KPMG’s Tax Incentives Practice has assisted thousands of organizations of all types and sizes, ranging from start-up businesses to multinational enterprises. Our multi-disciplinary team of professionals works with clients that are seeking to obtain Federal and Provincial Government funding for their research and development, innovation, capital growth, workforce advancement, market expansion and environmental sustainability projects. We can help explore your company’s eligibility to secure different forms of government funding, grants, incentives, investment tax credits (ITC), and cash refunds for your projects. In Canada, there are two main forms of government funding: indirect and direct funding.
Indirect funding – SR&ED:
Canada’s Scientific Research and Experimental Development (SR&ED) program is the country’s largest tax incentives program for research and innovation development. The intent is to foster technological innovation by creating a supportive environment for Canadian businesses and organizations. The support to conduct research and development (R&D) comes through the provision of both provincial and federal investment tax credits. Depending on the company size and incorporation status, these take the form of either cash refunds or reductions in taxes payable.
A discussion with KPMG’s experienced R&D tax incentive consultants on SR&ED eligibility is the key to unlocking substantial savings in the form of investment tax credits and corporate tax refunds.
For over 25 years, KPMG’s Tax Incentives Practice has helped businesses successfully navigate the SR&ED tax incentive program. Our professionals work together with your organization in preparing strong SR&ED claims that unlock the full potential of this corporate tax incentives program. Below are some of the services our team provides:
A solid, defensible SR&ED claim can be time-consuming, taking critical resources away from your company’s daily activities. KPMG tax professionals will take on the tax preparation services to help minimize the time your team spends on R&D compliance. Our proprietary turnkey claim preparation process allows us to compile your technical descriptions, calculate eligible expenditures, prepare the required tax forms, collect required documentation, as well as respond to the Canada Revenue Agency SR&ED audit/review requests while having focused and impactful interactions with your team that minimize their time.
Participation in Canada Revenue Agency SR&ED reviews and services
Defending your SR&ED claims under CRA services or reviews/audits can be very stressful. KPMG’s experienced Tax Incentives Practice team is well versed in preparing for these interactions and providing direct support. Our assistance can take the form of preparing your staff in advance of a review, physical attendance at meetings, or assistance in responding to information requests. Regardless of whether it is a partial or full CRA review/audit, KPMG can help you demonstrate the scientific eligibility and justify the financial extent of your SR&ED claim.
KPMG tax professionals can assist your company with administrative second reviews, notice of objections to legal proceedings to tax court, or developing a response to an unfavourable CRA findings report. Our team intimately understands the income tax act and related CRA policies; after all, SR&ED is a tax credit program. We will help you respond to the CRA in a manner that is supported by policy, legislation, and jurisprudence.
Development of an R&D tracking system
Using corporate data, KPMG tax professionals [GA1] develop a deep understanding of an organization, their cost tracking systems, and their technical documentation retention practices. Our professionals can assist companies in building best practices through methods such as the development of R&D tracking systems, documentation retention processes and ERP extractions to aid in the SR&ED claim process. This can help to ensure projects and expenditures are not missed and that proper documentation exists to defend your SR&ED claims under CRA review.
Digital media innovation tax credits:
Many provinces have significant tax credits for the production and marketing of interactive digital media products such as video games, digital educational products, e-business activities, as well as other gaming, digital arts and media products. These credits can work in conjunction with other creative industry funding and incentives to cover a large part of digital development efforts. KPMG’s experienced team will work with you to identify eligible productions and help you to prepare, optimize, and review your applications for digital production tax credits.
Direct funding – grants and loans
While the SR&ED program is by far the largest and most complex of the government's R&D support programs, both the federal and provincial governments also provide a wide variety of direct incentives in the form of grants, contributions, and loans. These government incentives target the areas of capital growth, workforce advancement, market expansion, environmental sustainability, and innovation development (alongside SR&ED), to cite a few.
