2016 Federal budsjett Den 22. mars 2016 presenterte forbundsfinansminister Bill Morneau de nye flertallsregjeringer første budsjett. Denne skatteinnsatsen drøfter skatteinitiativene som foreslås i budsjettet. Også 22. mars 2016, men etter utgivelsen av Canadas budsjett, uttalte finansminister Morneau at regjeringen ikke vil fortsette med sin plan om å begrense den gunstige skattebehandlingen av opsjoner. Bedriftsskatteforanstaltninger Gjennomgå skattesystemet I det kommende året vil regjeringen gjennomføre en gjennomgang av skattesystemet for å avgjøre om det fungerer bra for kanadiere med sikte på å eliminere dårlig målrettede og ineffektive skatteforanstaltninger. Spesielt regjeringen er opptatt av muligheten til høyverdienes enkeltpersoner til å bruke private selskaper til uhensiktsmessig å redusere eller utsette skatt. Small Business Tax Rate Budsjettet foreslår at reduksjoner i småbedriftsskattesatsen som nå er lovgilt i 2017, 2018 og 2019, blir utsatt. Følgelig vil skattesatsen for småbedrifter forbli til 10,5 etter 2016, og den nåværende opptjeningsfaktoren og utbytteskattesatsen på ikke-kvalifisert utbytte vil bli opprettholdt for å bevare integrerte skattesatser. Multiplikasjon av Small Business Deduction Det småbedriftsfradrag (SBD) som et kanadisk kontrollert privat selskap (CCPC) kan kreve med hensyn til inntekt fra et partnerskap, er begrenset til den minste av den aktive forretningsinntekt som den mottar som medlem av partnerskapet og dets pro rata andel av en ideell 500 000 forretningsgrense fastsatt på partnerskapsnivå. Enkelte skattebetalere har fått ytterligere tilgang til SBD ved å etablere en struktur der aksjonæren til en CCPC (og ikke selve KKPC) er medlem av et partnerskap, og KKPC tjener avgifter fra partnerskapet under en kontrakt for tjenester, slik at KKPC kan potensielt hevde en full SBD med hensyn til inntekt opptjent fra partnerskapet. I skatteår som begynner etter 21. mars 2016 foreslår budsjettet å ta opp denne skatteplaneringen ved å utvide gjeldende regler for å fange opp situasjoner hvor en CCPC leverer tjenester eller eiendom direkte eller indirekte til et partnerskap. Lignende planlegging kan også oppnås for øyeblikket gjennom bruk av et selskap i stedet for et partnerskap hvor selskapet gir tjenester eller eiendom til et annet privat selskap. Budsjettet foreslår endringer slik at en CCPC ikke vil være berettiget til mindre virksomhetsfradrag på inntekter fra å levere tjenester eller eiendom direkte eller indirekte til et annet privat selskap der når som helst i et skatteår, KKPC, en av sine aksjonærer eller en person Det handler ikke om armlengder når aksjonæren har en direkte eller indirekte interesse i det private selskapet. Denne regelen gjelder ikke dersom alle eller vesentlig alle KKPCs aktiv forretningsinntekt er opptjent fra å levere tjenester eller eiendom til andre personer enn andre enn det private selskapet. Unngåelse av forretningsbegrensning og skattepliktig grenseverdi i henhold til underskrift 256 (2) i inntektsskatteloven (ITA), to KKPCer som ikke ellers ville være tilknyttet, vil bli behandlet som tilknyttet hvis hver av selskapene er knyttet til samme tredje selskap. Når paragraf 256 (2) gjelder, må de tre KKPCene dele 500 000 SBD og den 15 millioner skattepliktige kapitalgrensen (TCL). Det tredje selskapet kan imidlertid legge inn valg etter underpunkt 256 (2) for ikke å være knyttet til de to andre. Hvis dette valget er arkivert, kan det tredje selskap ikke kreve SBD, men de to andre selskapene kan hver påstå SBD-emnet til eget TCL. I henhold til nr. 129 (6) behandles en CCPCs investeringsinntekt som aktiv forretningsinntekt som er kvalifisert for SBD dersom denne inntekten er hentet fra en tilknyttet selskaps virksomhet. Associert selskaps status i henhold til § 129 nr. 6 er imidlertid ikke berørt av et valg i underavdeling 256 (2), noe som kan resultere i en situasjon hvor de to andre selskapene hver påstår SBD på investeringsinntekter fra den aktive virksomheten av det tredje selskapet, selv om det tredje selskapet ikke kunne ha hevdet SBD. For skatteår som begynner etter 21. mars 2016, foreslår budsjettet endringer for å sikre at der hvor det velges underpunkt 256 (2) valg: Investeringsinntekter fra en tilknyttet selskaps aktiv virksomhet vil ikke være kvalifisert for SBD og vil bli beskattet ved generell selskapsskattesats tredje selskap vil fortsette å være tilknyttet hver av de to andre selskapene med det formål å anvende TCL-konsultasjonen om aktiv vs. investeringsvirksomhet etter konsultasjoner i 2015, bekrefter budsjettet regjeringer som har til hensikt å opprettholde en regel om at hvor en CCPC har hovedformålet med å tjene inntekt fra eiendom, kan det være berettiget til mindre virksomhetsfradrag hvis det har mer enn fem heltidsansatte. Livsforsikringspolitikk Fordelene for livsforsikring oppnås Livsforsikringsprovenu mottatt som følge av død av en forsikret person i en livsforsikring er generelt ikke skattepliktige. Budsjettet foreslår et tiltak for å sikre at livsforsikringsprovenu mottatt i et privat selskap eller et partnerskap ikke gir opphav til upassende tillegg til kapitalutbyttekontoen (i tilfelle av et privat selskap) eller justert kostnadsbase (i tilfelle av en samarbeid). Tiltaket vil også innføre krav til informasjonskrav som vil gjelde der et selskap eller et partnerskap ikke er forsikringstaker, men har rett til å motta en pensjonsytelse. Dette tiltaket gjelder for de politiske fordelene som er mottatt som følge av en død som oppstår etter 21. mars 2016. Overføringer av livsforsikringspolitikk Budsjettet foreslår endringer for å forhindre upassende skattefordeler i situasjoner når en livsforsikring overføres til et privat selskap eller partnerskap på roll-over basis. I virkeligheten forhindrer foranstaltningen skattebetalere i å trekke ut merverdien av den rettferdige markedsverdien av en politikk overført til et aksjeselskap eller partnerskap over sin overgivelsesverdi som en skattefri fordel når politikken overføres til et aksjeselskap eller partnerskap. Dette tiltaket gjelder for disposisjoner som oppstår etter 21. mars 2016. En tilsvarende tiltak vil gjelde for å redusere beløpet lagt til en kapitalutbyttekonto, innbetalt kapital og justert kostnadsgrunnlag når en policy ble overført til et selskap eller et partnerskap før 22. mars 2016. Kvalifisert kapitaleiendom (ECP) Budsjettet foreslår å oppheve ECP-regimet og erstatte det med en ny kapitalkompensasjon (CCA) - basseng. Opphevelsen av ECP-regimet ble omtalt i 2014-budsjettet. Disse endringene er ment å forenkle reglene knyttet til immaterielle egenskaper. Under dagens system inngår 75 av støtteberettigede investeringer (for eksempel kundelister, lisenser, franchise rettigheter, farmakvoter og oppkjøp av goodwill) i en kumulativ kvalifisert kapital (CEC) - basseng. Et fradrag kan hevdes til en pris på 7 per år på et synkende balansegrunnlag. Opptil 75 av inntektene mottatt ved disposisjon av ECP reduserer CEC-bassenget. Hvis kvitteringene overskrider CEC-bassenget, tar overskudd først tilbake eventuelle tidligere fradrag. Resten er inkludert i næringsinntekt med en 50 inkluderingsrate. Under de foreslåtte reglene vil en ny CCA, klasse 14.1 bli introdusert. Fra 1. januar 2017 vil 100 av utgifter som tidligere hadde blitt inkludert i CEC-bassenget bli inkludert i denne klassen. Avskrivningsgraden vil bli 5 (fallende balanse). Reglene som gjelder for avskrivbar eiendom, for eksempel halvårsregelen, gjenfangst og kapitalgevinst, gjelder for eiendommene som inngår i denne klassen. Spesielle regler gjelder for utgifter som ikke er relatert til en bestemt eiendom i en bedrift. Hver virksomhet vil bli vurdert å ha goodwill knyttet til den (selv om det ikke er foretatt utgifter til goodwill). Utgifter som ikke relaterer seg til en bestemt eiendom, vil øke kapitalkostnaden til forretningsvirksomheten og dermed balansen i klasse 14.1-bassenget. Et kvittering som ikke vedrører en bestemt eiendom vil redusere kapitalkostnaden til virksomhetenes goodwill, og dermed balansen i klasse 14.1-bassenget, med det minste av kostnaden for goodwill (som kan være null) og beløpet av kvitteringen. Eventuelt overskudd vil bli behandlet som en gevinst. Eventuell tidligere trukket CCA vil bli innhentet i den grad kvitteringen overstiger balansen i klasse 14.1 bassenget. CEC-saldoer vil bli overført til det nye klasse 14.1-bassenget pr. 1. januar 2017, inkludert for skattebetalere hvis skatteår strekker seg fra 1. januar 2017. Åpningsbalansen for klasse 14. 