SR&ED Frequently Asked Questions, Answered by R&D Partners Experts

Introduction

The federal scientific research and experimental development (SR&ED) tax incentive program (ITC) is one of the most generous in the world. As the largest federal funding program in support of business R&D in Canada, it awards more than $3 billion annually to companies that conduct eligible R&D activities. Compared to other programs, SR&ED is particularly accessible since it is industry agnostic and does not require businesses to be revenue-generating to be eligible for funding. However, its application process can often seem daunting – especially for new claimants – and its requirements are not always clearly understood.

We get questions about SR&ED all the time, so we decided to round up some of the more common ones and have the experts on our team answer them.

The Experts

Debbie Frail, P. Eng., MBA

Debbie has spent her professional career managing engineering, operations, and project teams in several technology fields. For over 20 years, she has successfully worked with clients ranging from entrepreneurs to multinational corporations to prepare and defend SR&ED tax credit claims. Debbie works primarily in the manufacturing, automation, and transportation sectors.

Patrick Campana , P. Eng., MBA

Patrick has been managing engineering and project teams in several technology fields for over 18 years. Patrick specializes in preparing and defending SR&ED tax credit claims for companies of all sizes operating in the telecommunications, software, and manufacturing sectors.

The Questions

How do I know if my project is eligible for SR&ED?

Patrick: SR&ED eligibility is based on a fundamental question: are you solving a technological uncertainty? If the current state-of-the-art technology available to you does not allow you to reach your technological objectives with a straightforward and known approach, your project is likely eligible for SR&ED tax incentives. However, the answer may not be that easy to ascertain depending on the situation.

Beyond technology specific criteria, the company’s size and experience in the field must be considered. Companies with extensive proprietary knowledge may have to push their experimental development efforts further than a less experimented company might need to do to qualify for the SR&ED program.  Conversely, a small company entering an unfamiliar area of technology for them may need to first go through a learning curve before reaching the state-of-the-art level of competency from where they can start working with the SR&ED program.

Ultimately, there is no one-size-fits all answer here, and each project still has to be evaluated on a case-by-case basis to determine eligibility.

Want to know more about how to evaluate your eligibility for SR&ED? Read one of our previous articles all about the topic here

What is the key to a successful SR&ED audit?   

Debbie: First, proper documentation is key. Keeping accurate time sheets and recording material and sub-contracting expenses is essential to a successful SR&ED claim.  Additional substantiating documentation to demonstrate the work done is also important. This can include records of tests carried out, analysis of results and conclusions made, meeting minutes, invoices, correspondence, modifications made to prototypes, and other contemporaneous information that can support the claim.

Additionally, it is important to be well prepared and knowledgeable as to the SR&ED program technical and financial tax requirements. For example, you can only claim the portion of an employee’s salary that is proportional to the amount of time they spent on eligible SR&ED activities – and not their entire salary for the year – unless they spent at least 90% of their time on activities that are eligible for SR&ED.

Want to know more about SR&ED audits and how to face them? Read our article dedicated to the subject here. 

What is the best way to track my project activities?

Patrick: The CRA doesn’t ask for any specific ways to track the project. The most important thing is to always have dated documentation, and there are a few ways to make it as simple and useful as possible.

Tracking individual tasks with a project management tool like Jira is not always the most helpful: this keeps the focus on low-level individual tasks and often lacks linkages to claimed SR&ED activities. Using an overall project map that gives a bird’s eye view of the project – its stages, who is assigned to which tasks and the general timeline – can be a simple and very useful tool. It can help anyone who is not familiar with your project – like a CRA auditor – understand it as a whole.  It is also a valuable resource to identify and justify which expenses can be claimed.

How should SR&ED program time be tracked? 

Debbie: You can only claim the salaries directly related to SR&ED eligible activities. This would exclude work that does not directly support experimental development, such as routine software development and routine quality control testing. It is important to track both eligible and non-eligible SR&ED program time to ensure you can demonstrate full work periods, and also to enable you to reclassify time in the event eligible SR&ED program time was improperly classified.

The worst way to track your time is of course to not track it at all: it often leads to either a refusal or underestimation of the time spent on eligible SR&ED work. This means that you are potentially losing money you could have been entitled to.

We recommend and work with three different kinds of time tracking systems: 1) intelligent spreadsheets we have developed for very small R&D teams; 2) our very popular, automated pull time tracking solution (contact us for a demo!) that requires very little training or work; and 3) established, customized web and ERP time tracking tools. This last option works best in large enterprises with well installed systems and methods.

How do I differentiate between SR&ED hours and non-SR&ED hours in my timesheets? 

Patrick: In most cases, it is not productive to ask individual contributors to classify their work as SR&ED or non-SR&ED in their timesheets, unless a project can be clearly circumscribed and identified as SR&ED work ahead of time.

Often, when a project encompasses both SR&ED and non-SR&ED activities, the final distinction can only be made retroactively, once one can determine what work went beyond the current state-of-the-art in an attempt to solve a technological uncertainty. Therefore, the important thing is to consistently label activities so they can later be easily retrieved and included in your SR&ED claim.

Artifacts naturally generated throughout the duration of the project – if they are dated and identify contributors and associated labels, will efficiently corroborate timesheet data down the road.

What is the best way to track my material expenses? 

Debbie: We often suggest that clients set up specific G/L codes for material and sub-contracting expenses that are related to a SR&ED claim in their internal accounting system. Tagging them and keeping track for when the claim is filed – and in case of audit – is crucial.

What should I do if I already received government funding for the project? Am I still eligible for SR&ED?

Debbie: Yes, you are still likely eligible for SR&ED even if you received other government funding – a grant, for example – for your project. However, you have to be aware of the stacking limits and of how the government aid you received or are expected to receive could reduce your eligible SR&ED expenses – or even your ability to claim the SR&ED tax credit.

The important element is understanding the stacking limits of every source of government funding, as well as the allowable interactions between these sources of funding.  Generally, more funding and funding programs are preferable. However, the cost of applying for, tracking, and reporting on the funding programs should be taken into consideration, as at some point additional funding programs will have diminishing or negative net funding returns.

Want to find out more about what to keep in mind when you apply for potentially competing government funding programs? Read our blog post all about it here. 

 

If you have any questions about SR&ED that this blog post left unanswered, or if you are considering submitting a SR&ED claim, don’t hesitate to contact our team at:  1-800-500-7733, ext.2

 

Disclaimer: The views expressed in this article are provided for informational purposes only. Iis not intended to nor can it replace the evaluation of your specific SR&ED claim by a dedicated consultant. 

Funding Opportunities for AI Quebec Companies

The Pan-Canadian Artificial Intelligence Strategy, launched in 2017, has catapulted Canada as a leading global player in AI. According to a report by the University of Toronto, this initiative has injected $125 million into the country’s top AI talent and research institutions as of 2020. It has also made Canada a true leader of AI innovation, bringing 50,000 jobs and $3 billion in investments to the country since 2015. In Quebec alone, there were 131 companies developing flagship products using AI in 2020.  

The implementation of the Innovation Supercluster strategy in 2018 and the establishment of an AI innovation supercluster in Montreal – Scale AI – continues to make Quebec a great place to develop artificial intelligence’s potential.  

As a result, significant investments have been made by government, not-for-profits and other key stakeholders to facilitate the growth of companies developing AI-powered technologies. There are now countless funding opportunities that AI startups, SMEs and entrepreneurs at various stages of their journeys can leverage to continue developing and implementing innovations related to artificial intelligence. 

Keep reading to find out more about five key funders that any company developing or implementing AI in Quebec should know about.  

 

Scale AI 

The Supercluster Initiative was launched in 2018 with the goal of fostering innovation in key economic sectors, increasing collaboration between the private sector and researchers, creating jobs, and giving Canada a competitive edge when it comes to technological development. There are five superclusters across Canada, each focused on one key industry sector: digital technology, plant protein development, advanced manufacturing, marine technology and artificial intelligence. This last supercluster is known as Scale AI 

Scale AI offers grants meant to create customized training programs for companies to enhance their employees’ knowledge and understanding of AI tools. These training grants can subsidize up to 85% of the first $100,000 of eligible training costs. 

They also offer an Acceleration program, which supports accelerators, incubators, innovation hubs and others involved in supporting and scaling-up Canadian AI startups with great potential. This program does not offer direct support to startups, but rather seeks to develop a robust innovation ecosystem through accredited partners.  

Scale AI’s main hub is located in Montreal and its activities are co-funded by the Federal and Quebec governments, but funding is being made available to companies Canada-wide. For example, their Acceleration program was expanded to British Columbia and Ontario in 2020.  

Want to learn more about this supercluster and the four others available to innovators in various industries across Canada? Read our article dedicated to the Supercluster Initiative.  

 

IVADO Labs 

IVADO Labs is a leading provider of AI-driven supply chain solutions. This Montreal-based organization was launched in 2017 with major support from the provincial government and in partnership with IVADO and its founding academic institutions. Through this unique partnership, IVADO Labs has access to a world-renowned faculty fellow network of the largest Canadian AI R&D federation of labs. 

The INVEST-AI program is a division of IVADO Labs with the mission to help small and medium Quebec companies increase their performance by integrating and applying AI to their business processes. This program has 4 main objectives: 

  • Improve the productivity and competitiveness of businesses in Quebec through the application of AI 
  • Enable companies to implement the AI solutions they develop within two years 
  • Provide businesses with the capacity to maintain those AI solutions
  • Expand the use of AI to other areas of the business  

Mitacs 

Mitacs is a National Canadian non-profit organization that builds partnerships supporting industrial and social innovation nationwide through its partnerships with 70 universities, 6000 companies, and both the federal and provincial governments. From aerospace systems to childhood literacy rates, Mitacs-funded research helps to strengthen connections, improve economic performance, and create jobs. 

