[bigboote]

Tax credits are one of the reasons I didn't start my business in Canada. (I'm Canadian and I know the workings of some Canadian tech companies, but my current projects are all in Silicon Valley.)

The way it works is that you get 50% of your R&D expenses back from the gov't, in cash, several months later. To claim it, you have to write reports explaining the R&D value of each project. Besides the obvious bureaucratic overhead, it ends up affecting the organizational structure of the company. It distorts the way the business is run, maybe by only 20%, but that's enough to make you lose in the market in the long run.

[hello_moto]

What constitutes R&D expenses if I may ask?

I used to work at a startup that makes no money at all. They asked me to sign some sort of "fake" stock options as part of the SR&ED requirements. Of course the numbers were meaningless (pennies or whatnot). So I'm very interested on how this works.

[henryprecheur]

I think this includes your salary/compensation. That's probably why they asked you to sign those stock options, so they could say "Hey look, we paid this guy $X for R&D. That's a tax credit of $Y."

[hello_moto]

I'm speechless, that's pretty darn good.

What if the startup is a one-man show, making money and start to pay himself? Sort of like owner-but-paid-annually? (Or maybe a one-man consultant).

So let me get this straight, let's say a startup has 4 employees and each employee got paid $50k annually. When the SR&ED is done correctly, the owner can get at least 50% back from the salary alone?

[chollida1]

For my company it's pretty much any expense related to an engineer. Salary, rent, power, computer, etc.

[hello_moto]

So to clarify: almost all expenses (hardware purchases included) will be reimbursed 50% by the BC?

Can rent be substituted as mortgage (say working on your own garage)?

[shawn13]

Basically, no. It is 50% of the loaded labor rate of all employees doing R&D activities on projects that your liaison agrees qualify as R&D. When you work out of your home, rent/mortgage on your home are specifically excluded as business expenses (by CRA), so they can't be included. Working out of an office, you get about 65% of salary back; out of a basement (my situation), it is basically 50% of salary.

Oh -- hardware purchases and the like don't count, and you have to be able to prove the salary was paid, so as far as I know there is no game to be played with stock options.

[chollida1]

> hardware purchases and the like don't count

Odd, we got to put the entire amount of the Tesla grid that we put together towards the SRED credits. Having said that I just filled out the paper work and handed it to the lawyers and accountants, perhaps they took it off afterwords?