1-bassenget vil være lik CEC-balansen per desember 31, 2016. CCA-avskrivningsgraden for eiendommer som inngår i klasse 14.1-bassenget relatert til utgifter påløpt før 1. januar 2017, vil være 7 til 2027. For beløp mottatt på disposisjon av eiendom etter 31. desember 2016, som vedrører eiendom anskaffet eller utgifter gjort før 1. januar 2017, vil redusere klasse 14.1 bassenget til en 75 rate. Også inkludert for 75 rate, er kvitteringer som ikke representerer inntektene på disposisjon av eiendom. For å forenkle overgangen foreslår budsjettet spesielle regler for små bedrifter som tillater fradrag: for utgifter som påløper før 2017, lik den største på 500 og beløpet som ellers er fradragsberettiget for året, i år som slutter før 2027, og i databehandling Inntekt for de første 3.000 inkorporeringskostnadene Gjeldsparkering for å unngå valutavekster Gjeldsparkeringsreglene omhandler for tiden bruken av teknikker for å unngå anvendelse av gjeldsgivningsregler, men ta ikke hensyn til valutakursgevinster for skyldneren i bestemme en tilgitt mengde. Budsjettet foreslår å innføre regler slik at eventuelle påløpte valutagevinster på en gjeld i utenlandsk valuta vil bli realisert når gjelden blir en parkert forpliktelse. Debitor vil bli ansett å ha gjort gevinsten, hvis noe annet ville ha gjort dersom den hadde betalt et beløp (uttrykt i valutaen hvor gjelden er denominert) til tilfredsstillelse av hovedbeløpet av gjelden lik: når gjelden blir en parkert forpliktelse som følge av oppkjøpet av den nåværende innehaveren, vil beløpet for hvilken gjelden ble anskaffet, og i andre tilfeller den virkelige markedsverdien av gjelden. For dette formål vil en gjeld i utenlandsk valuta bli en parkert forpliktelse til enhver tid hvis: den nåværende gjeldsinnehaver ikke på det tidspunkt håndterer gjeldslengden med debitor eller, når debitor er et selskap, har en betydelig interesse (eier aksjer i selskapet sammen med ikke - personer med armerelengde, hvorav 25 eller flere av stemmer eller verdier kan tilskrives) i selskapet, og til enhver tid, en person som holdt gjelden håndtert i armlengden med debitoren, og når skyldneren er et selskap, gjorde ikke ha en betydelig interesse i th e corporation Unntak vil sikre at en gjeld i utenlandsk valuta ikke vil bli en parkert forpliktelse i sammenheng med visse bona fide kommersielle transaksjoner. Tilknyttede regler vil gi lettelse til økonomisk forstyrrede debitorer. Dette tiltaket gjelder for en gjeld i utenlandsk valuta som oppfyller vilkårene for å bli en parkert forpliktelse etter 21. mars 2016. Et unntak gjelder dersom disse vilkårene er oppfylt før 2017 og følger av en skriftlig avtale inngått før 22. mars 2016. Tilbake - til-tilbakebetalingsregler: Aksjeselskapslån De foreslåtte endringene som beskrevet i avsnittet Internasjonal skattemåling nedenfor, kan også gjelde for innenlandske situasjoner. Verdivurdering av derivater I henhold til relevant rettspraksis kan en skattebetalers interesse for visse derivater på inntektskonto behandles som beholdning som kan verdsettes til laveste av opprinnelig kostpris og rettferdig markedsverdi, slik at verdifall kan fratrukket før realisering. Budsjettet foreslår en regel som vil betrakte en skattebetalers eiendom som er en swap-avtale, en forward-kjøps - eller salgsavtale, en terminsavtale, en opsjonsavtale eller en lignende avtale som ikke er inventar av skattebetaleren i henhold til disse verdivurderingsreglene . En ledsagerregel forhindrer også en skattyter fra å skrive ned derivatene til det minste av kostbar og rettferdig markedsverdi under generelle prinsipper for inntektsberegning for skattemessige formål. Reglene er effektive for derivater inngått etter 21. mars 2016. Accelerert CCA for ladestasjoner for elektrisk kjøretøy og lagringsegenskaper for elektriske energikilder Klassene 43.1 og 43.2 gir hastighetskvoter (CCA) (henholdsvis 30 og 50, balansegrunnlag) for investeringer i spesifisert rentgenererings - og bevaringsutstyr. Budsjettet utvider klassene 43.1 og 43.2, for å inkludere: kvalifiserte ladestasjoner for elektrisk kjøretøy klasse 43.2 hvis de er satt opp for å levere minst 90 kilowatt kontinuerlig kraft og klasse 43.1 hvis de er satt opp for å levere mer enn 10 kilowatt, men mindre enn 90 kilowatt kontinuerlig kraft kvalifisert stand-alone elektrisk energi lagrings eiendom klasse 43.1 hvis rundtur effektivitet (dvs. hvor mye energi vedlikeholdes i prosessen med å konvertere elektrisitet til en annen form for energi og deretter tilbake til strøm) av utstyret er større enn 50 i tillegg , budsjettet klargjør og utvider rekkevidden av elektrisk energilagringseiendom som kvalifiserer for klasse 43.2 eller klasse 43.1, til et bredt spekter av kort - og langtidslagringsutstyr som er tilknyttet kvalifisert produksjonsutstyr. Hvis lagringsutstyret er en del av et elektrisitetsgenereringssystem som er kvalifisert for: Klasse 43.2 (f. eks. Et godkjent fornybart, avfallsdrevet eller høyeffektiv kraftvarmeproduksjonssystem), vil det bli inkludert i klasse 43.2 klasse 43.1 (dvs. en kraftig kraftvarmeproduksjon systemet), vil det bli inkludert i klasse 43.1 Tiltakene gjelder for eiendom som er oppkjøpt for bruk etter 21. mars 2016, og som ikke er brukt eller ervervet til bruk før 22. mars 2016. Emissionshandelsregimer Under utslippshandelsregimer regulert Emittere må levere utslippskvoter til regjeringen. Disse kvotene kan kjøpes av emittenter, opptjent i utslippsreduksjonsaktiviteter eller leveres av myndighetene til nedsatt pris eller uten kostnad. For tiden eksisterer det ingen spesifikke skatteregler for å håndtere utslippshandlingsregimer. Budsjettet foreslår å innføre spesifikke regler for å avklare skattebehandlingen av utslippskvoter og å eliminere dobbeltbeskatning av visse gratis kvoter. Spesielt vil utslippskvoter bli behandlet som inventar for alle skattebetalere, men den laveste av kost - og markedsmetoden kan ikke brukes til å verdsette beholdningen. Dersom det mottas gratis godtgjørelse, vil det ikke være inntektsinntekt ved mottak av godtgjørelsen. I tillegg vil fradraget for en påløpt utslippsforpliktelse være begrenset i den grad forpliktelsen overstiger kostnaden for utslippsutgifter som skattebetaleren har kjøpt, og som kan benyttes til å avgjøre forpliktelsen. Dersom det kreves fradrag for en utslippsforpliktelse som påløper