While they are perhaps best known for their paid internship program, Accelerate, Mitacs offers an eight-week Digital Revolution collaboration course for companies of all sizes hiring students and post-doctoral fellows who are well-versed in AI, quantum computing, and cybersecurity to help them develop and harness these new crucial technologies.  

 

Quebec Ministry of Economy and Innovation 

The Quebec Ministry of Economy and Innovation offers funding programs of its own and partners with other sponsors to further accelerate scientific and technological advancements in Quebec. The Ministry emphasizes the importance of research and innovation, and assists organizations dedicated to the promotion, development and transfer of research and innovation.  

The Partenar-IA Business program is aimed at business groups, including start-ups or a minimum of 2 SMEs, wishing to carry out an innovative and collaborative R&D project. This call for projects originates from the Ministry of Economy and Innovation, but is administered by Quebec’s nine Industrial Research Sectorial Groups – Regroupements sectoriels de recherche industrielle or “RSRI” in French. These groups are dedicated to promoting the development and adoption of AI in their specific industry areas. 

Eligible projects are those that highlight research related to the field of artificial intelligence and that is carried out in collaboration with an eligible public research center. At the time of publication, the next application deadline for this program is October 15th, 2021. It is important to keep in mind that, as with many Quebec Government funding programs, most information about the program is in French.  

The MEI also currently has an active Call for Innovative Artificial Intelligence Projects that offer grants to fund various AI projects through 3 components: 

Component 1 is geared towards SMEs and startups wishing to carry out an innovation project for the development and marketing or adoption of artificial intelligence (AI) technologies. Component 1 is intended for artificial intelligence startups that currently receive (or plan to receive) support from a business incubator or accelerator. 

Component 2 is open to all Quebec companies, with priority given to SMEs and startups wishing to carry out an innovation project for the development and marketing or adoption of artificial intelligence (AI) technologies. It is intended for artificial intelligence projects related to the production of goods and services or for carrying out in-house research and development activities. 

Lastly, Component 3 is intended for major collaborative projects undertaken by consortia composed of at least two Quebec companies. The businesses involved in these collaborative projects must share the costs, benefits, and intellectual property of the project.  

Program details for all components are only available in French, and, at the time of publication, the next deadline for all three components is October 15th, 2021.  

 

CEIM Montreal 

CEIM Montreal is a pioneer of Montreal’s startup ecosystem that has contributed to the successful launch and development of various companies. Through its offering of accelerator and incubator programs, CEIM’s mission is to support entrepreneurs with innovative projects by offering them tailored coaching and mentoring services. 

The AI for Supply Chains program offered by CEIM Montreal has both an incubator and accelerator that can offer $35,000 to both early-stage or growth-stage startups. Both programs are directed towards earlier stage startups developing an AI solution that can have applications in supply chain management.  

 

How R&D Partners can help   

If you have any questions about the programs we mentioned above, do not hesitate to contact Dominik Klein at [email protected], or at 1-800-500-7733 ext. 103 

 

Further reading:  

Canada’s AI Ecosystem: Government Investment Propels Private Sector Growth (University of Toronto) https://research.utoronto.ca/media/541/download 

Intro to the Tax Credit for the Production of Multimedia Titles

The tax credit for the Production of Multimedia Titles has been in place since 1996 and was created to develop the multimedia sector in Quebec and make the province an attractive place to develop video games and interactive digital media applications. A variety of interactive media products can be considered eligible for this credit, with varying rates.

This credit is refundable and applies to the salaries of eligible employees or subcontractors for work done on eligible multimedia productions in Quebec. This work can include any stage of the production, with activities including initial design, writing, game development and user community management all being possibly eligible.

In this article, we will take a deep dive into Quebec’s Tax Credit for the Production of Multimedia Titles and go over the details of the funding as well as the specifics of the eligibility criteria.

Eligibility Criteria

First, this tax credit can only be claimed by businesses that meet specific criteria and that undertake eligible work. The work also needs to be done by eligible employees or subcontractors in Quebec. Therefore, several criteria must be met to claim the credit.

To be eligible for the Multimedia Tax Credit, companies must operate a corporation that has an establishment in Quebec and be the main producer of an eligible multimedia title. Only the producer of a title may claim the credit, so if a title is being developed in total or in part at the request of another corporation, Investissement Québec will not recognize the corporation as having produced the title.

A corporation that produces a portion of the eligible multimedia title on behalf of the main producer of the title can also claim the tax credit on the portion that they worked on, but only if the main producer of the title does not have an establishment in Quebec.

Eligible labour expenses related to production work can often be claimed in full – excluding any other source of government or non-governmental funding covering the same expenses – for salaried employees and subcontractors not at arm’s length. Eligible production work done by a subcontractor at arm’s length can be claimed at 50% of its total cost. In all these cases, the employee or subcontractor has to be based in Quebec for the tax credit to apply.

Eligible production work includes all activities necessary to design and produce the title, from the beginning of the design stage and continuing indefinitely, including after the title is initially commercialized. This includes principal development of the title’s interactive structure, architecture and programming, the core design of the title’s interactivity loops, and the production of the title’s content – art, text, scenario, sound design, music and more.

Activities necessary for further development and improvement of the title after it has been commercialized are also eligible. This can include developing and maintaining a community of users who can provide feedback on issues, additions to a title post-commercialization and the analysis of quantitative data to optimize the title.

Project Eligibility

Corporations can claim the Multimedia tax credit if they produce an eligible interactive digital media title in Quebec and intended for commercial release. Titles that are produced for internal use are not eligible, they must be available for sale. Interactive digital media titles can include video games, educational software, professional simulators, and more.

To be eligible, projects must include at least 3 of the following 4 media: text, sound, fixed images and animated images.

One important thing to keep in mind is that interactivity must be integral to the product’s functionality. Most – if not all – of the interactive elements should be contained within the electronic medium.

Investissement Québec specifies that the types of media – text, sound, fixed images and animated images – must be present in “appreciable quantity”, and they must all be an integral part of the functionality of the game, mobile app or another type of multimedia title. The loss of one of the elements should fundamentally affect the functionality of the software.

In addition to the basic eligibility criteria – the title must contain at least 3 of 4 types of media – the title must meet Investissement Québec’s criteria of interactivity within the electronic medium. This is evaluated with 3 main criteria: feedback, control, and adaptation.

Feedback is measured by the response given to the user – or player – of the title whenever an action is taken. This could be an audiovisual cue that an action has been completed, or a text-based comment on the quality of an answer given by the user for a puzzle, or other ways the title indicates a user’s performance in a level and suggestions on how to improve, for example.

Control is measured by the degree of influence the user can have on the electronic medium and its content. Examples of control include moving a character around, making choices between options provided by a game, or implementing a strategy to achieve a goal.

Adaptation is measured by the degree of variability of the actions available to the user of the title depending on specific situations. The presence of specific events that can only be engaged according to a user’s skill level or the skills they selected on a decision tree as they progressed through a game can satisfy this criterion.

Investissement Québec also evaluates the scenario of the title: what reason is the title giving the user to interact with it? This criterion can be met by having a series of objectives or a storyline.

All these elements work together and drive the criteria behind “interactivity” between the player and the multimedia title. While they are used in a broad sense to determine whether any digital media title or application available electronically is eligible as a “multimedia title,” in practice the tax credit is principally intended for video game production activities.

Tax Credit Rates

This refundable tax credit can fund up to 37.5% of eligible labour expenditures. However, different maximum amounts and percentages will apply depending on specific circumstances. The main factors that affect the tax credit rate and funding amounts of this program are the language in which the interactive title is released, the nature of the title – is it entertainment or educational? – and who conducted the eligible development work.

In the vast majority of cases, the base tax credit is 30% of eligible labour expenditures on an eligible multimedia title according to the criteria discussed above. Claimants can also receive a bonus 7.5% tax credit on a commercialized title if a French-language version is available at the time of its release. It is important to note that a corporation could not launch a title exclusively in English – or any other language – and then add French text or audio after it is released and claim the full 37.5%. Because the title was not available in French at the time of its release, the company could only claim up to 30% of labour expenditures in this case.

It is important to note that a lower tax credit rate of up to 26.25% applies to titles in any language that are intended for professional training purposes only.

Maximum Funding Amounts

Once we know the company’s overall tax credit rate for the project – 37.5%, 30% or 26.25% depending on the title – it is applied to the eligible labour expenses to calculate the actual amount the company can receive claiming the credit.

Three scenarios can apply depending on who conducted the eligible development work.

First, as mentioned earlier, production work done by a subcontractor at arm’s length can be claimed at 50% of its total cost. The maximum refundable tax credit amount, therefore, corresponds to 37.5% of half of the contract value in this case.

When the work is done by an employee or a subcontractor not dealing at arm’s length with the company claiming the credit, the eligible labour expenses are usually capped at $100,000 per employee or subcontractor per year. If an employee’s salary or subcontractor’s fee is lower than $100,000, the entire salary is therefore eligible. This means a maximum possible refund amount of $37,500 per employee in most cases.

That said, there are some exceptions. This is because, for employees and non-arm’s length subcontractors, the program allows companies to exceed the $100,000 of salary expenses per year for a certain number of eligible individuals. The entire salary of even the highest-paid employees can then be considered an eligible expense, even if it is well over $100,000 a year, making the potential refund per employee more than $37,500.

The number of employees who can have more than the first $100,000 of their annual salary be considered an eligible expense is determined by multiplying the total numbers of employees and non-arm’s length subcontractors for which the company is claiming the credit by 20% and rounding the number.

Application Process

While it is granted by Revenu Québec to incentivize companies to develop video games and interactive media products in Quebec, it is important to note that much of the application process for this credit first goes through Investissement Québec, not RQ itself.