There are thousands of government innovation funding programs available with varying funding eligibility criteria and intake periods. KPMG tax professionals can help you determine your eligibility for these programs, depending on when you plan to incur costs. Our team is also able to assist in the application development process to ensure it demonstrates key government program metrics versus business metrics.
KPMG’s experienced team of incentive consultants will work with you to analyze the research and development funding landscape and match your projects to programs that will maximize your funding requests. Our team will not only analyze expenditures in the current year, but we will investigate your long-term plans to ensure all eligible costs are captured for funding now and in the future.
Frequently asked questions (FAQ)
SR&ED tax credits are calculated based on a percentage of qualified expenditures that can be identified and attributed to projects that meet eligibility criteria as defined by the Income Tax Act. Quantifying your eligible SR&ED expenditures starts by first identifying projects that qualify and then determining the extent of expenditures that can be attributed to those projects.
Depending on the ownership of your company, as well as taxable capital, Federal tax credits in Canada can be earned at 35% or 15% of qualified SR&ED expenditures. Additional provincial credits may be available depending on the province in which the work is performed.
Businesses and organizations may qualify for SR&ED tax incentives if they have performed work to create or incrementally improve a new or existing product, process, material, or device.
Generally, the activity must involve experimental development and/or scientific research. This is loosely defined as a systematic search or investigation in a field of science or technology which results in the generation of new knowledge for your organization.
KPMG’s dedicated Tax Incentives Practice team can help you identify eligible R&D projects that meet the Income Tax Act’s definitions as well as the CRA’s interpretation and information policies. This can include digital media grants, video game funding, and Canada film tax incentives.
The Government of Canada and many provinces have funding programs to encourage specific work in high-priority sectors. These programs are designed to help companies offset some of the financial risks that the government wants investments made in and that are in fields that will potentially benefit the Canadian economy. Businesses and organizations that qualify for these tax credits, grants, and other funding may be:
- able to offset taxes payable
- eligible to receive cash refunds
- able to receive grants or non-repayable loans; or a combination of all of these
There are billions of dollars available from a variety of federal and provincial programs. The common tenant in all the programs is to increase or retain employment in specific sectors, create more competitive Canadian industries that can export globally, as well as be world leaders in innovation. As a result, incentives should, without a doubt, be part of your strategy. In particular, you will find that:
- Your competitors are securing funding and utilizing incentive programs that are available to them. To ensure your competitiveness, your organization should also be taking advantage of these programs.
- The government is setting aside funds to help companies like yours: especially those in priority areas. If you are in one of these priority sectors and are not applying or claiming credits, you are leaving a valuable source of funding on the table.
- Once companies are claiming and applying to funding programs regularly, they can utilize the amounts as part of their ongoing cash flow and investment models.
Finding and accessing the correct programs for your organization can be a time-consuming and challenging endeavour. There are thousands of programs, such as SR&ED, and legislative rules that you must follow. KPMG's dedicated Tax Incentives Practice team will bring deep industry experience, leading technical knowledge, and a global mindset. We work with a wide range of businesses and organizations in a variety of industries that rely on government funding and R&D tax credits to support their business goals.
Our team of professionals can help cut through the complexity of the government funding landscape. We will not only minimize your team’s time to find, apply, document and claim funding, but we will also narrow down the programs of focus to help increase your likelihood of receiving funding, grants, and tax credits. Additionally, KPMG’s team of SR&ED and government funding professionals will help ensure you are maximizing both direct and indirect funding contributions.
Finally, KPMG’s Tax Incentives Practice is part of a global R&D practice. If you have an international or global footprint, our team can help you in the countries in which you operate. We can help ensure your company is claiming incentives, grants, and government funding globally.
KPMG delivers modern tax preparation services and value-enhancing solutions that help organizations achieve their goals by securing different forms of government funding, grants, incentives, investment tax credits, and cash refunds. Contact one of KPMG’s Tax Incentives professionals today to learn more.
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