i ett år (for eksempel 2017) og som vil bli tilfredsstilt i et kommende år (for eksempel 2018), vil beløpet av dette fradraget bli inntektsført i Det påfølgende året (2018) og skattebetaleren vil bli pålagt å vurdere fradragsberettigelsen igjen hvert år, til det til slutt er tilfredsstillende. Hvis en skattyter disponerer over en utslippstillatelse ellers enn under utslippsutbetalingsordningen, vil eventuelle inntekter som overstiger skattebetalernes kostnader, om noen, for godtgjørelsen bli inkludert i beregningsinntektene. Tiltakene vil gjelde for utslippstillatelser som er oppnådd i skatteår som begynner etter 2016, og valgfritt for utslippstillatelser som ervervet i skatteår som slutter etter 2012. Internasjonal skattemåling Base Erosion and Profit Shifting (BEPS) Måler Canada har vært en aktiv deltaker i BEPS-handlingsplanen, et prosjekt fra Organisasjonen for økonomisk samarbeid og utvikling (OECD) og G-20. BEPS refererer til skatteplanleggingsstrategier som utnytter hull og mangler i nasjonale skattelov til å skifte overskudd til lave eller ingen skattemessige steder. Budsjettet indikerer at regjeringen har til hensikt å handle på følgende anbefalinger fra OECD BEPS-prosjektet. Innføring av rapportering fra land til land (CbCR) Tiltak 13 i OECDs BEPS-prosjekt omhandler overføringspriser for dokumentasjonskrav for multinasjonale foretak (MNE). Den 5. oktober 2015 utgav OECD sin endelige leveranse på disse kravene, som bekrefter sine anbefalinger for en tre-trinns tilnærming til dokumentasjon: en hovedfil (i hovedsak en oversikt over MNE) som skal arkiveres i foreldrenes jurisdiksjon a lokal fil som skal arkiveres av den lokale enheten i den jurisdiksjonen den driver for å forsvare prisingen av sine intercompany-transaksjoner (merk at mye av informasjonen i den lokale filen allerede er nødvendig under Canadas ITA) og en rapport for land for land arkivert av foreldre i sin bosteds jurisdiksjon. Rapporten vil inneholde viktige beregninger for hvert land som MNE opererer i, for eksempel: Inntekter, fortjeneste, skatt betalt, oppgitt kapital, akkumulert inntjening, antall ansatte, materielle eiendeler samt en beskrivelse av hovedaktiviteten til hvert av datterselskapene . OECD lanserte også en gjennomføringspakke relatert til disse nye kravene, som inkluderer tre modell kompetente myndighetsavtaler for å lette utvekslingen av disse land-for-land-rapportene. Mange land har allerede implementert disse kravene, særlig USA utstedte foreslåtte forskrifter for å implementere CbCR 21. desember 2015. Budsjettet foreslår å kreve CbCR for skatteår som begynner etter 2015 for kanadiske MNEs med total konserninterne konsernomsetning på 750 millioner euro eller mer. Denne rapporteringen vil være forfalt innen ett år etter utgangen av regnskapsåret som rapporten vedrører med en oppfatning at de første utvekslingene mellom jurisdiksjoner av land for land-rapporter skulle skje innen juni 2018. Før noen utveksling av informasjon med annen jurisdiksjon, Canada Revenue Agency (CRA) vil formalisere et utvekslingsarrangement med den andre jurisdiksjonen og vil sørge for at den har hensiktsmessige garantier for å beskytte konfidensialiteten til rapportene. Utkast til lovforslag om å gjennomføre disse reglene vil bli utgitt for kommentar i de kommende månedene. Revidert overføringsprisveiledning CRA vil anvende den reviderte internasjonale veiledningen om overføringsprising av multinasjonale foretak som stammer fra BEPS-prosjektet. Regjeringens oppfatning er at de reviderte retningslinjene for overføring av priser generelt er i samsvar med de aktuelle tilsynsforskrifterens nåværende tolkning og anvendelse av armlengdes prinsippet, derfor forventes dagens praksis ikke å endre seg vesentlig. Kredittilsynet vil ikke justere sin administrative praksis knyttet til lav verdiøkende tjenester og risikofri og risikojustert avkastning for minimalt funksjonelle enheter (ofte kalt kassebokser) til BEPS-prosjektet oppfølgingsarbeid på disse områdene er fullført . Den endelige BEPS-leveransen i forbindelse med trakthandler (Handling 6) krever at hvert deltakerland skal vedta minimumsstandarder for å motvirke traktatbrudd. Den endelige handlingsrapporten 6 ga fleksibilitet i hvordan disse minimumsstandardene kunne bli oppfylt, slik at det var åpent for land for å møte dem gjennom traktatbestemmelser eller gjennom alminnelige generelle eller spesifikke anti-unngåringsregler, men i rapporten blir det klart at avtalepartnere må ha en felles intensjon Ikke å skape muligheter for dobbel ikke-beskatning gjennom avtaler om å handle. I mellomtiden har arbeidet med et multilateralt instrument fortsatt, med over 90 stater som deltar i utviklingen av instrumentet med sikte på å ha et fastsettende instrument innen utgangen av 2016. Budsjettet bekrefter regjeringens forpliktelse til å takle traktatbrudd i samsvar med minimumsstandarden som er nevnt ovenfor. Regjeringen vil vurdere enten minimal standard tilnærming, avhengig av de spesielle omstendighetene og diskusjonene med Canadas skatteavtale partnere. Budsjettet indikerer også at Canadas skatteavtaler kan endres for å inkludere en regel om misbruk av misbruk gjennom bilaterale forhandlinger, det multilaterale instrumentet eller en kombinasjon av de to. Spontan utveksling av skattebestemmelser Budsjettet bekrefter regjeringens intensjon om å implementere BEPS-minimumsstandarden for spontan utveksling av visse skattemessige avgjørelser som kan føre til BEPS-bekymringer. Kredittilsynet vil begynne å utveksle skattemessige avgjørelser i 2016 med andre jurisdiksjoner som har forpliktet seg til minimumsstandarden. Regjeringen fortsetter å undersøke de andre anbefalingene i BEPS-prosjektets endelige rapporter utstedt 5. oktober 2015. Videre gjenoppretter det sitt engasjement for BEPS-prosjektet og dets ønske om å samarbeide med det internasjonale samfunn for å sikre en sammenhengende og konsistent respons på BEPS. Grenseoverskridende strykning ITA inneholder en anti-overskuddsbestemmelsesregel (§ 212.1) som kan gjelde når aksjer i et kanadisk selskap (fagforetaket) avhendes av en ikke-hjemmehørende person (eller utpekt partnerskap) til et annet selskap bosatt i Canada (det kanadiske kjøperselskapet) som den ikke-hjemmehørende personen ikke håndterer med armlengden. Regelen er ment å forhindre skattefri kvittering av den ikke-hjemmehørende personen av beløp som representerer beholdt inntjening (eller overskudd) som overstiger den opptjente kapitalen (PUC) til emnet aksjeandeler som utbytte av disposisjon. Når dette gjelder, resulterer denne regelen i et ansett utbytte til den ikke-hjemmehørende personen eller en undertrykkelse av PUC av aksjer som ellers ville vært økt som følge av transaksjonen. Et unntak fra denne anti-overskuddsbestemmelsesregelen finnes i underavsnitt 212.1 (4). Det sikrer at anti-overskuddsbestemmelsesregelen ikke gjelder for en disposisjon av en ikke-hjemmehørende person av aksjer fra et canadisk fagforening til et kanadisk kjøperselskap der det kanadiske aksjeselskapet som kjøpte aksjene, umiddelbart før disposisjonen kontrollerte ikke - - resident person. Dette unntaket kan gjelde i situasjoner hvor den ikke-hjemmehørende personen er smeltet mellom to kanadiske selskaper, og det ikke-hjemmehørende selskapet disponerer aksjene i det nederlandske canadiske aksjeselskapet til det canadiske morselskapet (effektivt, avvikling av sandwichstrukturen). Budsjettet foreslår å