The application process for this tax credit is divided into two parts. Companies must first obtain a certificate of eligibility to assess the eligibility of the title itself, followed by an attestation of production work, where IQ will certify the number of eligible hours worked by the corporation on the title. Both are issued by Investissement Québec. The first certificate confirms that the multimedia title qualifies for the credit and only needs to be obtained once, while the production work attestation has to be renewed for every taxation year in which the corporation claims the credit.

 

How R&D Partners can help  

Still have questions about this tax credit? Contact Dominik Klein at [email protected]

 

Additional Resources:

Investissement Québec program page: https://www.investquebec.com/quebec/en/financial-products/smbs-and-large-corporations/tax-credits/production-of-multimedia-titles.html

Detailed program factsheet: http://www.investquebec.com/Documents/qc/FichesDetaillees/FTTITRES_general_en.pdf

7 Funding Opportunities for Life Sciences & Health Technology Businesses

While the life sciences and health technology sector – LSHT for short – has seen an average of about 5% growth per year over the past decade, 2020 was a critical year for medical innovations as the world faced the COVID-19 pandemic. This crucial industry encompasses everything from prosthetics to pills, as well as therapeutics, diagnostic tools and methods, medical devices, pharmaceuticals, and any other product designed to treat a disease or aid in the treatment of patients.  

Now more than ever, the importance of R&D in the medical and pharmaceutical sectors is collectively understood, and topics like vaccine manufacturing capacity and the rapid development of new therapeutic treatments and technologies like ventilators has come to the forefront of our discussions as a society. 

Of course, with the increased need for PPE, new medical technologies, treatments, vaccines and more, the government as well as private sponsors have dedicated increased funds to projects related to the LSHT sector. In 2020 and 2021, Innovative Solutions Canada launched innovation challenges to develop new, compostable surgical masks and more inclusive respirators, for example.  

Other program sponsors have always been focused on funding life sciences and health technology innovations and helping ground-breaking Canadian LSHT companies grow. The rest of this article will highlight some key sponsors offering funding programs, support services, and accelerators specifically meant for pharmaceutical, health technology, and life sciences companies across Canada and in Quebec.  

 

Support Organizations and Research Consortia 

Montreal InVivo 

Montreal InVivo is a non-profit that represents the LSHT cluster of Greater Montréal and is a credible source of information and reference for the LSHT sector. It aims to create a business environment that fosters innovation, growth, and competitiveness of the public and private organizations in the LSHT sector. Their recent partnership with Fundica allows SMEs to search for private and public funding through a powerful search tool with smart filters and advanced customization.  

CQDM 

The CDQM is a biopharmaceutical research consortium that funds the development of innovative tools and technologies to accelerate the discovery and development of safer and more effective drugs. Their business model is based on a collaborative approach between world-class pharmaceutical corporations, several Canadian biotech companies, the best scientists from both the public and private sectors, as well as the Canadian and Quebec governments. The CQDM has raised over $90M and has established 11 funding programs, launched 49 calls for proposals and more than 800 evaluated projects, for a total of over $850 M in funding applications. 

The Quantum Leap program offered by the CDQM is a funding program for drug discovery research and strongly encourages public-private partnerships between Canadian universities and SMEs to achieve innovative translational biopharmaceutical research projects. The deadline to participate in the current selection round is August 12th, 2021.  

MEDTEQ 

MEDTEQ is a focus point for Canada’s medical technology sector in terms of research, innovation and the integration of leading-edge solutions in the delivery of health care. Through collaborative industry-led projects, MEDTEQ’s mission is to accelerate innovation and to position products and services developed by the Canadian medical technology industry on a global scale.  

MEDTEQ’s Impact and Partenar- IA program is aimed at all public research centers and Quebec businesses (primarily SMEs and startups) wishing to carry out an innovation project for the development and commercialization or adoption of artificial intelligence technologies. The deadline for their 17th Call for Project is July 15th, 2021, with eligible projects required to be carried out by public research centers in collaboration with at least two companies. 

 

Startup Support & Accelerators 

Because the pharmaceutical and medical industries are constantly evolving, various accelerator programs can help LSHT startups grow. Montreal Universities Concordia and McGill also offer their own accelerator programs for startups in the LSHT sector.  

AdMare Bioninnovations 

adMare Bioinnovations is a Canadian global life sciences venture that works with academic researchers and companies to advance research, scale existing companies and technology, and provide professionals in the field with the skills they need to succeed.  

They offer an acceleration program supported by the Canadian and Quebec government to scale up promising young life sciences companies. Companies will receive capital up to $150,000 and other resources such as coaching/mentoring and discounts on office or lab spaces.  

District 3 

Concordia’s District 3 focuses on advancing an open, collaborative ecosystem that enables entrepreneurs to thrive and succeed while taking no equity from the companies they work with. Their Biohub 8-week accelerator offers weekly workshops, networking events with industry professionals, and potential access to their state-of-the-art wet lab.  

McGill Dobson Centre for Entrepreneurship 

In the Spring of 2021, McGill’s Dobson Centre for Entrepreneurship opened applications for a Health Sciences Lean Startup Program to accelerate health-related innovation through the development of entrepreneurship. The 8-week program includes weekly workshops and exposure to industry experts and business frameworks. The deadline to apply is September 26th, 2021, with the program activities taking place from October 19 and December 7th of the same year.  

Quantino 

In a recent press release, high-tech business incubator provider Quantino announced a new partnership with Université Laval’s Québec Heart and Lung Institute Research Centre that will provide incubation services to emerging medical businesses.  

Their goal is to develop made-in-Québec solutions for preventing, diagnosing, and treating cardiovascular and respiratory diseases (including COVID-19 and other emerging viruses) as well as type 2 diabetes and obesity. Quantino offers first-rate facilities, world-renowned experts and top-of-the-line technology to their incubatees to further accelerate their progression. Interested LSHT startups can apply to become an incubatee as of June 22nd 2021. 

 

How R&D Partners can help  

If you have any questions about the programs we mentioned above, do not hesitate to contact Dominik Klein at [email protected], or at 1-800-500-7733 ext. 103. 

The Dos and Don’ts of Grant Stacking

Entrepreneurs looking for funding in Canada have access to a large number of government programs that can support many of the costs associated with running a business: from R&D salaries and subcontractor costs to export-related expenses like market research and advertising to name only a few.

Despite the variety of programs in existence—whether they be tax credits, grants, low-interest government loans or other—many end up having overlapping eligible costs. Meanwhile, “double-dipping”—the practice of covering the same expense twice with two or more programs, under certain conditions and scenarios—is not allowed, for obvious reasons.

In fact, governments often put out multiple grants and tax credits intentionally focused on the same expenditures. Therefore, the number of programs available explodes. However, the expenses that can be covered are finite and to what extent they can be funded is generally capped at a certain percentage. This creates two problems:

1) The government is inefficiently and independently managing applications, claims, and audits for two or more programs that could be just one since they essentially cover all the same expenses.

2) Entrepreneurs need to apply for several programs rather than one. They try to maximize government funding but often do so without realizing that there are restrictions on the amount of funding a project or an expense can receive. This often ends up being less than the combined maximum offered by the programs the entrepreneur applied to, and the programs essentially “cannibalize” each other.

Over the last year, we have seen the second issue reach new heights as several—albeit very important—COVID-19 support programs, like the Canada Emergency Wage Subsidy (CEWS), became available to businesses. Since both the CEWS and the CRA’s Scientific Research & Experimental Development tax credit program (SR&ED) fund employee salaries, businesses claiming SR&ED in 2020 that benefited from the CEWS see a layer of complexity added to their SR&ED claim—they essentially need to remove their CEWS funding from their eligible expenditures for SR&ED when calculating their tax credit.

This process is further complicated by the changing funding rates of the CEWS—a subsidy that offered varying rates of financial support depending on the calculated revenue loss—as well as the SR&ED’s eligible activities and time tracking requirements. The CEWS / SR&ED cannibalization scenario was previously documented here, but this problem is not exclusive to emergency COVID-19 support.

Here is an example to illustrate the grant “cannibalization rate” concept more broadly. Take an imaginary company headquartered in Quebec with annual salary expenditures of $50,000. They develop innovative products and are eligible for the SR&ED tax credit. They find a grant to cover 50% of their payroll expenses for the year. Should they go for that grant?

The quick, obvious answer might seem to be “yes”. If they apply to the grant program and are accepted, they will ultimately receive more money from the government to cover the year’s salary expenses. But is that extra money worth it? When we break it down further, we quickly find that it might not be as advantageous as it first appears. This fictional company would benefit from running the following scenarios before making a final decision:

Note that in this example, we assume that the company is a Canadian Controlled Private Corporation (CCPC) where the incremental expenditure is above the minimum QC threshold. We can see that 54% of the grant ($13,625) is cannibalized before you even get to the cost of applying for or managing the grant, or the expected success rate. This leaves our example company with an $11,375 possible grant that is further reduced to $5,688 when we take typical success rates into consideration.

The cannibalization rates are generally between 35% and 55% for the situation above across other provinces prior to grant management costs. These cannibalization rates increase even more when dealing with other grants competing for the same expenditures until a ceiling is reached. In many cases, the cannibalization rates can reach 100% as early in the process as the second grant because the stacking ceiling has already been reached.

The simulation above is also interesting because we notice that the cost of applying for, managing, monitoring, and—heaven forbid—supporting the audit for, a grant is important to understand as well. It is estimated to cost $5,000 in the example.

When we add everything up, this fictional company only has a weighted incremental benefit of $688 if they go for the grant. However, the grant also may also provide this business with greater cash flow as it is received before the SR&ED tax credit. The value it can bring is not exclusively in terms of the total contribution received from the government; the timing is also important when considering this added cash flow.

