The 2012 Canadian federal budget was released on March 29, 2012. One of the issues that the budget addressed, was the SR&ED program. The budget proposed the following changes to the SR&ED program:
- Removal of capital from the expenditure base (for capital expenditures incurred in 2014)
- Reduction of the proxy to calculate overhead costs from 65 percent to 60 percent for 2013 and to 55 percent after 2013 (to be fully phased in as of January 1, 2014)
- Reduction of contract payment eligibility to 80 percent of the payment (effective January 1, 2013)
- Reduction in the General Investment Tax Credit rate from 20 percent to 15 percent (effective January 1, 2014). This will not affect organizations that qualify for the enhanced rate of 35 percent.
We believe that the SR&ED program will continue to be one of the most critical programs to support research and development in Canada. Although the overhead proxy will be reduced, this should only have a minimal impact on SMEs, and the reduction of the general investment tax credit rate should not have any impact on the majority of small- to medium-sized businesses. This is a strong indication that the federal government will continue to support the SR&ED program.