endre unntaket i underavsnitt 212.1 (4) for å sikre at det ikke gjelder når et ikke-hjemmehørende selskap begge (i) eier, direkte eller indirekte, aksjer i det kanadiske kjøperselskapet, og (ii) ikke handler i armlengden med den kanadiske kjøperen. Regjeringen indikerer også at det vil fortsette å utfordre visse transaksjoner som er foretatt før 22. mars 2016, av skattebetalere som er avhengige av anvendelsen av nr. 212.1 (4). Regjeringen ser på endringene i anvendelsen av dette unntaket som å tydeliggjøre hensikten med de eksisterende reglene. Videre for å ta opp situasjoner hvor det kan være usikkert om en ikke-hjemmehørende person har mottatt det fra det kanadiske kjøperselskapet med hensyn til disposisjonen av den ikke-hjemmehørende person av aksjer i det nederlandske canadiske aksjeselskapet, foreslår budsjettet å anse den ikke-hjemmehørende for å motta ikke-deltakelse fra det kanadiske kjøperselskapet i slike situasjoner. Beløpet av denne vurderte vederlaget vil bli bestemt med henvisning til den rettferdige markedsverdien av aksjene i det nederlandske canadiske aksjeselskapet mottatt av det kanadiske kjøperselskapet. Tiltakene vil gjelde for disposisjoner som oppstår etter 21. mars 2016. Utvidelse av Back-to-Back Regler Back-to-Back Regler for utleie, royalties og lignende betalinger Del XIII av ITA pålegger vanligvis en kildeskatt på kors - betalinger av leier, royalties eller lignende betalinger (samlet kalt royalties) gjort av kanadiske innbyggere til utenlandske statsborgere. Denne 25 kildeskattesatsen reduseres ofte med en skatteavtale. Enkelte skattebetalere bruker en formidling som er lokalisert i et gunstig skatteavtale land for betaling av disse royalties. Budsjettet foreslår å takle disse back-to-back-ordningene ved å utvide de grunnleggende konseptene av back-to-back låne regler under del XIII til royalty betalinger gjort etter 2016. Når de gjelder, vil de foreslåtte reglene for royalty betalinger vurdere kanadiske - President betaler for å ha betalt royalty til den endelige utenlandske mottakeren, og et beløp på kildeskatt, som er lik mengden av kildeskatt ellers unngått som følge av back-to-back-arrangementet, vil bli betalt på Betalt royalty. Karakterutskiftningsregler Budsjettet foreslår å utvide reglene for tilbakeføring i del XIII for å hindre at de unngås ved å erstatte økonomisk liknende avtaler mellom mellommann og en annen utenlandsk person. Spesielt kan en back-to-back-ordning eksistere i situasjoner hvor: renter betales av en kanadisk bosatt person til en mellommann og det foreligger en avtale som gir betalinger med hensyn til royalties mellom formidleren og en ikke-hjemmehørende personavgift er betales av en kanadisk bosatt person til en mellommann, og det er et lån mellom formidleren og en ikke-hjemmehørende person, eller renter eller royalties betales av en kanadisk bosatt person til en mellommann, og en ikke-hjemmehørende person har aksjer i formidler som inkluderer visse forpliktelser til å betale utbytte eller som tilfredsstiller visse andre forhold (f. eks. de kan innløses eller kanselleres). Under disse foreslåtte tegnsubstitusjonsreglene vil det foreligge en back-to-back-ordning når en tilstrekkelig forbindelse er etablert mellom arrangementet hvor en renter eller royalty betaling er gjort fra Canada og mellommennsforpliktelsene i hver av de tre situasjonene som er beskrevet ovenfor. Dette tiltaket gjelder for rente - og royaltiesbetalinger som er foretatt etter 2016. Back-to-Back Aksjonærlånsregler Budsjettet foreslår å endre aksjonærlånsregler for å inkludere regler som ligner de eksisterende back-to-back-lånene, med unntak av at foreslåtte regler vil gjelde for gjeld på grunn av kanadiske residente foretak i stedet for gjeld på grunn av kanadiske innbyggere skattebetalere. En back-to-back-aksjonærlånsordning anses å foreligge når en mellommann som ikke er knyttet til aksjonæren, skylder et beløp av aksjonæren og mellommann skylder et beløp til det kanadiske selskap og det er en sammenheng mellom de to forpliktelser (visse forhold må være oppfylt). Dersom de foreslåtte reglene gjelder for en gjeld som følge av en aksjonær i et kanadisk-hjemmehørende selskap, vil aksjonæren anses å være gjeld direkte til selskapet. Dette tiltaket gjelder for back-to-back-aksjonærlånsarrangementer per 22. mars 2016. For tilbakebetaling av aksjonærlånsarrangementer som er på plass 22. mars 2016, anses den ansvarsfordel som skyldes på grunn av 22. mars 2016. Budsjettet foreslår å klargjøre anvendelsen av de eksisterende back-to-back regler i del XIII til back-to-back arrangementer som involverer flere mellommenn. De foreslåtte back-to-back regler for royalty betalinger vil også gjelde for flere mellomledd back-to-back ordninger. Under disse foreslåtte reglene vil en back-to-back-ordning omfatte alle ordninger som er tilstrekkelig knyttet til arrangementet hvor en kanadisk innbygger gjør en grenseoverskridende betaling av renter eller royalties til en mellommann. Når det foreligger en back-to-back-ordning som involverer flere mellommenn, vil en ekstra betaling (med samme karakter som den kanadiske hjemmehørende til den første mellommann) anses å ha blitt betalt direkte av den canadiske beboeren til den ultimate ikke - bosatt mottaker i en kjede av tilkoblede arrangementer. Budsjettet foreslår også å inkludere regler som omhandler flere formidlingsarrangementer innenfor de foreslåtte tilbakebetalinger for aksjonærlånsregler. Dette tiltaket gjelder for utbetalinger av renter eller royalties foretatt etter 2016 og til aksjonærgjeld fra 1. januar 2017. Personlige skatteforanstaltninger Canada Child Benefit En ny Canada Child Benefit erstatter Universal Child Care Benefit (UCCB), Canada Child Tax Benefit (CCTB) og National Child Benefit, for utbetalinger fra juli 2016. Den nye månedlige ytelsen er skattefri og avtar som inntektsvekst. Det kan bli eliminert når husholdningenes inntekt er så lav som 157.188. Ytterligere beløp vil fortsatt bli gitt når barnet er kvalifisert for uførbarhetsskatt. Programmet er utvidet til å omfatte alle individer som er indianere under den indiske loven og innbyggere i Canada til skattemessige formål der alle andre krav til kvalifikasjon er oppfylt. Budsjettet foreslår også at en skattyter kan kreve en retroaktiv betaling av Canadas barnefordel, CCTB eller UCCB innen en 10-års periode som er effektiv for forespørsler som er foretatt etter juni 2016. Topp Marginal Skattesats Konsekvenser Endringer Budsjettet inneholder ytterligere endringer i ITA til gjenspeiler den nye toppmarginale skattesatsen for enkeltpersoner på følgende måte: Oppgi en 33 veldediggjeldsskattekreditt (på donasjoner over 200) til tillit som er underlagt 33 skattesatsen på all sin skattepliktig inntekt, gjelder 33 skattesats for overskytende ansatt fortjeneste delingsplan bidrag øke skattesatsen på personlige tjenester virksomhetsinntekter opptjent av selskaper til 33 endre definisjonen av relevant skattefaktor i utenlandske tilknyttede regler for å redusere den relevante skattefaktoren til 1.9 endre kapitalgevinster refusjon mekanisme formler for verdipapirfond til reflektere topprenten på 33 øke del XII.2 skattesatsen på distribuert inntekt av visse trusts fra 36 til 40 endre utvinningen skatteregler for kvalifiserte funksjonshemmedeforetakere å henvise til 33-tallet Lærer - og barnehageutdanningsskole Leveringsskattkreditt Fra 1. januar 2016 kan en kvalifisert lærer (personer