In the end, always make sure you understand the success rates, cost, cash flow needs, net benefit, and what is important to you in a grant application before you pursue it. If you are planning to access competing government programs, then make sure you understand the cannibalization rates associated with combining them as well.

There are some excellent government grants that we use regularly for our business, but make sure you are informed before devoting time, energy, and money to applications that may not yield the return on investment you hoped for.

If you have more questions about grant stacking and cannibalization rates or want to find out how R&D Partners can help you maximize your government funding and simplify your life, please contact Mike Lee at [email protected] 1-800-500-7733, ext 110.

The 2021 Federal Budget: What’s in it for Canadian Innovators?

On April 19th, 2021, Deputy Prime Minister and Finance Minister Chrystia Freeland presented the first Federal budget in two years. Despite the proposed $101 billion investment and projected $154.7 billion deficit in 2021-2, no personal or corporate tax increases are planned. The budget’s focus on economic recovery and growth means several measures and investments will benefit Canada’s leading technology and innovation sectors. It is described as “a plan to invest in Canadian innovation, for long-term growth.” (127)   

This blog post will focus on what we consider to be the announcements most likely to lead to direct funding for Canadian technology companies or startups, and less so on general economic or personal tax measures. For more information about the rest of the budget, we have linked some other helpful articles, as well as the full budget document, at the end of this post.   

Economic Recovery and Small Business Support  

The Canada Recovery Hiring Program (CRHP) will be introduced in June 2021 and stay in place until November 2021 (128). It will help Canadian-controlled private businesses hire more employees as the economy recovers from the COVID-19 pandemic. At its height, the program will cover up to 50% of incremental remuneration paid to employees, going down to 20% by the planned end of the program in November.   

Additionally, the government is extending the Canada Emergency Wage Subsidy and Canada Emergency Rent Subsidy programs until September 25th, 2021. These programs will see their subsidy rates go down gradually starting in July, right after the CRHP comes into effect. It is important to note that, when it comes to the CEWS and the CRHP, a business will only be able to use one of the programs but will be able to choose the one that would offer them the largest amount of support.   

The Canada Small Business Financing Program will see its annual funding increased by $560 million (135). This additional funding will serve a variety of purposes. Maximum loan amounts will be able to go from $350,000 to $500,000 and new loan classes will be introduced to better serve the startup and technology ecosystem: Intellectual property, as well as startup expenses, will become eligible for funding.  

To help small businesses adopt digital technologies, the government is introducing the Canada Digital Adoption Program (131). The program is expected to have an impact in two areas: job creation and helping SMEs adopt new digital technologies faster. “Main street” businesses with a storefront and business location will be eligible to receive microgrants to support costs associated with technology adoption. Manufacturers, processors and other SMEs will also be eligible to receive advisory services for technology planning and development of e-commerce strategies, as well as access to zero-interest loans with the Business Development Bank of Canada.   

Technology and innovation funding  

Zero-emission technology manufacturers will benefit from a new temporary tax reduction until 2032 (161-2). Their corporate tax rates will be slashed by 50% as of January 2022: from 9% to 4.5% for small businesses and from 15% to 7.5% for general corporations. These tax cuts are meant to facilitate the growth of the already significant clean manufacturing sector in Canada. While the products that make a company eligible for the tax cut will be re-evaluated with time, currently the tax reduction could apply to manufacturers of electric vehicles, solar panels, green hydrogen and many others.   

MITACS will receive $708 million over 5 years to create 85 000 work-integrated learning placements (130). MITACS work placements allow students in high technology and science fields to bring their skills to eligible companies. Their Accelerate internships generally offer $7,500 (or 50% of the intern’s total salary) per 4-month work term.   

NRC-IRAP will receive $500 million in funding over 5 years (139). These additional funds are expected to help support 2,500 more innovative SMEs across the country through the popular Industrial Research Assistance Program (IRAP).    

A total of $450 million is being made available for a Venture Capital Catalyst Fund to support innovative companies and entrepreneurs, $50 million of which will be reserved for the life sciences and health technology sectors (139).   

The Innovation Superclusters Initiative will receive an additional $60 million in funding over the next two years. The initiative, launched in 2018, includes five organizations across the country, each focusing on a key economic sector: advanced manufacturing, digital technology, plant protein and agricultural technology, oceans and artificial intelligence.   

The Pan-Canadian Artificial Intelligence Strategy will receive $ 443.8 million in the next 10 years (148). The funding will mainly go towards the commercialization of AI-related technologies and will also support several academic training and research initiatives.   

The government is also launching a new National Quantum Strategy to invest in companies, researchers and other major actors of the emerging quantum technology field. This new initiative represents an investment of $360 million (149).  

A Pan-Canadian Genomics Strategy is also in the works, with a total investment of $400 million over six years planned (150). Few details are currently available on how the funding will be administered for these new Quantum and Genomics initiatives, but more will be announced in the next few months.   

We hope that this overview of some key proposals found in the 2021 Federal Budget can be useful to you and your business. As previously mentioned, we have included some additional resources below if you want to find out more about the many measures included in the 2021 federal budget.   

 

Other resources:  

Highlights of budget 2021: Billions for green economic growth, healthier Indigenous communities (CBC) 

Budget 2021: Building an Innovation Economy of the Future (Government of Canada) 

Read or download the official 2021 Federal Budget here 

If you are wondering what funding is available for innovative companies at the provincial level, read our other recent blog post about the provincial Ontario and Quebec budgets here 

Ontario and Quebec Budget Highlights for Canadian Tech Companies

As soon as the Ontario and Quebec provincial budgets were released, R&D Partners combed through their pages to find out what kind of financial support innovative companies from both provinces could expect from these highly anticipated government releases. In this month’s blog, we will share with you the announcements that most caught our eye.

This article will focus on some new investments that will likely have a direct impact on funding programs for innovative companies in Ontario and Quebec, and less so on measures for individual taxpayers or other industries. If you want to read more on general provincial budget highlights, we have linked other helpful articles at the end of this blog. Since it has yet to be tabled, we will also not be covering Canada’s Federal 2021-2022 budget, set to be released on April 19th.

 

Ontario

On March 24th, Minister of Finance and President of the Treasury Board Peter Bethlenfalvy presented Ontario’s 2021 provincial budget. The Ontario government projects a deficit of $33.1 billion by the end of the 2021-2021 financial year, with the hope of a return to a balanced budget in 2029 (CBC). Despite this, Ontarians will find that no corporate or personal tax increases were announced in this year’s budget.

Many measures to support the health sector, digitize access to government services and help families were announced, but we will focus on the key measures that will most benefit Ontario’s innovation sector.

There are few “funding programs” per se announced in the budget, but we can presume that some of the money attributed to various initiatives will be distributed as grants or other forms of government funding in the following months. Several other key investments are also likely to benefit Ontario’s innovative ecosystems and flagship industries in an indirect way.

$400 million to create the Invest Ontario Fund: Invest Ontario is a relatively new initiative with the mandate to encourage investments into Ontario’s advanced manufacturing, information technology and life sciences sectors. Invest Ontario is not a direct grant fund to which companies can apply for project funding but offers a repertory of Ontario government incentives and a panoply of consulting and investment attraction services and incentives. Later in the year, more details about how this $400 million investment will be used to support Ontario’s innovative companies will be announced.

$56.4 million to create the Ontario Vehicle Innovation Network (OVIN): This brand-new innovation network with continue and expand on the work achieved by its predecessor AVIN (Autonomous Vehicle Innovation Network). The new organization aims to bring together two of the most important innovative industries in Ontario: automotive manufacturing and information technology. Again, specific challenges and funding programs were not disclosed in the budget, but more details should follow soon. If OVIN adopts a similar approach to its predecessor, we can reasonably expect innovation challenges and hiring programs to be delivered by the Ontario Centre of Innovation (OCI). Companies developing electric or autonomous vehicles and connected mobility solutions will be the ones best positioned to benefit from this investment.

Doubled rates for the Regional Opportunities Investment Tax Credit: This refundable Corporate Income Tax credit introduced in the 2020-2021 provincial budget is being temporarily doubled, going from 10% to 20%. The credit is available to Canadian-controlled private corporations that invest at least $50,000 into the renovation or purchase of commercial or industrial buildings in targeted regions of the province where employment rates have historically been below those of the rest of the province, with the goal of increasing employment and strategic investments.

 

Quebec

A day after the release of Ontario’s provincial budget, it was Quebec’s finance minister Eric Girard’s turn to table his own. Like in Ontario, despite a large projected deficit of $12.3 billion and an anticipated slow return to a balanced budget for 2027-2028, no tax increases are planned (The Gazette). In Quebec, SMEs will in fact benefit from a tax reduction making their effective tax rate equal to that of Ontario SMEs: from a previous 4% to a 3.2% rate.

As far as a high-level budget highlights go, Quebec is relying heavily on infrastructure funding to kick-start its pandemic-stalled economy, and significant help is also planned for the tourism, culture, aerospace and IT sectors (Global News).

The Quebec budget offered a few more details than Ontario’s in terms of what portion of the major investments announced can be expected to affect government funding programs, but we will be waiting for many details until later this year.

$27 million for cybersecurity innovation: Prompt Quebec will use this investment to increase the funding allocated to the Quebec Cybersecurity Innovation Program. This program supports Quebec SMEs working on cybersecurity solutions, but also aims to attract foreign cybersecurity companies to settle in Quebec.

$6 million for accelerators and incubators: The government is allocating this amount to increase support available for existing accelerators throughout the province. The goal of this investment is to facilitate the rapid growth of innovative startups and to help Quebec technology accelerators and incubators take their place in global networks.

