What Is SR&ED? A Founder’s Guide for 2026
SR&ED is Canada’s main tax incentive for research and development. For a qualifying Canadian-controlled startup, it can return 35 cents in cash for each dollar of eligible R&D spending. It rewards real technical work and good records, not routine development dressed up in R&D language.
What is SR&ED?
SR&ED (Scientific Research and Experimental Development) is a federal tax incentive that rewards Canadian businesses for R&D work that tries to resolve scientific or technological uncertainty through systematic investigation. Eligible claimants can deduct SR&ED spending from income and earn an investment tax credit, claimed with the corporate tax return (CRA’s SR&ED program page). For qualifying Canadian-controlled private corporations (CCPCs), the enhanced credit is refundable, so it can arrive as cash even before the company is profitable.
How much is SR&ED worth in 2026?
For qualifying CCPCs and, since late 2024, eligible Canadian public corporations, the enhanced credit is 35% of qualified expenditures up to an annual limit, now $6 million. Spending above the limit, and claims by other corporations, earn the basic 15% rate (CRA on SR&ED investment tax credits).
| Qualifying CCPC | Other corporations | |
|---|---|---|
| Credit rate | 35% up to the expenditure limit, then 15% | 15% |
| Refundable? | Yes: 100% on current expenditures at 35%, 40% on capital | Generally no; offsets tax payable |
| Expenditure limit | $6M for tax years beginning after Dec 15, 2024 | Not applicable |
| Unused credits | Carry back 3 years, forward 20 | Carry back 3 years, forward 20 |
Who can claim SR&ED?
Canadian corporations, individuals, trusts and partnerships that do eligible work in Canada can claim. Startups usually claim as CCPCs, which is why protecting that status matters; see CCPC status and SR&ED. The work itself must qualify: see does software qualify for SR&ED.
What changed recently?
Bill C-15 received Royal Assent on March 26, 2026, doubling the enhanced expenditure limit to $6 million, widening the taxable-capital phase-out to $15 million to $75 million, opening the enhanced credit to eligible Canadian public corporations and restoring capital expenditures. Details are on SR&ED changes in 2026.
Build the evidence while you build the product.
A claim written months later from memory is weaker and harder to defend than records kept as the work happened.
Where should a founder start?
- Check whether your technical work involves real uncertainty (what qualifies).
- Set up records as the work happens (SR&ED documentation).
- Track eligible costs, starting with salaries (eligible expenses).
- Model federal and provincial credits together (how much you get back).
- File the claim within the deadline, with your corporate return.
Frequently asked questions
What is SR&ED?
Canada’s federal tax incentive for R&D that tries to resolve scientific or technological uncertainty through systematic investigation.
How much is the SR&ED tax credit?
35% refundable for qualifying CCPCs up to a $6M annual expenditure limit, and 15% for other spending and claimants.
Is SR&ED refundable?
For qualifying CCPCs, the enhanced credit on current expenditures is fully refundable; capital expenditures are 40% refundable.
Who is eligible for SR&ED?
Businesses doing eligible R&D in Canada. Startups usually claim as Canadian-controlled private corporations.
Do I need to be profitable to claim SR&ED?
No. The enhanced credit is refundable for qualifying CCPCs, so it can be paid out without tax owing.
When do I claim SR&ED?
With your corporate tax return. The reporting deadline is 18 months after the end of the tax year.
Is this tax advice?
No. It is general information. Confirm your situation with a qualified Canadian tax and SR&ED advisor.
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.