eligible contracts, equipment lease costs incurred after December 15, 2024, overhead and other expenditures under the traditional method, and third-party payments. Certain depreciable property acquired after December 15, 2024 may also qualify as a capital expenditure.
When SR&ED is performed on a claimant's behalf under an eligible contract, 80% of the allowable contract expenditure may be treated as a qualified expenditure for investment tax credit purposes.
How the credit is calculated
The basic investment tax credit rate is 15%. Most Canadian-controlled private corporations can earn the enhanced 35% rate on qualified expenditures up to their calculated expenditure limit; eligible Canadian public corporations can also earn that rate for tax years beginning after December 15, 2024. For those tax years, the maximum expenditure limit is $6 million. The actual limit and refundability depend on the claimant, group structure, tax year and expenditure type.
Provincial and territorial R&D credits may also be available. Government assistance and provincial or territorial credits can reduce the expenditures used in the federal calculation, so the result depends on more than one headline rate.
Move the work into the prescribed forms
Form T661 describes the claimed work and calculates SR&ED expenditures. Corporations calculate the federal investment tax credit on T2 Schedule 31, while individuals use Form T2038-IND. The claim is submitted with the applicable income tax return, together with any relevant provincial or territorial forms.
Test the work against both CRA requirements
The CRA currently states two requirements: the work must be conducted in Canada for scientific or technological advancement, and it must be a systematic investigation or search carried out in science or technology by experiment or analysis. Scientific or technological uncertainty explains why new knowledge was needed. We break the requirements down with examples in the eligibility guide.
Make the path from work to amount easy to follow
A reviewer should be able to move from the technical narrative to the underlying experiment, people and costs without guessing. Record the work as it happens, keep the allocation method, and write in cautious, specific language. See the documentation guide and CRA review guide.
SREDlog keeps approved source records, form drafts and reviewed amounts connected in an indexed package.
Frequently asked questions
Corporations, individuals, trusts and partnerships that conduct SR&ED work in Canada may be able to claim. Partnerships allocate an earned investment tax credit to eligible partners.
No. The industry does not decide eligibility. Work in manufacturing, food, agriculture, energy, construction and other fields may qualify when its facts meet both CRA requirements.
It depends on the claimant, the qualified expenditures, the expenditure limit, assistance and any provincial or territorial credit. The basic investment tax credit rate is 15%. Most Canadian-controlled private corporations can earn the enhanced 35% rate on qualified expenditures up to their calculated expenditure limit; eligible Canadian public corporations can also earn that rate for tax years beginning after December 15, 2024. For those tax years, the maximum expenditure limit is $6 million. The actual limit and refundability depend on the claimant, group structure, tax year and expenditure type.
A corporation submits the prescribed forms with its T2 return by the SR&ED reporting deadline, generally 18 months after tax year-end. Other claimant types use their applicable return and deadline. See the deadlines guide.
No. Some companies prepare their own claims, while others use a consultant or tax professional for complex or high-value work. In either case, the claim should be grounded in the source records.
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This guide is general information, not tax advice. SR&ED rules, rates and limits change, so confirm the current figures with the CRA or your advisor before you file.