Doubled rate of the Investment and Innovation Tax Credit (C3i): The base rate of this tax credit first announced in the 2020-2021 budget will be doubled until December 31st, 2022, meaning the minimum tax credit rate will go from 10% to 20% and the maximum rate will increase to 40%. The credit is for businesses that acquire manufacturing and processing equipment, computer hardware and management software packages before January 1st, 2025. Its goal is to incentivize Quebec companies to adopt new technologies.

Simplification of the application process for the University Researcher Tax Credit: The Quebec Government is making this tax credit, which is very useful for innovative companies eligible for the Federal SR&ED credit, more accessible by removing requirements to obtain a pre-authorization from Revenu Quebec to access it. Eligible companies can now simply claim their research and development expenses subcontracted to a university or research center when filing their taxes. The tax credit rates vary from 14% to 30% depending on if the eligible company is an SME or a large corporation.

 

Other resources: 

Read the official Ontario 2021 provincial budget here. 

Here’s what you need to know about Ontario’s 2021 budget (CBC) 

Read the official Quebec 2021 provincial budget here 

Highlights of the 2021-22 Quebec budget (The Gazette) 

Getting to Know Canada’s Innovation Superclusters

What is the innovation supercluster initiative?  

In 2018, the Government of Canada announced the launch of 5 innovation superclusters. These organizations were meant to foster innovation in key economic sectors, increase collaboration between the private sector and researchers, create jobs and increase Canada’s competitive advantage in technology development 

The Federal Government planned to invest $950 million over 5 years when launching the program. As of December 2020, close to $1.2 billion had been invested in over 265 approved projects across Canada (Government of Canada).   

The requirements to be selected as one of the superclusters were quite stringent: each organization had to demonstrate they would be able to match the government funds to finance selected projects. The superclusters also had to be led by a new or existing not-for-profit, represent firms of all sizes (from both the public and private sector), and include at least one academic institution (Government of Canada).  

While a variety of relevant activities can be funded by the different superclusters, the eligible costs applicants can expect to see covered are restricted to administrationoperational and direct project costs. Research and development activities, recruitment of new talent, market expansion, equipment purchase and installation and more can constitute eligible projects.   

Each supercluster offers its own programs, with targeted goals, timelines, and specific funding amounts. Below, you will find out more about each cluster, their industry focus and the programs they offer. You will also discover how some of them leveraged Canadian innovation capabilities and technologies to face the pandemic.   

Scale AI Supercluster  

Scale AI is “an investment and innovation hub focused on accelerating the application of artificial intelligence (AI) for supply chains” (Scale AI). Its main hub is in Montreal.  

At launch, they received $230 M in federal funding, with an additional $54.3 M coming from the Quebec Provincial Government. The key industry sectors in which they work to implement AI technologies include areas such as retail, manufacturing, transport, logistics and construction.  

Although this cluster is based in Quebec, Scale AI is expanding its program offering to other regions of Canada. In 2020, they launched initiatives in British Columbia, Ontario, and Quebec as part of their Acceleration Program, with even more projects planned in 2021. Announced in 2019, the Acceleration Program’s goal is to support—via cash infusions to certified entrepreneurial institutes—100 startups a year across the country.  

To apply for broader project-based funding, applicants must collaborate with other members of the cluster to create a proposal that meets Scale AI’s objectives. This cluster is also developing training initiatives: Scale AI and partner organizations across Canada offer individual skill development, as well as custom training programs for businesses 

According to their 2019-2020 annual report, 75% of their investments so far have gone to SMEs (small and medium enterprises), and 73% of investments were made in Quebec.  

Next Generation Manufacturing Supercluster  

This supercluster, also known as NGen, leverages the innovative capabilities and talent pool found in Southern Ontario and Quebec. Machine learning, robotics, cybersecurity, the Internet of Things (IoT) and 3D printing technologies, along with even more applications of advanced manufacturing capabilities, are all relevant to this cluster.   

NGen’s goal is to “leverage Canada’s technology and industrial strengths to accelerate the development, adoption, and scale-up of world-leading capabilities in Canadian manufacturing.” (NGen) Regular project funding from this cluster usually varies between $50k to $20M depending on the nature of the demand and the need for program funds.  

During the summer of 2020, in response to the COVID-19 pandemic, NGen launched the Made Smarter Strategic Supply Challenge. The goal of this call for proposals was to scale up the Canadian production capacity of health products and devices instrumental in fighting the global pandemic.  

In January of 2021, the Financial Post reported that NGen awarded over $27M to a number of projects. This does not include any co-investments, which bring the total funding amount invested in this call for proposals to over $60M. (Financial Post)   

Digital Technology Supercluster  

Based in British Columbia, this cluster aims “to solve the world’s biggest problems by developing, deploying and scaling Canadian made digital technologies in ways never seen before”. (Digital Technology Supercluster) Like the other superclusters, they support companies across Canada. Members of the cluster are found in 9 provinces, with 40% being located outside of BC.  

The wide-ranging possibilities offered by data science and digital technologies are reflected in the diversity of industries – health sciences, cybersecurity, agrifood and more – targeted by this supercluster. 

Their Capacity Building program is focused on helping Canadians expand their skills and opportunities. It is divided into 2 kinds of projects: strategic initiatives and exploratory projects. Funding recipients for the strategic initiatives will obtain between $2M and $4M, whereas the exploratory project can access between $50K and $500K.  

They also offer a Technology Leadership program, dedicated to using data science to address important, global issues such as the accessibility of health services, climate change and more. The program will co-invest up to $30M in 5 to 7 projects in each targeted field.  

Protein Industries Canada Supercluster  

The Plant Protein Supercluster’s headquarters are in Alberta. This innovation cluster seeks to develop new plant-based protein alternatives and strengthen Canada’s agri-food economy, leveraging Western Canada’s agricultural strengths. As of the publication of their 2020 annual report, an estimated 569 jobs had been created by 17 funded projects.  

Protein Industries Canada offers two main funding programs to member organizations: The Capacity Building Program and the Technology Program. The first is focused on cross-industry initiatives to create long-term benefits for the agricultural and food processing sector. This is done through collaborative projects aiming to train a more skilled workforce, increase intellectual property literacy, improvements in infrastructure and more. The Technology Program creates partnerships to create new and innovative plant protein products that will develop Canada’s value-added food processing potential.  

In response to COVID-19, Protein Industries Canada made changes to their technology program. Until March 31st, 2021, projects could see eligible salaries funded at 75% – as opposed to the usual 50% – and applicants could receive advances on their funding.   

Ocean Supercluster  

Canada’s Ocean Supercluster, based in Atlantic Canada, has the mandate to leverage Canada’s uniquely vast and resource rich ocean economy potential. To do so, this supercluster collaborates with several industries, from aquaculture and transportation to offshore energy, national defense, ocean resources, and more 

Their Ocean Startup Project aims to double the number of ocean technology startups operating in Atlantic Canada. The program is in partnership with notable accelerators like Creative Destruction Lab (CDL) and Innovacorp. Bootcamps, innovation competitions and dedicated accelerator programs are being created to meet this goal. Like other superclusters, they also have a Technology Leadership program to fund collaborative projects with total costs ranging from $500k to $20M.   

Their most recent call for proposals, the Ocean Supercluster Resilience (OSCR) program, took place in February 2021. A response to the massive disruptions caused by the global pandemic, this program accepted EOIs for projects able to increase the ocean economy’s resilience by addressing supply chain efficiency, sustainability issues and more. Projects will see up to 50% of their eligible costs covered, and selected applicants should be announced shortly.   

Have questions about these Superclusters, or think your company is a good fit for any of their funding programsDon’t hesitate to reach out to our team 

 

Financial Aid for Businesses Impacted by COVID-19

R&D Partners is compiling a list of financial aid and other measures created or amended to help businesses struggling in the wake of COVID-19.

We will continue to update this list as the situation progresses, so please check back regularly. 

Table of Contents

Federal

Provincial

General

Municipal

 

Federal

Grants, Subsidies, & Loans


Government of Canada: Temporary Wage Subsidy (10%)

This program is a three-month measure that will allow eligible employers (individuals, NPOs, charities and/or CCPCs eligible for the small business deduction) to reduce the amount of payroll deductions required to be remitted to the Canada Revenue Agency (CRA). The subsidy is calculated when employers remit federal, provincial, or territorial income tax to the CRA. Payroll remitance of these amounts can then be reduced to obtain the subsidy, up to a maximum of 10% of the remuneration paid and $25,000 per employer.


Government of Canada: Emergency Wage Subsidy (CEWS)

The Canada Emergency Wage Subsidy initially provided a 75% wage subsidy to eligible employers for up to 12 weeks, retroactive to March 15th, 2020.

The Government of Canada’s Fall 2020 Economic Statement, published on November 30th, proposed to increase the maximum subsidy rate back to its original 75%. It had previously been reduced to 65%. The subsidy is expected to be in place until March 2021.


BDC: Highly Affected Sectors Credit Availability Program (HASCAP) Guarantee

This new loan guarantee is intended for businesses that were greatly affected by COVID-19 and the lockdown measures. To be eligible, businesses need to have benefited from the CEWS or CERS by showing a 50% revenue decline for at least three months (consecutive or not) in the eight-months preceding their HASCAP Guarantee application. If they were not eligible for CEWS or CERS, businesses could still qualify for HASCAP if they can still show a 50% year-over-year revenue decrease for three months.

BDC will guarantee 100% of a new term loan, with actual amounts ranging from $25,000 to $1 million.

Applications must be submitted to the business’ primary financial institution.


EDC: EDC Loan Guarantee for Small and Medium-Sized Enterprises (BCAP Program)

Canadian small and medium-sized businesses from all sectors that were financially viable and generating revenue prior to the COVID-19 outbreak can access credit and cash flow terms loans backed by EDC and co-lending arrangements with BDC. Financial institutions will be able to issue credit and cash flow terms loans of up to $6.25 million to existing clients. These loans will be guaranteed at 80% by the EDC.