med gyldig lærerbevis i den provinsen de er ansatt) kreve en 15 refunderbart skattegodtgjørelse på opptil 1000 i kvalifiserte forsyninger til bruk i en skole eller regulert barnepass. Norske innbyggere Fradrag I begynnelsen av 2016 har maksimal bostedsfradrag økt til opptil 11 per dag per husstandsmedlem, og, når ingen andre medlemmer henter fradraget, til 22 per dag. Mining Exploration Tax Credit for Flow-Through Shares This credit is extended by one year and will apply to flow-through share agreements entered into on or before March 31, 2017. Taxation of Switch Fund Shares Mutual fund and investment corporations can issue multiple classes of shares. Some corporations are structured so that each share class tracks a fund that comprises a specific pool of assets. The corporate rollover rules allow an investor in one class of shares to switch to another class that tracks a different fund without recognizing accrued gains on the original investment. The budget proposes a measure, effective for dispositions that occur after September 2016, which will treat an exchange of shares that track different funds to be a disposition at fair market value. The measure will not apply to switches when the shares received in exchange differ only in respect of management fees or expenses to be borne by investors and otherwise derive their value from the same portfolio or fund within the mutual fund corporation (e. g. the switch is between different series of shares within the same class). Sales of Linked Notes Linked notes are a type of investment whereby a taxpayer is entitled to a return on its original investment that is contingent on the performance of a reference asset such as a basket of stocks, a market index, a commodity, a currency, or units of a fund. Investors often take the position that the accrued return on a linked note is not taxable until maturity. Investors who treat the notes on capital account can, by selling before maturity, convert their accrued but unrealized return from fully taxed income to a capital gain taxed at 50. The budget proposes rules that will treat the accrued but unrealized increase in value on a linked note to be accrued interest for the purpose of the prescribed debt obligation rules. This accrued interest is included in income at the time of disposition. Any gain or loss on the debt obligation due to foreign exchange fluctuations is excluded in determining the amount of accrued interest. If a portion of the return on a linked note is based on a fixed rate of interest, the rules will also exclude any portion of the gain that is reasonably attributable to market interest rate fluctuations. Employee Stock Options Changes to the taxation of employee stock options have been anticipated since the election of the new government. At a press conference held after the release of the budget, the Finance Minister confirmed that the government will not modify the tax treatment of stock options. Family Income Splitting Beginning 2016, the family income splitting credit is eliminated. This credit refers to the measure that, during 2014 and 2015, allowed some families with children under 18 to reduce their tax bills by up to 2,000. Education and Textbook Tax Credits Starting 2017, the education and textbook tax credits are eliminated. Annually, these credits resulted in tax savings of up to 720 and 117, respectively. Childrens Fitness and Arts Tax Credits Effective 2016, the maximum eligible amounts will be reduced to 500 for the childrens fitness tax credit and 250 for the childrens arts tax credit. Both credits will be eliminated for the 2017 and subsequent taxation years. The current credits resulted in annual tax savings of up to 150 and 75, respectively. Labour-Sponsored Venture Capital Corporations (LSVCC) Tax Credit The federal tax credit of 15 is restored for share purchases of provincially registered LSVCCs for the 2016 and subsequent years. Certain newly registered LSVCCs under provincial legislation may be eligible for prescription under the ITA. The federal LSVCC tax credit for federally registered LSVCCs will remain at 5 for 2016 and will be eliminated for the 2017 and subsequent taxation years. Ontario Electricity Support Program Amounts received under the Ontario Electricity Support Program (introduced as of January 1, 2016) will be exempt from income. Withholding for Non-Resident Employers The budget affirms the governments intention to proceed with proposed legislative changes to Canadian payroll withholding compliance requirements for non-resident employers with non-resident employees working temporarily in Canada. Although not included in the budget, there are indications there will be some modifications to the original draft legislation, taking into account consultations and deliberations since the original announcement. Many of these discussions involved further simplification of the compliance process. The original legislation released by the Department of Finance on July 31, 2015, was not enacted into law due to the change in the Canadian federal government in October 2015. Foreign employers that have: already applied for non-resident employer certification with the CRA have assurance that it is still the governments intention to go forward with proposed legislation with potentially favourable modification not applied for certification and may have been delaying the decision to certify until Canada enacted the proposed changes may now want to reconsider certification as an approach to Canadian payroll compliance See our Tax Insights quotBudget 2016: Canada affirms reintroducing legislative changes to payroll withholding compliance for non-resident employers, quot which will be available shortly at pwccataxinsights . Sales and Excise Tax Measures Health Measures For supplies made after March 22, 2016, the budget adds insulin pens, insulin pen needles and intermittent urinary catheters to the list of zero-rated medical devices. In certain cases, supplies made before March 23, 2016, will also be zero-rated. Furthermore, for supplies made after March 22, 2016, the budget clarifies that GSTHST generally applies to supplies of purely cosmetic procedures provided by all suppliers, including registered charities. Exported Call Centre Services The supply of a service of rendering technical or customer support to individuals by means of telecommunications (e. g. by telephone, email or web chat) made after March 22, 2016, will generally be zero-rated for GSTHST purposes if: the service is supplied to a non-resident person that is not registered for GSTHST purposes, and it can reasonably be expected at the time the supply is made that the technical or customer support is to be rendered primarily to individuals who are outside Canada at the time the support is rendered to those individuals In certain cases, supplies made before March 23, 2016, will also be zero-rated. Reporting of Grandparented Housing Sales Under the transitional rules that applied when a province either joined the harmonized value-added tax system since 2010 or increased its HST rate, certain sales of newly constructed or substantially renovated homes were grandparented for HST purposes. The budget simplifies builder reporting with respect to grandparented housing sales by: limiting the reporting requirement to those grandparented housing sales for which the consideration is equal to or greater than 450,000, and