How Much SR&ED Refund Will You Get?
The headline is 35%, but your refund depends on what counts as qualified, how much assistance you received, whether provincial credits apply and your tax status. A provincial credit also reduces the federal base, which many quick estimates miss.
How much SR&ED refund will a startup get?
A qualifying CCPC earns 35% on qualified expenditures up to $6 million, fully refundable on current expenditures and 40% refundable on capital; other spending earns 15% (CRA on SR&ED investment tax credits). Before applying the rate, qualified expenditures are reduced by government assistance, and provincial R&D credits count as assistance.
What does a worked example look like?
| Step | Amount |
|---|---|
| Eligible Ontario SR&ED expenditures | $500,000 |
| Ontario Innovation Tax Credit (8%) | $40,000 |
| Federal base after provincial credit ($500,000 − $40,000) | $460,000 |
| Federal enhanced credit (35% × $460,000) | $161,000 |
| Combined credit | $201,000 |
| Quick estimate that ignores the interaction (35% + 8% of $500,000) | $215,000 |
The difference comes from CRA treating provincial credits as government assistance, which reduces the federal base (CRA’s assistance policy). Ontario rules are on the Ontario Innovation Tax Credit.
What changes the amount?
- How much of the work and spending truly qualifies.
- IRAP and other assistance for the same work.
- Provincial credits and where the work was done.
- Associated corporations sharing the expenditure limit.
- Taxable capital above $15 million, which shrinks the limit.
- CCPC status: without it, the enhanced refundable credit may not apply.
- Adjustments after a CRA review.
How should you budget for it?
Treat the expected credit as a conservative cash-flow item. Model a base case, a reduced claim and a delayed payment, and make sure the operating plan survives all three. Timing is on review and timeline. If you raise money, model the credit before the deal; see CCPC status and SR&ED.
Plan on the low end, celebrate the high end.
A delayed or reduced claim shouldn’t put payroll at risk.
How big a deal is it for a startup?
For a Canadian software startup with a few engineers on eligible work, SR&ED plus a provincial credit can fund months of runway without dilution. It works best alongside other non-dilutive funding planned on purpose; see SR&ED vs IRAP and grants, and for runway planning in a raise, financial projections.
Frequently asked questions
How much is the SR&ED refund?
Up to 35% of qualified expenditures for qualifying CCPCs, within the $6M limit, fully refundable on current costs.
How do I calculate my SR&ED refund?
Total qualified expenditures, subtract assistance including provincial credits, then apply the federal rate.
Do provincial credits reduce federal SR&ED?
Yes. CRA treats provincial R&D credits as government assistance that reduces federal qualified expenditures.
What is the maximum SR&ED refund?
At the full $6M limit, the enhanced federal credit is up to $2.1 million a year.
Is the SR&ED refund taxable?
The credit reduces the related expenditure pool or is otherwise taken into income. Ask your accountant how it applies to you.
Should I budget for my SR&ED refund?
Yes, conservatively, with plans that survive a reduced or delayed claim.
Sources & further reading
Standards and platform rules change. These sources let you verify the current requirements directly. All screens shown are mock-ups of fictional products.