Advancement of Scientific Knowledge
Scientific or technological advancement / scientific advancement / advancement of scientific knowledge / technological advancement
Scientific or technological advancement is the generation of information or the discovery of knowledge that advances the understanding of scientific relations or technology. This definition encompasses the definition of scientific advancement, advancement of scientific knowledge and technological advancement. The only difference is that scientific advancement and advancement of scientific knowledge relate to science whereas technological advancement relates to technology.
(Government of Canada, SR&ED Glossary Date: July 15, 2015)
Analysis
Analysis is the detailed examination of information to differentiate the various parts of a whole, determine their attributes, or explain their relationships. It is performed against the background of available knowledge and experience and it involves using tools such as models, graphs, statistics, tables, diagrams, mathematical formulas, and computer programs to express this knowledge or experience. Analysis is an integral part of the systematic investigation or search and it can be used to generate or test a hypothesis
(Government of Canada, SR&ED Glossary Date: July 15, 2015)
Applied Research
Applied research is work undertaken for the advancement of scientific knowledge with a specific practical application in view.
(Government of Canada, SR&ED Glossary Date: July 15, 2015)
Basic Research
Basic research is work undertaken for the advancement of scientific knowledge without a specific practical application in view.
(Government of Canada, SR&ED Glossary Date: July 15, 2015)
Basic Investment Tax Credit Rate (15%)
The basic rate of SR&ED ITC is 15% for tax years that end after 2013 and 20% for tax years that end before 2014. For tax years that include January 1, 2014, the reduction in the basic ITC rate is pro-rated based on the number of days in the tax year that are after 2013.
The following types of claimants will earn SR&ED ITC at the basic ITC rate:
- corporations (other than certain CCPCs
- sole proprietorships (individuals
- partners of a partnership
- beneficiaries of trusts
(Government of Canada, SR&ED Investment Tax Credit Policy, Date: December 18, 2014
Canadian-controlled Private Corporation
For your corporation to be considered a CCPC, it has to meet all of the following requirements at the end of the tax year:
- it is a private corporation
- it is a corporation that is resident in Canada and was either incorporated in Canada or resident in Canada from June 18, 1971, to the end of the tax year
- it is not controlled directly or indirectly by one or more non-resident persons
- it is not controlled directly or indirectly by one or more public corporations (other than a prescribed venture capital corporation, as defined in Regulation 6700 of the Income Tax Regulations)
- it is not controlled by a Canadian resident corporation that lists its shares on a designated stock exchange outside of Canada
- it is not controlled directly or indirectly by any combination of persons described in the three preceding conditions
- if all of its shares that are owned by a non-resident person, by a public corporation (other than a prescribed venture capital corporation), or by a corporation with a class of shares listed on a designated stock exchange, were owned by one person, that person would not own sufficient shares to control the corporation
- no class of its shares of capital stock is listed on a designated stock exchange
(Government of Canada, Type of corporation Date modified: 2018-02-15)
Directly in Support
Within the context of SR&ED, work that is directly in support is work that was carried out specifically to perform the related basic research, applied research or experimental development.
(Government of Canada, SR&ED Glossary Date: July 15, 2015)
Engineering
Engineering is the practice of designing, composing, evaluating, advising, reporting, directing, or supervising the construction or manufacturing of tangible products, assemblies, systems, or processes that requires in-depth knowledge of engineering science and the proper, safe, and economic application of engineering principles.
By definition, and according to sound professional practice, engineering practice does not involve scientific or technological uncertainty and is thus not eligible on its own. However, engineering work that is commensurate with the needs and directly in support of basic research, applied research, or experimental development is eligible.
It is important to distinguish between work with respect to engineering and the work that engineers perform. Even though engineering practice is not eligible on its own, engineers can still be carrying out basic research, applied research, and experimental development.
