IT cost rationalisation : R&D tax returns



Canada, and Quebec in particular, is generous in terms of tax credits for technology development and innovation. In a context of high restructuring cost demand, IT management has every incentive to exploit the opportunities offered by provincial and federal savings programs for the development of e-business and information technology (IT) .

With our SR & ED & ProGestion partner, Pradel Consulting can assist you in optimizing the management of your IT costs and support you in your corporate tax credit application file.

Similar to the e-business development tax initiative, the tax credit program for SR & ED (Scientific Research and Experimental Development) - while the largest tax incentive in Canada - remains one of the most complex, especially for projects in information technology (IT) .

ProGestion hereinafter summarizes the eligibility criteria for Canadian SR & ED technology tax credits.


Companies handling a development platform, a new or obsolete technology, third-party tools or just a programming language, will sooner or later face technological barriers or unexpected technical difficulties. For these companies, the question is not about knowing if their activities are eligible but rather about being able to identify and properly present them according to the eligibility criteria of the SR & ED program.

The first priority is about detecting the indicators of technological issues that may be the beginning of potentially eligible activities :

  • Have you experienced issues associated with the handling and processing of data?

  • Have you tried to resolve incompatibility issues (format, language, tools) ?

  • Has your mobile version affected the operation of your applications (performance, timing, portability ?

  • Do you have an idea about the limitations of your programming language (procedural, OO , Open Source )?

  • Did you have to manage security and data encryption and protocols ?

  • Did you encounter performance issues ?

  • Do you have a Web version of your applications ? If so, are you aware of language limitations(JavaScript, VBScript , HTML, CSS ) ?

Once the themes have been identified, a subgroup of second-level criterias may be proposed. For example , for the ' handling and processing of data ' criteria, the second level of items to consider would be the following :

• Data export issues due to third party proprietary protocol.

• Format File mismatch in a direct conversion process.

• Abnormal reading of posts in a browser.

• Converted data loss.

• Poor conversion algorithms of graphic format.

• Inability to extend deductive reasoning when merging trees.

• Desynchronization between parents and offspring objects resulting in integrity loss.

• Failure to anticipate the identification of dynamic URL via " Java Script ".

• Reaching the limit of a parameter.

• Data Corruption issues.

• Lack of metadata structure.

A third level of indices may also be provided, depending on the platforms, used or integrated third-party technologies. At this point, the linventory of activities required to solve the problem needs to be done. The line between what is eligible from what is not being thin, intermediate activities deemed ineligible once isolated, may be considered eligible if they support an eligible activity. Developing a new product, or improving an existing one, present difficulties. When it is possible to achieve it through common practices with a predictable result, associated activities are usually ineligible. On the contrary, when experimental development may lead to a new concept, a new process or even a small technological improvement, the associated activities may then be considered eligible.

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