In the March 29th, 2012 budget, the federal government announced certain changes to the Scientific Research and Experimental Development Program (SR&ED).

Some of these measures have been in effect since January 1st, 2013.

Here are the key changes brought to the calculation of federal tax credits for SR&ED in effect since January 1st, 2013:

Outsourcing Costs

As of January 1st, 2013, only 80% of the cost of outsourcing contracts concluded between persons at arm’s length shall be eligible for the SR&ED credit.

SR&ED Overhead Expenses

Overhead expenses directly imputable to execution of SR&ED are eligible to the calculation of the SR&ED tax credit. However, instead of itemizing overhead expenses, taxpayers can use a proxy method according to which overhead expenses are estimated at 65% of SR&ED salaries. As of January 1st, 2013, the rate of 65% is reduced to 60%.

For calendar years overlapping January 1st, 2013, the rates used shall be pro-rated based on the number of days in each of the calendar years.

SR&ED Credits – Quebec

On the provincial level, the new government of Quebec announced in its November 20, 2012 budget that from now on, all refundable tax credits shall be taxable. Hence, SR&DE tax credits in Quebec which pertain to an expense incurred in a taxation year beginning after November 20, 2012, are taxable.

Other Changes

In addition, Canada Revenue Agency, has just published twenty newly revised policies for the application of the SR&ED program. This revision was done in view of consolidating and clarifying existing policies developed over the years, based on needs.

The most crucial document concerns eligibility of work. In principle, the notions explained in previous publications have not changed. Therefore, the three criteria of a project’s eligibility that is, advancement, uncertainty and scientific or technological content, remain unchanged even if a new, five-question method to assess them is proposed. However, it is possible that the text of the new policies may limit the scope of the SR&ED program. The implementation of these new consolidated policies shall allow to determine if this is indeed the case.

Do not hesitate to contact us to optimize your SR&ED tax credits in view of supporting your growth.

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Grant Thornton International has published a special edition of IFRS News regarding the recent publication by the IASB of a document entitled Investment Entities (Amendments to IFRS 10, IFRS 12 and IAS 27) (the amendments). This special edition explains the key features of the amendments and provides practical insights into their application and impact.

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With the exception of IFRS 9 Financial Instruments, the revised guide has been updated to reflect changes and updates in IFRS 1 and other IFRS that have been issued as of June 2012, including those that are not yet in mandatory effect.

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The Grant Thornton International IFRS team has published a new guide, Under control? A Practical Guide to IFRS 10 Consolidated Financial Statements. This guide is a useful tool that will assist management in transitioning to and applying IFRS 10 Consolidated Financial Statements.

By issuing IFRS 10 in May 2011, the International Accounting Standards Board (IASB) introduced new requirements on assessing control. IFRS 10 redefines “control” and provides extensive new guidance on applying the new definition. IFRS 10 applies to all investees and replaces both IAS 27 Consolidated and Separate Financial Statements and SIC-12 Consolidation – Special Purpose Entities.

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