allowing builders to correct past misreporting and avoid potential penalties by electing to report all past grandparented housing sales for which the consideration was equal to or greater than 450,000 Generally, this measure will apply in respect of reporting periods of a person that end after March 22, 2016, and for any sales of grandparented housing for which the federal portion of HST became payable after June 30, 2010, if the builder elects and files corrective returns between May 1, 2016, and December 31, 2016. GSTHST on Donations to Charities The budget proposes that, for supplies made after March 22, 2016, when: a charity supplies property or services in exchange for a donation, and an income tax receipt may be issued for a portion of the donation, only the value of the property or services supplied will be subject to GSTHST. The proposal will apply to supplies that are not already exempt from GSTHST and will ensure that the portion of the donation that exceeds the value of the property or services supplied is not subject to the GSTHST. In addition, when a charity did not collect GSTHST on the full value of donations made in exchange for an inducement, for supplies made between December 21, 2002 (when the income tax split-receipting rules came into effect) and March 22, 2016, transitional relief will be provided. De Minimis Financial Institutions Financial institutions are subject to GSTHST rules that exempt various activities from GSTHST and restrict the ability of such institutions to claim input tax credits (ITCs) on inputs. A person can be deemed to be a de minimus financial institution for a year if it earns more than 1 million in interest income in the preceding year. The budget proposes a rule to exclude interest on demand and term deposits and GICs issued for 364 days or less in determining whether a person exceeds the 1 million dollar threshold. The rule is effective for years that begin after March 21, 2016, and the fiscal year of a person that includes March 22, 2016, for the purpose of determining if the person is required to file the Financial Institution GSTHST Annual Information Return. Application of GSTHST to Cross-Border Reinsurance GSTHST imported supply rules for financial institutions require a financial institution, including an insurer, with a presence outside Canada to self-assess GSTHST on certain expenses incurred outside Canada that relate to its Canadian activities. Uncertainty has existed in relation to the application of these rules to reinsurance premiums. The budget proposes to clarify that two specific components of the premium for imported reinsurance services, ceding commissions and the margin for risk transfer, do not form part of the tax base that is subject to self-assessment, and to set out specific conditions under which the special rules for insurers do not impose GSTHST on reinsurance premiums charged by a reinsurer to a primary insurer. This measure will apply as of the introduction of the special GSTHST imported supply rules for financial institutions (i. e. in respect of any specified year of a financial institution that ends after November 16, 2005), but solely for the purpose of taking into account the effect of this measure. In addition, this measure will allow an insurer to request a reassessment by the Minister of National Revenue of the amount of tax owing by the financial institution under the special GSTHST imported supply rules for prior years, as well as any related penalties or interest. A financial institution will have until the day that is one year after the day that these amendments receive royal assent to request such a reassessment. Closely Related Test Under the GSTHST, special relieving rules allow the members of a group of closely related corporations or partnerships to neither charge nor collect GSTHST on certain intercompany supplies. To ensure that the closely related test applies only when nearly complete voting control exists, the budget provides an additional requirement a corporation or partnership must hold and control 90 or more of the votes in respect of every corporate matter of the subsidiary corporation (with limited exceptions). This measure will generally apply as of March 22, 2017. It will apply as of March 23, 2016, for the purposes of determining whether the conditions of the closely related test are met in respect of elections under section 150 and section 156 of the Excise Tax Act that are filed after March 22, 2016, and that are to be effective as of March 23, 2016. Restricting the Relief of Excise Tax on Diesel and Aviation Fuel To ensure that the excise tax relief provided for heating oil applies only to heating in respect of buildings, the budget proposes to define heating oil, for excise tax purposes, as fuel oil that is consumed exclusively for providing heat to a home, building or similar structure, and is not consumed for generating heat in an industrial process. The budget also proposes to remove the generation of electricity exemption for diesel fuel used in or by a vehicle, including a conveyance attached to the vehicle, of any mode of transportation. Therefore, no relief will apply to fuel used to produce electricity in any vehicle (e. g. trains, ships, airplanes), regardless of the purpose for which the electricity is used. Both of these measures will apply to fuel delivered or imported after June 2016, and to fuel delivered or imported before July 2016 that is used, or intended to be used, after June 2016. Enhancing Certain Security and Collection Provisions in the Excise Act, 2001 To ensure that security requirements better reflects current tobacco duty rates, the budget proposes to increase the maximum amount of security required for a person to be issued a licence or any duty-paid stamps from 2 million to 5 million. This change will be effective on the later of the day following the day of royal assent to the legislation enacting the new collection proposal (see below) or three months following March 22, 2016. To enhance certain enforcement measures under the Excise Act, 2001 . the budget proposes to give the Minister of National Revenue the authority to require security for payment of assessed amounts and penalties in excess of 10 million that are not otherwise collected under the Excise Act, 2001. If the requested security is not furnished to the Minister, the budget also proposes that the Minister be provided the authority to collect an amount equivalent to the amount of security that the Minister had required. This measure will apply to amounts assessed and penalties after the day of royal assent to the enacting legislation. Other Tax Measures Improving Tax Compliance The budget provides support to the CRA to: enhance its efforts to crack down on tax evasion and combat tax avoidance by hiring additional auditors and specialists, developing robust business intelligence, increasing verification activities and improving the quality of investigative work that targets criminal tax evaders improve its ability to collect outstanding tax debts ramp up its outreach efforts to ensure that taxpayers understand and meet their tax obligations Aboriginal Tax Policy The government reiterates its support for direct taxation arrangements with Aboriginal governments. Previously Announced Measures The budget confirms that the government will proceed with the following previously announced