(Government of Canada, SR&ED Glossary Date: July 15, 2015)
Enhanced SR&ED Investment Tax Credit Rate (35%)
Some Canadian-controlled private corporations (CCPCs) that meet certain requirements may earn investment tax credits at the enhanced rate of 35% (20% basic rate + 15% enhancement - before 2014) and (15% basic rate + 20% enhancement - after 2013). This enhanced rate may be earned on their qualified SR&ED expenditures up to a maximum threshold of $3 million. The qualified SR&ED expenditures in excess of the expenditure limit for the tax year earn ITC at the basic rate.
(Government of Canada, SR&ED Glossary Date: July 15, 2015)
Experiment
An experiment is the test of a hypothesis under controlled conditions.
(Government of Canada, SR&ED Glossary Date: July 15, 2015)
Experimental Development
Experimental development is work undertaken for the purpose of achieving technological advancement for the purpose of creating new, or improving existing, materials, devices, products, or processes, including incremental improvements thereto
(Government of Canada, SR&ED Glossary Date: July 15, 2015)
Hypothesis
A hypothesis is an idea, consistent with known facts, that serves as a starting point for further investigation to prove or disprove that idea.
(Government of Canada, SR&ED Glossary Date: July 15, 2015)
Investment Tax Credit (ITC)
An investment tax credit (ITC) may be earned in respect of various investments or expenditures. The definition of ITC within the Act determines the amount of ITC that is available to a taxpayer at the end of a tax year. There are additional provisions in the Act that adjust the ITC amount available to the taxpayer at the end of a particular tax year.
Unless otherwise noted, any reference to ITC within the SR&ED program is a reference to an ITC earned on qualified SR&ED expenditures
(Government of Canada, SR&ED Glossary Date: July 15, 2015)
Ontario Innovation Tax Credit (OITC)
Summary of provincial and territorial research & development (R&D) tax credits - As at June 30,2017.Ontario Research and Development Tax Credit (ORDTC)
Summary of provincial and territorial research & development (R&D) tax credits - As at June 30,2017.Prescribed Proxy Amount (PPA)
The prescribed proxy amount is a notional amount on which SR&ED ITC can be earned. It is calculated as a percentage of a salary base. The PPA is only applicable when the claimant elects to use the proxy method.
The PPA is used in lieu of actual SR&ED overhead and other expenditures when calculating qualified SR&ED expenditures to earn SR&ED ITC. The PPA is not included in the pool of deductible SR&ED expenditures.
(Government of Canada, SR&ED Glossary Date: July 15, 2015)
Qualified Individuals
Qualified individuals are personnel who have qualifications and / or experience in science, technology, or engineering. The qualifications and experience must be relevant to the science or technology involved in the projects claimed.
(Government of Canada, SR&ED Glossary Date: July 15, 2015)
Qualified SR&ED Expenditures
The term qualified SR&ED expenditure is a term used on Form T661, Scientific Research and Experimental Development (SR&ED) Expenditures Claim. The term represents all the amounts that qualify for calculating the investment tax credit in a tax year, except for repayments of assistance and contract payments made in that year.
(Government of Canada, SR&ED Glossary Date: July 15, 2015)
Qualifying Corporation
Qualifying corporation means:
- a corporation that is a Canadian-controlled private corporations (CCPC) in a particular tax year, with a 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 corporations that is a CCPC in a particular tax year and is associated with one or more corporations and 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
(Government of Canada, SR&ED Glossary Date: July 15, 2015)
Qualifying Income Limit
For the 2010 and later tax years, the qualifying income limit of a corporation for a particular tax year is the amount determined in the ITA by the formula:
$500,000 x [($40,000,000 - A) / $40,000,000]
In this formula A is:
- nil if the taxable capital amount* is less than or equal to $10 million; or
- is the lesser of $40 million and the amount by which the taxable capital amount exceeds $10 million, in any other case.
* The taxable capital amount is the total of the corporation's taxable capital employed in Canada for its immediately preceding tax year and the taxable capital employed in Canada of all associated corporations (if applicable) for the last tax year ending in the preceding calendar year that ended before the end of the particular tax year of the corporation. Taxable capital employed in Canada by the corporation has the meaning provided in the ITA. For more information on taxable capital, please refer to Interpretation Bulletin IT 532, Part I.3 – Tax on Large Corporations.