This money is to be used for operational expenses, not for dividend payouts, shareholder loans, bonuses, stock buyback, option issuance, increases to executive compensation or repayment/refinancing of other debt.


BDC: Co-Lending Program for Small and Medium Enterprises (BCAP Program)

This program provides term loans for operational and liquidity needs of businesses, which could include interest payments on existing debt. The program is designed in three segments to better support different business sizes:

  • Loans of up to $312,500 to businesses with revenues of less than $1 million.
  • Up to $3.125 million for businesses with revenues between $1 million and $50 million.
  • Up to $6.25 million for businesses with revenues in excess of $50 million.

Loans will be interest-only for the first 12 months, with a 10-year repayment period.


Government of Canada: Canada Emergency Business Account (CEBA) (BCAP Program)

This program will provide interest-free loans of up to $40,000 to help cover small businesses’ operating costs while their revenues are reduced because of COVID-19. Loans that are repaid on or before December 31st, 2022 will receive a loan forgiveness of 25% (up to $10,000). To be eligible, businesses must demonstrate they paid $20,000 to $1.5M in total payroll in 2019.

A new loan of up to $20,000 is being made available in addition to the original CEBA loan. $10,000 of this new loan is also forgivable if the remaining amount is repaid on or before December 31st, 2022.

Applicants should contact their financial institutions in order to begin the application process.


The Government of Canada: Farm Credit Canada

The Government of Canada will support Farm Credit Canada by providing $5 billion in additional lending capacity to producers, agribusinesses and food processors. This is meant to address farmers’ cashflow issues as well as help processors absorb the cost of lost sales.


BDC: Special COVID-19 Initiatives

BDC is offering new relief measures for qualified businesses, including:

  • Working capital loans of up to $2 million with flexible repayment terms such as principal postponements for qualifying businesses
  • Small business loans of up to $100,000 for businesses that are generating revenue and have been in operation for at least 24 months
  • Postponement of payments for up to 6 months, free of charge, for existing BDC clients with total BDC loan commitment of $1 million or less
  • Reduced rates on new eligible loans

BDC: Mid-Market Financing

In order to better support medium-sized companies, BDC will offer loans ranging from $12,5 to $60 million to eligible Canadian businesses. 


Government of Canada: Canada Emergency Rent Subsidy (CERS)

This program replaces the Canada Emergency Commercial Rent Assistance (CECRA). Businesses, charities and NPOs can qualify for this program. The rent subsidy will be paid directly to tenants or property owners, eliminating the need to go through landlords to apply for the program. Subsidy amounts will be proportional to the business’s revenue drop.

Application periods have been harmonized with the CEWS, with CERS’s period one corresponding to the CEWS period 8 (September 27 to October 24, 2020).


Government of Canada: Regional Relief and Recovery Funds (RRRF)

The federal government will provide loans, some of which will be partially forgivable, to Canadian companies affected by COVID-19 for whom previous federal support was unavailable or insufficient. Details such as eligibility, funding amounts, and conditions vary from province to province. 


Government of Canada: Canada Seafood Stabilization Fund (CSSF)

This program is offered by different regional agencies across Canada and aims to support fish and seafood processors. Direct aquaculture and fishing enterprises are not covered by this initiative.

The delivery agencies are: 

Atlantic Canada: Atlantic Canada Opportunities Agency (ACOA)

Quebec: Canada Economic Development for Quebec Regions (CED)


Canada Enterprise Emergency Funding Corporation (CEEFC) and Canada Development Investment Corporation (CDEV): Large Employer Emergency Financing Facility (LEEFF)

This program will provide loans of $60 million or above to large Canadian employers affected by COVID-19. Companies will need to demonstrate yearly revenues above $300 million, as well as significant operations in Canada, in order to justify their eligibility. The loans will be repayable at any time during the lending term without penalty.


Telefilm Canada: Short-Term Compensation Fund for Canadian Audiovisual Productions (STCF)

Film and TV productions that have been pre-approved by Telefilm can obtain a reimbursement of up to 20% of their approved, eligible production costs in the case of a filming interruption caused by COVID-19.

The following conditions must be met:

  • An Actor or Director declared on the insurance policy covering the project has to have tested positive for COVID-19 or;
  • There must be a confirmed COVID-19 outbreak on set and it must cause a production shut down.

In all cases, reasonable and systematic measures must have been taken to prevent the spread of COVID-19 on set, in compliance with public health measures.

The program will offer compensations to eligible productions until March 2021.

Challenges/Calls for Solutions


The Government of Canada: Calling All Suppliers – Help Combat COVID-19

The Government of Canada is calling on suppliers capable of providing disposable N95 masks, disposable surgical masks, hand sanitizer, and other products and services to combat COVID-19. If you’re able to help, you can fill out the submission form for Coronavirus disease (COVID-19) products and services.

For more information, contact their info line.


NRC-IRAP/Innovative Solutions Canada: Pandemic Response Challenge Program

This program will receive $15M in funding to foster collaboration between academia and Canadian SMEs taking up R&D challenges related to COVID-19. To start, the main research areas will be: 

  • Rapid detection and diagnosis
  • Therapeutics and vaccine development 
  • Digital health

The specific R&D challenges have yet to be announced, but interested researchers and SMEs can register here to begin the team-building process.


Thales Digital Solutions: COVID-19 Rapid Response Call

Thales Digital Solutions is looking for partners to develop specific solutions to help fight COVID-19 on several fronts. Companies that manufacture and supply medical equipment, as well as healthcare organizations and more are invited to manifest their interest. 

Tax Deferrals


The Canadian Revenue Agency: Flexibility for Businesses Filing Taxes

The Canada Revenue Agency will allow all taxpayers to defer, until after August 31st, 2020, the payment of any income tax amounts that become owing on or after March 18th, 2020 and before September 2020. This relief will apply to tax balances due, as well as instalments, under Part I of the Income Tax Act. No interest or penalties will accumulate on these amounts during this period.

Provincial

ALBERTA


Government of Alberta: Relaunch Funding

Alberta will help eligible businesses that were affected by mandatory closures–or that remained open but were severely affected,–to re-open and adapt to the new public health guidelines through a first grant of up to $5,000.

A second grant will soon be made available. This amount will be up to $15,000 per business, giving access to up to $20,000 total through the program.

The funds may be used for various expenses essential to business continuity (such as rent or salaries) as well as non-medical PPE and other equipment.


Government of Alberta: Payments and Tax Deferrals

The Government of Alberta has announced the following tax and payment deferrals, including:

  • Deferral of corporate income tax balances and installment payments from March 19 until August 31, 2020 to increase employers’ access to cash so they can pay employees, address debts, and continue operations. 
  • Deferral of electricity and natural gas bill payments for the next 90 days for residential, farm, and small commercial customers. Call your utility provider directly to arrange the deferral.

Government of Alberta: Alberta Bits and Pieces Program

A call for products and services that can help deal with COVID-19 can manifest their interest through this form.


Government of Alberta: Site Rehabilitation Program

This program will provide grants to eligible oil and gas industry contractors to close up inactive pipelines and other oil and gas exploitation sites. Projects submitted to this program could see 100% of their eligible costs covered.

There will be multiple application periods, each catering to specific types of projects, sites, and costs. 


Canada Agricultural Partnership: Agriculture Training Support

Eligible Alberta farms and agribusinesses could benefit from a grant of up to $2,000 per eligible new employee (up to $50,000 per employer) to cover various training costs or the purchase of PPE or other materials and equipment related to public health measures. 

 

BRITISH COLUMBIA


Creative BC: Amplify BC

Amplify BC is adapting many of its programs to the new COVID-19 reality in order to better support British-Columbia’s musical artists, production companies, concert venues, and event organizers.

 

MANITOBA


Government of Manitoba: B2B Manitoba

This online platform aims to connect non-medical grade personal protective equipment (PPE) suppliers with businesses who may need PPE to open and operate safely.


Government of Manitoba: Manitoba Bridge Grant

The Manitoba Bridge Grant has begun issuing second payments to eligible businesses that submitted applications between November 16 and December 31, 2020.

NEW BRUNSWICK


Government of New Brunswick: General Measures for Businesses

  • Late penalties accumulated on business property taxes due on May 31st will be evaluated on a case-by-case basis. Undue financial challenges such as business closures caused by COVID-19 will be taken into account and late fees may be waived. 
  • Existing provincial loan and interest repayments could be deferred for up to six months.

Government of New Brunswick/Community Business Development Corporations (CBDCs): Working Capital Loans for Small Businesses

Loans of up to $100,000 will be allocated to eligible small businesses to help them respond to challenges associated with COVID-19. Examples of eligible small businesses include restaurants, seasonal tourism operators, service sectors, and self-employed business owners impacted directly by the pandemic. These loans will be interest-free for the first 6 months. 


Government of New Brunswick: Working Capital Loans for Mid-to-Large Employers

Opportunities New Brunswick (ONB) will make support available to mid-to-large-sized employers. ONB will also provide –upon request–working capital in excess of $100,000 to help large employers manage the impacts of COVID-19 on their operations.

 

NORTHWEST TERRITORIES


Northwest Territories Business Development and Investment Corporation: Deferred Loan Payments 

From April 1st, 2020 to February 24th, 2021, clients of the Business Development and Investment Corporation (BDIC) can apply to reduce or defer up to three months of loan payments without penalty or additional interest charges. Regular interest will still be charged. Businesses are automatically approved and not required to demonstrate financial hardship or impacts resulting from the COVID-19 crises. Businesses only need to notify their Department of Industry Tourism and Investment regional office that they wish to suspend their payments and specify the three month time period in which they need the suspension to take effect.