measures, as modified to take into account consultations and deliberations since their announcement or release: the common reporting standard established by the Organisation for Economic Co-operation and Development for the automatic exchange of financial account information between tax authorities legislative proposals on the income tax rules for certain trusts and their beneficiaries (draft legislative proposals were released for comment on January 15, 2016) synthetic equity arrangements under the dividend rental arrangement rules the conversion of capital gains into tax-deductible inter-corporate dividends (section 55) the offshore reinsurance of Canadian risks alternative arguments in support of an assessment an exception to the withholding tax requirements for payments by qualifying non-resident employers to qualifying non-resident employees the repeated failu re to report income penalty the acquisition or holding of limited partnership interests by registered charities the qualification of certain costs associated with undertaking environmental studies and community consultations as Canadian exploration expenses the sharing of taxpayer information within the CRA to facilitate the collection of certain non-tax debts the sharing of taxpayer information with the Office of the Chief Actuary the tax deferral in respect of the commercialization of the Canadian Wheat Board the GSTHST joint venture election the relief of the GSTHST for feminine hygiene products Further, the government will move forward as required with technical amendments to improve the certainty of the tax system. However, it will not proceed with the measure announced in the 2015 budget that would provide an exemption from capital gains tax for certain dispositions of private corporation shares or real estate when cash proceeds from the disposition are donated to a registered charity or other qualified donner within 30 days. Line 101 - Security option benefits A security option benefit results when you buy securities through your employer at a pre-established price which is less than the fair market value of the securities. If your employer is a Canadian controlled private corporation (CCPC), which you deal with at arms length, you only have to report this taxable benefit on your tax return for the year you sell the securities. If your employer is not a CCPC you may have to report taxable benefits you received in (or carried forward to) the year you exercise your stock option. For eligible securities under option agreements exercised up to and including 4 p. m. Eastern time, on March 4, 2010, that were not granted by a CCPC, an income deferral of the taxable benefit may have been allowable subject to an annual limit of160100,000 on the fair market value of the eligible securities. If you exercised an option for eligible securities after 4 p. m. Eastern time, on March 4, 2010. that was not granted by a CCPC, the election to defer the benefit is no longer available for those securities. Your notice of assessment or notice of reassessment will show the remaining balance of your deferred amounts. For more information, see Guide T4037, Capital Gains. or contact the CRA . To claim a deduction on your stock options, see line 249 . Completing your tax return Report on line 101 the total of amounts shown in box 14 of all your T4 slips. The taxable benefit you received in (or carried forward to) 2016 on certain security options you exercised, is already included in these amounts. Forms and publications Related topics Secondary menuSRampED Glossary Date: July 15, 2015 The scientific research and experimental development (SR38ED ) glossary is provided for information purposes only as a plain language explanation of some of the terms used on the SR38ED Web pages, policies, forms and guides, when administering the SR38ED legislation under the federal Income Tax Act (ITA ) and the Income Tax Regulations . The SR38ED Glossary does not replace the law, either enacted or proposed. For the purpose of calculating qualified SR38ED expenditures adjusted selling costs involves the tracing of the costs incurred by non-arms length (NAL ) parties in providing a property such that there will be no inter-company profit included in the cost of the property to the performer. The cost to the party performing the160SR38ED will be the cost incurred by the160NAL party who acquired the property at arms length. For the purpose of calculating160qualified SR38ED expenditures. adjusted service cost involves the tracing of the costs incurred by160non-arms length (NAL ) parties in rendering a particular service such that there will be no inter-company profit included in the cost of the service to the performer. The cost to the party performing the160SR38ED will be the cost incurred by the supplier of the service by the160NAL party who rendered the particular service to the performer (the cost incurred by the supplier of the service will also be adjusted if it includes the cost of a service rendered by a party dealing at160NAL to that supplier). Agricultural check-offs are contributions made to agricultural organizations that fund SR38ED . The Canada Revenue Agency (CRA ) allows farm producers to earn investment tax credits (ITCs ) on contributions made to agricultural organizations that fund SR38ED. For the producers to receive the160ITC under the ITA. the agricultural organization may act as an agent for the producers in matters relating to SR38ED. In effect, all160SR38ED transactions by agricultural organizations will constitute a transaction made by producers. All or substantially all (ASA ) means 90 or more. Analysis is the detailed examination of information to differentiate the various parts of a whole, determine their attributes, or explain their relationships. It is performed against the background of available knowledge and experience and it involves using tools such as models, graphs, statistics, tables, diagrams, mathematical formulas, and computer programs to express this knowledge or experience. Analysis is an integral part of the systematic investigation or search and it can be used to generate or test a hypothesis . Note The following160is the explanation of changes to this term as of April 24, 2015. systematic investigation or search replaced scientific method as the latter is no longer used in policy. Applied research is work undertaken for the160advancement of scientific knowledge with a specific practical application in view. Arms length refers to a situation where two parties that deal with each other are not related to each other and no control exists between them. It is a question of fact whether two parties not related to each other are dealing with each other at arms length. Generally, an asset is considered to become available for use and eligible for capital cost allowance and investment tax credit (ITC ) at the earliest of: the time at which the property is first used by the claimant for the purpose of earning income or the time the property is delivered or is made available to the claimant and is capable of producing a saleable product or to perform a commercially salable service. Basic research is work undertaken for the advancement of scientific knowledge without a specific practical application in view. Basic SR38ED investment tax credit rate (15) Taux de base du crdit dimpt linvestissement pour la RS38DE (15 ) The basic rate of an SR38ED