Invest in Canada

A recent webpage released by the Government of Canada’s Invest in Canada initiative touted the benefits that foreign companies have of investing in Canada. Specifically, a foreign company can take advantage of a 20% non-refundable tax credit through forming a Canadian subsidiary, which can significantly reduce or eliminate Canadian taxes payable. Alternatively, a foreign company can also set up a Canadian-controlled private corporation (CCPC), as long as the foreign company owns less than 50% of the company’s voting shares. A CCPC with taxable incomes of under $500,000 can receive a refundable tax credit of 35% of eligible SR&ED expenditures, to a maximum of $3 million of expenditures per year.

A breakdown of the various SR&ED scenarios is outlined in the table below.

SR&ED expenditures Credit Rate % Refund Refundable Tax Credit (Cash Back) Non-Refundable Tax Credit (Reduce Taxes)
Small Canadian-controlled Private Corporations First $3 million 35% 100% $1,050,000
Remaining $2 million 20% 40% $160,000 $240,000
Total $1,210,000 $240,000
Large Public or Foreign-controlled Corporations First $3 million 20% $600,000
Remaining $2 million 20% $400,000
Total $1,000,000
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