 

NOVA SCOTIA


Government of Nova Scotia: Tourism Accommodations Real Property Tax Rebate Program

This 25% tax rebate is available to operators of qualified roofed tourism accommodations (like hotels, motels, bed and breakfasts…) who have incurred a 30% or more revenue loss from 1 April 2020 to 31 October 2020 compared to the same period in 2019.


Government of Nova Scotia: Small Business Impact Part 2

This program offers financial help to Halifx and Hants county that were forced to close or reduce operations under public health directives in effect from 26 November 2020. The program will offer funding amounts of up to %15 of the business’s revenue from sales for the month of April 2019 or February 2020 as selected by the applicant.

Eligible businesses include restaurant, bars, gyms and various leisure facilities, from escape rooms to board game bars and restaurants.

NUNAVUT


Nunavut Department of Economic Development and Transportation Services: Small Business Support Program – Special COVID-19 Grants

Nunavut small businesses can access short-term relief in the form of a $5,000 non-repayable contribution.

 

ONTARIO


Government of Ontario: Ontario Small Business Support Grant 

This new grant is intended for businesses ordered to shut down or severely curtail their operations by the provincial lockdown put in place on December 26th, 2020. To qualify, businesses need to demonstrate a 20% revenue loss compared to the same period in the previous year. Alternative comparison periods are accepted in the case of seasonal businesses. 

These grants from $10,000 to $20,000 are intended to offset this revenue loss and businesses may use the funds for any necessary expenses.


Government of Ontario: Main Street Relief Grant for Personal Protective Equipment (PPE)

This program offers a grant of up to $1,000 to help cover PPE (Personal Protective Equipment) purchase costs. Eligible businesses can have between 2 and 9 employees.


Ontario Energy Board: Energy Assistance Program for Small Business (CEAP-SB)

This program provides a one- time, on-bill credit to eligible small business and registered charity customers affected by COVID-19 to help them catch up on their energy bills and resume regular payments.

Businesses can apply for a $1,500 rebate.


Ontario Arts Council: Artist-Presenter Collaboration Projects

Due to COVID-19, OAC’s 2021 Touring and Market Development program is temporarily on hold and is replaced by this program. The goal is to keep developing relationships and artistic projects while touring is suspended.


Government of Ontario: Property Tax and Energy Cost Rebate Grants

Businesses that were forced to close or significantly curtail their operations due to new lockdown measures may be eligible for a grant to help cover their property tax or energy bills.


Ontario Ministry of Finance: Employer Health Tax Exemption

This tax exemption has been bonified from $490,000 to $1 million for 2020 in order to relieve some of the tax burden on eligible Ontario employers.


Government of Ontario: WSIB Deferment

$1.9 billion will go to the Workplace Safety and Insurance Board (WSIB) to allow employers to defer their payments by up to six months.


Government of Ontario: Regional Opportunities Investment Tax Credit

This new refundable Corporate Income Tax Credit is designed to support regions where employment growth is lagging behind the rest of Ontario. It will help eligible businesses to save up to $45,000 (10% tax credit rate) on the construction, renovation or acquisition of commercial or industrial buildings.


Ontario Ministry of Finance: Interest and Penalty Relief for Businesses

Ontario businesses who are unable to file or remit select provincial taxes on time, due to the special circumstances caused by the coronavirus (COVID‑19) in Ontario, will benefit from a five-month relief period to file or pay them. The payments remain due at the normal dates, but no late fees or interests will accumulate for five months, starting on April 1st, 2020. This relief is automatic, that is businesses that find themselves unable to meet tax deadlines do not need to contact the Ontario Ministry of Finance to notify them.


Ontario Call for Suppliers and Solutions: Emergency Products

Producers, manufacturers and suppliers are invited to fill out this form if they have any supplies which can be used to fight COVID-19.


Government of Ontario: Innovative Solutions

Suppliers and innovators are invited to submit proposals to help address the spread and impact of COVID-19. Businesses that can support virtual mental health services, supply chain monitoring, or financial advice for small businesses are invited to submit their proposals.


Ontario Centers of Excellence: COVID-19 Collaboration Platform

OCE is looking to match collaborators with access to assets, technologies or products which could be instrumental in fighting the  COVID-19 virus. 

Application here


ENCQOR: Call for projets – Resilience to Pandemics

This technological challenge calls on Quebec and Ontario SMEs to develop innovative 5G solutions to help Canada become more resilient when facing situations such as the COVID-19 pandemic. 

A wide variety of economic sectors could benefit from the proposed solution, from the health sector to manufacturing, transportation and more.


Digital Main Street: Digital Transformation Grant

This program aims to help Ontario businesses to implement technological strategies and tools to facilitate their digital transformation and increase their online presence.

 

PRINCE EDWARD ISLAND


Finance PEI: Emergency Working Capital Financing

This new loan program will help qualifying companies maintain normal business operations during these difficult times. Eligible applicants can apply to receive a working capital loan of up to $100,000 with a fixed interest rate of 4% per annum to be used to assist with fixed operating costs.

To be eligible, a business must:

  • be located, operating, and generating revenue in the Province of PEI
  • be registered to conduct business within the Province of PEI
  • have a satisfactory credit rating and no defaulted outstanding debt obligation on file in the Province’s Central Default Registry

Finance PEI: Fisheries Emergency Loan 

These loans of up to $25,000 are intended for eligible fisheries or aquaculture businesses operating in PEI. Borrowers will benefit from deferred interest payments for a maximum of 18 months.

 

QUEBEC


Caisse de dépot et placement du Québec (CDPQ): Support for Québec Businesses

Loans of $5 million or more to Quebec companies that can demonstrate that they were profitable before the start of the COVID-19 crisis and have a promising growth outlook in their sector. Companies from all sectors and sizes may apply.


Investissement Québec: Concerted Temporary Action Program for Businesses (PACTE)

This measure is designed to shore-up Quebec businesses’ working capital in response to temporary difficulties they may be experiencing as a result of COVID-19. To be eligible for funding, they must demonstrate that:

  • their financial structure offers realistic prospects for profitability outside of these extraordinary circumstances. Financing can also take the form of a loan from Investissement Québec, but guarantees will be the preferred funding method.
  • their cash flow issues are temporary and that the liquidity shortage stems from:
    • A problem involving the supply of raw materials or products (goods or services)
    • An inability, or a substantially decreased ability, to deliver goods, products or services

Investissement Québec: Concerted Temporary Action Program for Businesses (PACTE): Red Zone Businesses

This new stream of the PACTE is intended for businesses located in “Red zones” currently under maximum alert and targeted by government-mandated closures. Some examples of eligible industries for this special stream include:

  • Restaurants;
  • Theatres;
  • Bars;
  • Museums;
  • Spas;
  • and more.

The main difference between the original PACTE and this special stream is that 80% of the loan (up to a maximum of $15,000 for each month of closure) can be written off.


Quebec Ministry of Tourism: Regional Tourism Partnerships

This program funds projects according to three streams, two of which are reserved for COVID-19 struggles encountered by the tourism industry in Quebec:

  1. Stream one is intended to help tourism businesses adapt their workplaces to meet the new public health guidelines regarding COVID-19. 
  2. Stream two will focus on collective projects that will help tourism-sector SMEs to adapt to the new COVID-19 guidelines and restrictions. 

Businesses must contact their regional tourism associations in order to access the application form and obtain more details about the program. Funding amounts will depend on the specifics of each project.


Investissement Québec: PACTE Tourism Industry Stream 

The new stream of the Concerted Temporary Action Program for Businesses offers the same loan guarantees as it does to all other eligible sectors, with a few new, advantageous conditions for the tourism sector: 

  • A 24-month moratorium on reimbursement of capital;
  • A repayment term of up to 60 months after the end of the moratorium;
  • And no minimum loan amount

Quebec Ministry of Tourism / Investissement Québec: Support for the Development of Tourism Attractions – Component 2: Hotel Renovation Fund 

This new stream of the “PADAT” will provide term loans to eligible hotels for the purposes of facilitating major renovations in order to boost the tourism sector in Quebec after COVID-19. Loan amounts will range from $100,000 to $5 million and cover up to 80% of eligible expenses. All costs directly related to the approved construction or renovation activities could be deemed eligible, including equipment and furniture expenses, among others.


SODEC: Temporary Support for Film and TV Production

The SODEC is offering this new program to help the film and TV production recover from the financial impact of the COVID-19 crisis. 

Two streams were available, the first offering general support to production activities and the second one emergency grants meant to offset the cost of interrupting a production because a member of the cast or one of the directors received a positive COVID-19 diagnostic. The second stream has now been terminated, but general support remains available. 


SODEC: Temporary Working Capital Support

Exceptional support for SODEC-supported sectors. These new support measures include a new line of credit, a new loan guarantee and a new term loan.


Government of Quebec: Emergency Support for Small and Medium-Sized Businesses

As short-term support, Quebec government will offer loans or loan guarantees of up to $50,000 to Quebec SMEs.

Eligible businesses include:

  • Those in all sectors that are otherwise viable
  • Those significantly impacted by COVID-19
  • Those that have cash flow issues directly related to the impacts of the pandemic

Government of Quebec: Emergency Support for Small and Medium-Sized Businesses: Support for Businesses in a Red Alert Zone

This new stream of this emergency support program is intended for businesses located in “Red zones” and affected by government-mandated closures.
This stream offers the possibility to forgive up to 80% of the loan (up to a maximum of $15,000 per month of closure).


Financière agricole du Québec (FADQ): Loan guarantee

FADQ financing clients experiencing temporary cash flow issues due to the COVID-19 pandemic can now access loan guarantees for loans of up to $50,000. 


Quebec Ministry of Tourism: Tourism Industry Support

The Quebec government has announced several measures that will benefit the tourism industry, hard hit by COVID-19. A total of $750 million is expected to be spent across various programs and measures.


