T2 Corporate Scientific Research and Experimental Development (SR&ED) Statistics (2012 – 2018 tax years)

The SR&ED statistical tables provide key tax and accounting information as of September 30, 2020. The tables include select information from all T2 returns that were assessed or reassessed for corporations with tax years ending in years 2012 to 2018. These tables are to be released yearly.

Explanatory notes

Who has to file a T2 Corporation Income Tax Return?

All resident corporations (and some non-resident corporations), including non-profit organizations, tax-exempt corporations, and inactive corporations, have to file a T2 Corporation Income Tax Return for every tax year, even if there is no tax payable. The only exception to this rule is a corporation that was a registered charity throughout the year, which has to file a Registered Charity Information Return. A non-resident corporation must file a T2 return with the Canada Revenue Agency (CRA) if it carried on business in Canada, had a taxable capital gain or disposed of a taxable Canadian property (TCP) at any time in the tax year. The Income Tax Act requires corporations to file their return no later than six months after their tax year-end. For more information on filing requirements, see Guide T4012, T2 Corporation — Income Tax Guide.

Scientific Research and Experimental Development (SR&ED) Program

The SR&ED Program provides the following two incentives:

1. SR&ED expenditures can be deducted to reduce income for tax purposes in the current tax year or these expenditures can be carried forward to reduce income for tax purposes in future tax years.
2. A SR&ED investment tax credit (ITC) can be received on qualified expenditures in the form of a cash refund or a reduction of tax payable or both. Unused SR&ED ITCs can be carried back three years or carried forward 20 years.

Filing requirements

To access the two incentives for SR&ED work performed, the following forms containing the prescribed information must be completed and submitted by the SR&ED reporting deadline:

1. Form T661, Scientific Research and Experimental Development (SR&ED) Expenditures Claim; and
2. Schedule T2SCH31, Investment Tax Credit Corporations, or Form T2038(IND), Investment Tax Credit – Individuals as applicable.

The above forms and schedule should be filed with the income tax return for the year. If any of the above forms and schedules are being amended and filed electronically, they must be filed with an income tax return for the year.

A claimant's SR&ED reporting deadline is the day that is 12 months after the filing due date of the income tax return for the year. This means that corporations have 18 months and individuals have 17.5 months from the end of the tax year in which the expenditures were incurred to file an SR&ED claim.

A corporation exempt from tax that incurs SR&ED expenditures has to file Form T661 on or before the due date for filing its return of income for the year or it will be subject to a penalty. The filing due date is six months after the end of the corporation's tax year.

Coverage

The statistics in these tables include corporations with tax years ending in 2012 to 2018 that filed corresponding corporation income tax returns as of September 30, 2020.

Confidentiality

To ensure the protection of taxpayer information, data have been suppressed where warranted. As well, counts are rounded to the nearest multiple of 10. For example, 104 would be rounded to 100 and 105 would be rounded to 110. Dollar amounts are rounded and in thousands in all tables. Totals may not add up due to rounding or suppression.

Data sources

The corporate statistical tables reflect corporation income tax returns that were assessed or reassessed for the tax years that ended in 2012 to 2018. The data source used to generate these tables is the Corporate Tax Assessing System (CORTAX). It contains data on all corporation income tax returns and related schedules. The Business Number (BN) file was also used to obtain the North American Industry Classification System codes. The data extracted from these sources are as of September 30, 2020.

Changes that impact the data

For all changes in legislation that have occurred during the 2012 to 2018 period, see the federal government budgets and other federal legislative announcements during this period. For additional information, please refer to the T4088, Scientific Research and Experimental Development (SR&ED) Expenditures Claim- Guide to Form T661.

Description of items/variables

Corporation

For the purposes of these tables, a corporation is defined at the unique 15-digit program account number. When a corporation files more than one return in a tax year, adjustments are made to avoid double-counting of stock variables such as the opening balance for ITCs carried forward. However, when a corporation amalgamates (usually resulting in a change in BN), double counting will occur as it will be treated as a separate entity due to the different 15-digit program account number. Due to multiple year-ends within a calendar year, there are generally more returns than corporations.

Current year ITC Allowable (Schedule 31, Line 540)

Investment tax credits from SR&ED expenditures.

ITC Allowed (Schedule 31, sum of Lines 560, 580, 610, 911, 912, 913)

Line 560 – Credit deducted from Part I tax

Amount of current year SR&ED investment tax credit deducted from Part I tax.

