1995 – SR&ED tax incentives apply to all businesses that invest in information technology, including Healthcare Companies. Expenditures eligible for the tax incentives under contracts with related parties are limited to the actual costs incurred by the performers in carrying out the SR&ED. Third parties must provide information about the nature of the SR&ED they have carried out and indicate the related expenditures. Payments to third parties are eligible for the tax incentives in the year in which the SR&ED is carried out. Payments to third parties are eligible for the tax incentives in the year in which the SR&ED is carried out. The amount of salaries and wages eligible for the SR&ED tax incentives in the case of specified employees is limited to five times the year’s maximum pensionable earnings for the purposes of the Canada Pension Plan.

The federal government provides SR&ED tax incentives for three types of research:

1. Basic research, namely, work undertaken for the advancement of scientific knowledge without a specific practical application in view;
2. Applied research, namely, work undertaken for the advancement of scientific knowledge with a specific practical application in view; and
3. Experimental development, namely, work undertaken for the purpose of achieving technological advancement for the purpose of creating new, or improving existing, materials, devices, products or processes, including incremental improvements thereto.

In applying this definition in respect of a taxpayer, it includes work undertaken by or on behalf of the taxpayer regarding engineering, design, operations research, mathematical analysis, computer programming, data collection, testing or psychological research, where the work is commensurate with the needs, and directly in support, of work described in 1), 2), or 3) above that is undertaken in Canada by or on behalf of the taxpayer