ENCQOR: Call for projets – Resilience to Pandemics

This technological challenge calls on Quebec and Ontario SMEs to develop innovative 5G solutions to help Canada become more resilient when facing situations such as the COVID-19 pandemic. 

A wide variety of economic sectors could benefit from the proposed solution, from the health sector to manufacturing, transportation and more.


La Piscine and SODEC: SURF

La Piscine is partnering with SODEC to offer support to the businesses and non-profits of the cultural industry. Group coaching sessions will help participants address their particular challenges related to the pandemic.

The program is entirely offered online.

 

YUKON


Government of Yukon: Increase to Tourism Cooperative Marketing Fund

The Department of Tourism and Culture has announced a one-time, $1 million increase to the Tourism Cooperative Marketing Fund (TCMF) in the interest of helping support more businesses in the summer when the pandemic subsides. Where the fund previously covered 50% of marketing costs it will now cover 100%. It will also be extended to cover initiatives targeting people already in the Yukon.


Government of Yukon: Paid Sick Leave Rebate for Employers

This program will reimburse employers who pay their employees to take sick days and self-isolate. The rebate will cover a maximum of 10 days of wages per employee, up to $378.13 per day per employee. This program can also support self-employed workers who lose income due to taking sick leave.

Provincial – General

MANITOBA


Government of Manitoba: General Economic Measures

Until October 1st 2020: 

  • Manitoba Hydro, Centra Gas, Workers Compensation Board and Manitoba Public Insurance (MPI) will not charge interest or penalties. 
  • Manitoba Hydro and Centra Gas will not disconnect any customers. 
  • MPI will relax ordinary practices on policy renewals and collections. 
  • Interest will not be charged on education property taxes.
  • Manitoba Liquor and Lotteries will not charge restaurants receivables.

 

NOVA SCOTIA


Government of Nova Scotia: COVID-19 Economic Budget

Small and medium-sized businesses in Nova Scotia will receive $161 million to help them weather the economic storm caused by COVID-19.

 

ONTARIO


Ontario Ministry of Finance: Economic Support in Response to COVID-19

The government of Ontario has pledged $17 billion to fight COVID-19. Of this amount, $200 million will provide emergency support for individuals experiencing financial difficulties, and to municipalities and other services so they can quickly respond to local needs. How this amount will be divided and administered has yet to be disclosed. 

A $1.5B increase in electricity cost relief will make electricity bills more affordable for eligible residential, farm, and small business consumers. In addition, the Province is also setting electricity prices for time-of-use customers at the lowest rate, known as the off-peak price, 24 hours a day for 45 days, to support ratepayers in their increased daytime electricity usage as they respond to the COVID‑19 outbreak.

Other measures (with no clear guidelines to date) include:

  • $200M for research institutions, industry, and nonprofit scientific partners to develop tools and resources to combat COVID-19 and related diseases.
  • $100M in skills training for workers affected by the outbreak.

 

Municipal

MONTREAL


Municipal Government of Montreal: Business Support Hotline

Montreal is offering a hotline for small business owners looking for general information about assistance programs as well as answers to questions about support measures offered by the city. The hotline is open 8 a.m. to 5 p.m., Monday to Friday.

To decrease wait times on calls, business owners are encouraged to ask their questions via a short online questionnaire. They will receive an answer from a city economic development advisor within four hours, between 8 a.m. and 5 p.m., Monday to Friday.

Fill out the form (French).

Or call: 514 394-1793


PME MTL: Automatic, Interest-Free Moratorium

The PME MTL network is partnering with the Fonds de solidarité FTQ to offer an automatic, six-month moratorium on capital and interest to private and social economy businesses that have received a loan through the PME MTL fund, Fonds Locaux de Solidarité, and Fonds de commercialisation des innovations. This measure is effective as of March 19th, 2020.

Clients of PME MTL can contact their advisor for more information.


PME MTL:  Recovery Fund for LaSalle Businesses

This $200,000 fund is meant to ensure socio-economic vitality on LaSalle’s commercial arteries and to maintain commercial diversity despite the impact of COVID-19. Targeted sectors are those particularly affected by the pandemic such as retail, food services and personal services. 

 

EDMONTON


City of Edmonton: Edmonton Economic Recovery Grants: Phase 1

Phase 1 of the Edmonton Economic Recovery Grants will be delivered as micro grants ranging from $1,000 to $5,000. Businesses may use these funds to purchase equipment and services needed to adapt their business to the new public health measures and allow them to resume their activities more quickly. Eligible businesses can come from any sector of activity, but must demonstrate that they have experienced significant financial hardship as a result of the pandemic and the related public health closures, restrictions, and measures. 

Businesses can apply every Monday of the intake period, which will end in December 2020.

Phase 2 funding will begin rolling out in 2021 and will address more long-term recovery and development goals. It is important to note that businesses that receive funding under Phase 1 will not be eligible for Phase 2 funding.


For general information about COVID-19, visit the Government of Canada.

Stay home and stay healthy!

 

 

 

COVID-19 Funding and SRED: Best Practices for Canadian Companies

Over the past few months, we’ve seen various levels of government create many new funding programs for Canadian companies that were hit hard by COVID-19 or the necessary lockdown measures. This has affected nearly every industry, from the biggest industrial manufacturers to our favourite local restaurants and independent coffee shops. However, receiving this funding is not the end of the journey. For many innovative Canadian firms, getting ready to file a SRED claim for 2020, the influx of government subsidies and other supports brings confusion about how these funding programs interact with the SRED claim.

As a general rule, any government funding that a company receives and that goes towards their R&D expenditures must be deducted from the amount they include in their SRED claims. This is to avoid what is commonly called “double-dipping”, which happens when the same expenses are covered by two or more different sources of government aid. Moreover, stacking rules as specified by each funding program must also be adhered to. As your company prepares its SRED claims, forgetting to deduct non-repayable COVID-19 pandemic support from your SRED-eligible expenses could end up costing you time and money, especially if an audit is conducted. Below, you will find important information about two of the most important Federal Government coronavirus relief programs and how they may interact with your SRED claims:

1. Canada Emergency Wage Subsidy (CEWS)

This wage subsidy has already seen a few different iterations in its short existence. This corner stone of the federal COVID-19 support strategy has distributed over $60 billion to Canadian companies to date and will continue to approve applications until at least June 2021.

You may have accessed the full 75% wage subsidy in its early months, and then, depending on your industry and how much it was affected by COVID-19, seen your subsidy rate go up or down with the introduction of the base and top-up subsidies system that allowed some businesses to cover up to 85% of their eligible salaries.

When it comes to R&D expenditures, the principle of how to treat the CEWS funds remains the same, regardless of the claim month and exactly which proportion of your employees’ salaries was subsidized. However, individual calculations will vary greatly. You will need to keep a few key things in mind:

  • You only need to deduct the amounts of the wage subsidy that apply to employees that are actively engaged in research and development activities; and
  • You only need to deduct the amounts of the wage subsidy that are proportionate to the amount of time your employee actually spent on research and development activities in a given month.

Here is a practical example: Let’s consider a company that has 10 employees and benefited from a 75% wage subsidy from CEWS in April 2020. Each employee’s salary amounts to $1,000 a month, bringing the total CEWS amount the company benefited from for April to $7,500.

10×(0.75×$1,000)=$7,500

However, that month, only three employees spent time on research and development activities the company can include in their SRED claim. Therefore, only $2,250 would need to be deducted from eligible SRED expenses at most, and that is if all three employees spent 100% of their time on eligible R&D activities that month.

3×(0.75×$1,000)=$2,250

Say two of these three R&D employees spent 50% of their time that month on eligible activities, with the last spending 75% of their time on eligible SRED work. For our first two, you would only need to deduct $375 each, and for our last eligible employee $562.5.

50%×(0.75×$1,000)=$375

75%×(0.75×$1,000)=$562.50

(2×$375)+$562.50=$1,312.50

In total, you would have to deduct a total of $1,312.5 from April expenses from your total SRED claim to account for the monies received from CEWS that month and avoid any double dipping. Repeat this process for every month you received CEWS and conducted eligible R&D. This will give you the total amount you need to deduct from your claim for the financial year. Do not forget that your CEWS rate will vary from month to month and make sure to adapt your calculations accordingly.

(2×$375)+$562.5=$1,312.50

2. Canada Emergency Business Account (CEBA)

This program was initially introduced as a $40,000 interest-free loan with the possibility of up to $10,000 of that loan amount being forgiven if the remainder is repaid by December 31, 2022. On December 4, 2020, the total loan amount was increased to $60,000, with now $20,000 eligible for complete loan forgiveness.

While it is officially a government loan administered by various local financial institutions across Canada, the potentially non-repayable portion of CEBA should generally be treated like a grant at this time for tax accounting and purposes (this can be reversed if the loan is not repaid on time and the grant portion is thus lost). This grant portion is a form of government funding that should be deducted in the year it is expected to be received and could impact other government funding. The R&D tax credit expenditures are reduced by government aid that is associated with R&D activities and this may include both grants and loans with “noncommercial” terms, as long as the government aid is directly associated with these R&D expenditures.

The important element to keep in mind with respect to interaction of financial aid and the SRED tax credit program is that any government or non-government aid your business benefited from that is directly associated with the SRED expenditures must be taken into account. Complex and often competing stacking rules for each program must be considered as well. This includes the programs mentioned above and the many other COVID-19 and other government incentives, even if we did not specifically mention them in this short overview.

How R&D Partners can help:

If you have any questions about SRED or COVID-19-related government funding, or if you are considering submitting a SRED claim, do not hesitate to contact me, Mike Lee, at R&D Partners:

1-800-500-7733, 110

[email protected]