Line 580 – Credit transferred to offset Part VII tax liability

Line 610 – Refund of credit claimed on SR&ED expenditures

Amount of current year SR&ED investment tax credit refunded.

Carryback of credit from SR&ED expenditures:
Line 911 – 1st previous tax year
Line 912 – 2nd previous tax year
Line 913 – 3rd previous tax year

Jurisdiction

Jurisdiction is identified using line 750 of the T2 Corporation Income Tax Return. This is the province or territory where corporations earned their income. Usually, this is where a corporation has its permanent establishment. If the corporation earned income in more than one province or territory, “Multi-Jurisdiction (MJ)” is used. Note that “Newfoundland and Labrador offshore area” and “Nova Scotia offshore area” are included in “Newfoundland and Labrador” and “Nova Scotia” jurisdictions, respectively, in the tables. For the most part, “Outside Canada (OC)” includes corporations that do not have a permanent establishment in any of the provinces or territories.

North American Industrial Classification System (NAICS) sector groupings

Corporations are assigned an industry code based on their major business activity in accordance with the NAICS. Industry groupings are based on the 2018 NAICS coding system according to the filer’s most recent assigned industry code. This classification system was developed by the statistical agencies of Canada, Mexico, and the United States to provide common definitions of the industrial structure of the three countries. When a corporation is engaged in more than one activity, it is classified in the industry that corresponds to its main activity.

The NAICS divides the economy into 20 sectors according to a production criterion, with five sectors being largely goods-producing (Agriculture, Forestry, Fishing and Hunting, Mining and Oil and Gas Extraction, Utilities, Construction, and Manufacturing) and 15 sectors being entirely service-producing industries. For the purpose of these tables, Educational Services, Health Care and Social Assistance, Arts, Entertainment and Recreation and Accommodation and Food Services are grouped under one category and also include Public Administration under Other Services. In addition to that, corporations that have yet to be assigned a NAICS code by Statistics Canada have been classified as “Missing/Not Assigned.” The NAICS codes assigned to corporations are based on the September 30, 2020, version of the BN System. The BN System provides a snapshot of NAICS codes. The codes assigned are therefore used over the five-year period of this release. The groupings are based on the first two digits of the NAICS code. For more information on NAICS codes and groupings, refer to Statistics Canada’s website.

Qualifying corporation

Qualifying corporation is defined in the Income Tax Act and means:

• a corporation that is a Canadian Controlled Private Corporation (CCPC) in a particular tax year, with taxable income in the previous tax year that is not more than the corporation's qualifying income limit for the particular tax year, or
• a corporation that is a CCPC in a particular tax year and is associated with one or more corporations, the total of the taxable incomes of the corporation and the associated corporations for their last tax year ending in the preceding calendar year that is not more than the corporation’s qualifying income limit for the particular tax year.

The taxable income in the previous tax year or in the last tax year ending in the preceding calendar year is calculated before taking into consideration the specified future tax consequences for that previous year.

Where a CCPC's qualifying income limit is reduced to zero because the CCPC's taxable capital is $50 million or greater in the immediately preceding year, the CCPC is not a qualifying corporation and would not be entitled to any refundable ITC.

The definition of qualifying corporation was amended and no longer relies upon the corporation's business limit as determined under the Act. The reference is now to the corporation's qualifying income limit. The amended definition of qualifying corporation applies to tax years that end after February 25, 2008. For the definition of qualifying corporation before February 26, 2008, please refer to Schedule T2SCH31, Investment Tax Credit – Corporations, for the applicable year. For more information on business limit before February 26, 2008, see Line 410 of Guide T4012, T2 Corporation - Income Tax Guide, for the applicable year.

SR&ED Expenditures Deducted From Tax on Schedule 1 (Schedule 1, Line 411)

This is the amount the corporation wishes to claim as a deduction in their net income for tax purposes in the tax year. The deduction is optional. All or a portion of the pool of deductible SR&ED expenditures calculated on line 455 may be deducted.

Note: If the corporation has undergone an acquisition of control, it might not be able to claim the total amount on line 455 in the tax year or in a later tax year.

Tax year

A tax year includes all T2 returns with a tax year end date in the calendar year. For example, all amounts relating to a T2 Corporation Income Tax Return with a starting period of February 1, 2015, and an end date of January 31, 2016, will be included in the 2016 tax year.

Total Allowable SR&ED Expenditures (Form T661, Line 400)

Total allowable SR&ED expenditures are the total current and capital expenditures made in the tax year.

