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Tax Rebates & Credits

Overview

Both the Provincial governments and the Federal government provide non repayable cash grants for certain specific business activities. In most cases the application for the grant is incorporated with the filing of the annual corporate income tax return and it is only after this filing do you know for sure if you have qualified for the grant. Since these grants often come with many strings attached, it is important that you receive proper accounting advice before you start on the activity that will lead to the grant.

This approach also gives us a better perspective to provide income tax and general advisory services best suited to client needs, and to assist management with sound business decisions.

The Scientific Research and Experimental Development tax credit is both a Federal and Provincial cash credit which typically amounts to 35% of your expenditures. The aim of the program is to encourage businesses to develop new processes or new products to either increase the firms sales or decrease its cost. The program is administered by CRA but it has been our experience that the CRA auditors have been very supportive of the businesses they audit.

The title “Scientific Research” is a bit of a misnomer in that it conjures up labs and Bunsen burners. All it really means in this program, is that you conduct your activities in a “scientific” manner. This means that you should first identify a problem that you have, then you should identify a solution you think will work, implement the solution and evaluate the results. Your success or failure does not affect the grant only that you legitimately tried to solve a problem in your business or your future business.

In your first year of applying for this grant you will be visited by two auditors. The first, the “scientific” auditor will evaluate your program to see that it fits the general guidelines of scientific research, the second, the “regular” auditor, will examine your records to verify that you have spent the amounts you have claimed to have spent.

Film Industry Tax Prep & Rebates

The film tax credits are available from both the Provincial and Federal governments but are administer by CRA. The credits are for feature films, short films, Documentaries and TV productions. They are based on the Canadian Labor content of the production and can equal up to half of the labor costs. To be eligible you must first apply to CAVCO for the federal grant and BC Film for the Provincial grant (if you are shooting in BC) and obtain a film tax number. The actual grant application is submitted with the corporate income tax return at the end of the year.

The Interactive Digital Media Tax Credit is a product of the BC Finance Department but will be administered by CRA. The purpose of the program is to encourage the digital media industry in BC. The grant is 17 ½ % of the BC labor incorporated in the production of interactive digital media which is usually, but not always, the production of video games.

There are both Provincial and Federal credits for the exploration of minerals and oil and gas. They can typically run up to 30% of the costs of exploration. The grants are applied for on filing the corporate income tax return at the end of the fiscal year. The purchase of an mineral property does not qualify for the grant but almost all other direct costs up until the time of commercial production do.

The Industrial Research Assistance Program is a federal Program monitored by the Nations Research Council of Canada. The purpose of this program is to help small and medium businesses in Canada with their research. The application is submitted to the IRAP office before the research is undertaken and, if approved, the grant will be funded as the research proceeds.

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