For more information, please refer to the SR&ED Investment Tax Credit Policy
(Government of Canada, SR&ED Glossary Date: July 15, 2015)
Science
Science is a branch of study in which phenomena are observed and classified and, usually, in which quantitative and qualitative relations are formulated and verified.
(Government of Canada, SR&ED Glossary Date: July 15, 2015)
Scientific or Technological Knowledge Base
Scientific or technological knowledge base refers to the existing level of technology and scientific knowledge, and consists of the knowledge of the resources within the company and sources available publicly.
The resources within the company include:
- technical knowledge, education, training, and experience of its personnel; and
- its technical capabilities typified by its current products, techniques, practices, and methodologies (for example, trade secrets and intellectual property).
Publicly available sources generally include scientific papers, journals, textbooks, and internet-based information sources as well as expertise accessible to the company (for example, through recruiting employees or hiring consultants or contractors). The company is expected to have information that is common knowledge at the time the work is performed. Common knowledge is knowledge available to professionals familiar with the specific areas of science or technology in question.
It is recognized that, although the knowledge available publicly is the same for all companies, the scientific or technological knowledge base may vary from company to company because the internal resources can vary from company to company.
(Government of Canada, SR&ED Glossary Date: July 15, 2015)
Scientific Uncertainties or Technological Uncertainties
Scientific or technological uncertainty / scientific uncertainty / technological uncertainty / technological obstacle
Scientific or technological uncertainty means whether a given result or objective can be achieved or how to achieve it, is not known or determined on the basis of generally available scientific or technological knowledge or experience. This definition encompasses the definition of scientific uncertainty, technological uncertainty and technological obstacle. The only difference is that scientific uncertainty relates to science whereas technological uncertainty and technological obstacle relate to technology.
(Government of Canada, SR&ED Glossary Date: July 15, 2015)
Scientific Research and Experimental Development (SR&ED)
SR&ED is defined for income tax purposes in subsection 248(1) of the ITA as follows:
scientific research and experimental development means systematic investigation or search that is carried out in a field of science or technology by means of experiment or analysis and that is
- basic research, namely, work undertaken for the advancement of scientific knowledge without a specific practical application in view,
- applied research, namely, work undertaken for the advancement of scientific knowledge with a specific practical application in view, or
- experimental development, namely, work undertaken for the purpose of achieving technological advancement for the purpose of creating new, or improving existing, materials, devices, products or processes, including incremental improvements thereto,
- work undertaken by or on behalf of the taxpayer with respect to engineering, design, operations research, mathematical analysis, computer programming, data collection, testing or psychological research, where the work is commensurate with the needs, and directly in support, of work described in paragraph (a), (b), or (c) that is undertaken in Canada by or on behalf of the taxpayer,
- market research or sales promotion,
- quality control or routine testing of materials, devices, products or processes,
- research in the social sciences or the humanities,
- prospecting, exploring or drilling for, or producing, minerals, petroleum or natural gas,
- the commercial production of a new or improved material, device or product or the commercial use of a new or improved process,
- style changes, or
- routine data collection;
and, in applying this definition in respect of a taxpayer, includes
but does not include work with respect to
(Government of Canada, SR&ED Glossary Date: July 15, 2015)
Systematic Investigation or Search
The systematic investigation or search called for in the definition of SR&ED is an approach that includes defining a problem, advancing a hypothesis towards resolving that problem, planning and testing the hypothesis by experiment or analysis, and developing logical conclusions based on the results.
(Government of Canada, SR&ED Glossary Date: July 15, 2015)
Technology
Technology is the practical application of scientific knowledge and principles.
While technology can be represented in physical form (patents, procedures, design documents, manuals, etc.), it is not a physical entity. It is the knowledge of how scientifically determined facts and principles are embodied in the material, device, product, or process.
(Government of Canada, SR&ED Glossary Date: July 15, 2015)