Total Qualified SR&ED Expenditures (Form T661, Line 570)

After December 31, 2012:

The term "qualified expenditure" is defined in the Income Tax Act and means:

• an expenditure incurred in the tax year by the claimant in respect of SR&ED carried on in Canada and is:
  • an allowable expenditure of a current nature for SR&ED directly undertaken by the claimant;
  • 80% of an expenditure which is:
    • a contract expenditure for SR&ED performed on behalf of the claimant, and
    • a third-party payment;
  • an expenditure for shared-use-equipment (SUE) acquired before 2014;
  • an allowable expenditure of a capital nature acquired before 2014;

or

• a prescribed proxy amount (PPA) of the claimant for the tax year.

Prior to January 1, 2013:

The term "qualified expenditure" is defined in the Income Tax Act and means:

• an expenditure incurred in the tax year by the claimant in respect of scientific research and experimental development carried on in Canada and is:
  • an expenditure for shared-use-equipment (SUE);
  • an allowable expenditure of a current nature;
  • an allowable expenditure of a capital nature;

or

• a prescribed proxy amount (PPA) of the claimant for the tax year.

Tables in PDF format

Please refer to the explanatory notes about these tables.

• Table 1A: Total Allowable Scientific Research and Experimental Development (SR&ED) Expenditures, by Sector (two digits) based on the North American Industry Classification System (NAICS), 2012 to 2018
• Table 1B: Total Allowable Scientific Research and Experimental Development (SR&ED) Expenditures, by Jurisdiction, 2012 to 2018
• Table 2A: Total Qualified Scientific Research and Experimental Development (SR&ED) Expenditures, by Sector (two digits) based on the North American Industry Classification System (NAICS), 2012 to 2018
• Table 2B: Total Qualified Scientific Research and Experimental Development (SR&ED) Expenditures, by Jurisdiction, 2012 to 2018
• Table 3A: Current Year Investment Tax Credit (ITC) Allowable, by Sector (two digits) based on the North American Industry Classification System (NAICS), 2012 to 2018
• Table 3B: Current Year Investment Tax Credit (ITC) Allowable, by Jurisdiction, 2012 to 2018
• Table 4A: Investment Tax Credit (ITC) Allowed, by Sector (two digits) based on the North American Industry Classification System (NAICS), 2012 to 2018
• Table 4B: Investment Tax Credit (ITC) Allowed, by Jurisdiction, 2012 to 2018
• Table 5A: Scientific Research and Experimental Development (SR&ED) Expenditures Deducted From Tax on Schedule 1, by Sector (two digits) based on the North American Industry Classification System (NAICS), 2012 to 2018
• Table 5B: Scientific Research and Experimental Development (SR&ED) Expenditures Deducted From Tax on Schedule 1, by Jurisdiction, 2012 to 2018

Tables in CSV format

Please refer to the explanatory notes about these tables.

Table 1A: Total Allowable Scientific Research and Experimental Development (SR&ED) Expenditures, by Sector (two digits) based on the North American Industry Classification System (NAICS), 2012 to 2018

Table 1B: Total Allowable Scientific Research and Experimental Development (SR&ED) Expenditures, by Jurisdiction, 2012 to 2018

Table 2A: Total Qualified Scientific Research and Experimental Development (SR&ED) Expenditures, by Sector (two digits) based on the North American Industry Classification System (NAICS), 2012 to 2018

Table 2B: Total Qualified Scientific Research and Experimental Development (SR&ED) Expenditures, by Jurisdiction, 2012 to 2018

Table 3A: Current Year Investment Tax Credit (ITC) Allowable, by Sector (two digits) based on the North American Industry Classification System (NAICS), 2012 to 2018

Table 3B: Current Year Investment Tax Credit (ITC) Allowable, by Jurisdiction, 2012 to 2018

Table 4A: Investment Tax Credit (ITC) Allowed, by Sector (two digits) based on the North American Industry Classification System (NAICS), 2012 to 2018

Table 4B: Investment Tax Credit (ITC) Allowed, by Jurisdiction, 2012 to 2018

Table 5A: Scientific Research and Experimental Development (SR&ED) Expenditures Deducted From Tax on Schedule 1, by Sector (two digits) based on the North American Industry Classification System (NAICS), 2012 to 2018

Table 5B: Scientific Research and Experimental Development (SR&ED) Expenditures Deducted From Tax on Schedule 1, by Jurisdiction, 2012 to 2018