investment tax credit (ITC ) is 15 for tax years that end after 2013 and 20 for tax years that end before 2014. For tax years that include January 1, 2014, the reduction in the basic ITC rate is pro-rated based on the number of days in the tax year that are after 2013. The following types of claimants will earn ITCs at the basic ITC rate on qualified SR38ED expenditures : corporations (other than certain Canadian-controlled private corporations (CCPC ) ) sole proprietorships (individuals) partners of a partnership beneficiaries of trusts. Beta site testing is the testing or validation of a product or process in a customer or an end-user facility or environment. Often, the need for this type of testing arises when the product or process that is being developed cannot be tested in isolation without the full process environment, or in cases where the developer is unable to simulate the specialized environment or conditions required to evaluate the product performance. While beta site testing is a commonly used term, depending on the industry or technology involved, other terms may be used to characterize the type of testing discussed above. These terms include for example, field testing, field investigation, field trials, validation, offsite testing, consumer testing, in-situ testing, end-use testing, final verification, or on-orbit or on-mission testing. The CRA uses the term beta site testing in a generic sense to refer to all of the above terms. Canadian-controlled private corporation (CCPC ) Socit prive sous contrle canadien (SPCC ) For more information on CCPC and other types of corporations, please refer to the following CRA web page, Types of corporations . A claim preparer of an SR38ED form means a person or partnership who agrees to accept consideration to prepare, or assist in the preparation of, the form but does not include an employee who prepares, or assists in the preparation of, the form in the course of performing their duties of employment. For this purpose, an SR38ED form is a prescribed form required to be filed under subsection 37(11) of the Income Tax Act . which is the Form T661 Scientific Research and Experimental Development (SR38ED ) Expenditures Claim . Within the context of SR38ED. work that is commensurate with the needs must be corresponding in the amount, size, extent, or duration that is necessary to carry out basic research. applied research. or experimental development . A commercial asset is an asset that is developed for the purpose of being used within the companys own business. It is constructed to meet the companys own requirements. A commercial plant is a production facility used for commercial (or other non-SR38ED ) purposes. Although new plants may sometimes be built or existing commercial plants may be modified, to test and demonstrate new processes, these plants are generally not pilot plants as their intended purpose and actual use is commercial. Commercial production is work associated with producing materials, devices, and products, intended for sale or business operations. It is expected that a profit will be made. The definition of SR38ED states that work with respect to the commercial production of a new or improved material, device or product or the commercial use of a new or improved process is not included in the meaning of SR38ED . Computer programming is preparing and coding operating instructions for a computer. Context of the production run refers to the circumstances under which the production run is carried out. When experimental development work is performed during a production run, the context of that production run must be established since the allowable SR38ED expenditures vary depending on that context. In other words, the circumstances surrounding that production run will determine how the expenditures are treated. When experimental development work is performed during a production run, the context of the production run can be EDEP or EDCP . A contract payment is: an amount paid or payable to a claimant by a taxable supplier in respect of the amount for SR38ED. for, or on behalf of. a person or partnership entitled to a deduction for the amount as a current expenditure or as a third-party payment to a corporation and at a time when the claimant and the person or partnership (the taxable supplier) are dealing at arms length or an amount for an expenditure of a current nature (other than a prescribed amount) payable by a Canadian government, municipality or other Canadian public authority or by a person exempt from Part I tax, for SR38ED to be performed for it or on its behalf. A custom product is an asset that is developed for the purpose of subsequently being sold. It is constructed to meet customer specifications or market-driven technical requirements. Data collection is the gathering of information using pre-determined procedures or protocols. The term routine data collection refers to data collection that is carried out for supporting normal business operations, and it is excluded from SRampED work. Only the data collection work that is commensurate with the needs and directly in support of basic research. applied research or experimental development is eligible. Depreciable property is any property for which the claimant would be allowed to claim capital cost allowance. Design is work to transform concepts and ideas into a plan. Directly attributable to the prosecution of160SRampED Directement attribuable 224 des activit233s de RSampDE An expenditure of a current nature is directly attributable to the prosecution of SRampED if it is: the cost of materials consumed or transformed in such prosecution (please refer to the Materials for SRampED Policy ) for an employee who directly undertakes, supervises or supports the prosecution of SRampED that would be, the portion of salaries or wages incurred, to the extent the amount can reasonably be considered in respect of such prosecution (please refer to the SRampED Salary or Wages Policy ) and for other expenditures that are, an expenditure, or portion of an expenditure, that is directly related to the prosecution of SRampED and that would not have been incurred if such prosecution had not occurred. For more information on other expenditures (please refer to the SRampED Overhead and Other Expenditures Policy ). Directly attributable to the provision of premises, facilities or equipment for the prosecution of160SRampED Directement attribuable 224 la fourniture de locaux, d8217installations ou de mat233riel servant 224 des activit233s de RSampDE The following expenditures are directly attributable to the provision of premises, facilities or equipment for the prosecution of SRampED in Canada: the cost of the maintenance and upkeep of such premises, facilities or equipment and other expenditures, or those portions of other expenditures, that are directly related to that provision and that would not have been incurred if those premises or facilities or that equipment had not existed (incremental ). Directly engaged in SRampED 160 Exerce directement des activit233s de RSampDE Directly engaged in SRampED refers to hands on work. Whether an employee is directly engaged in SRampED is based on the tasks that are performed and not on the job title of the employee. For a list of tasks to be considered as directly engaged, see Table 3 in the T4088, Guide to Form T661 Scientific Research and Experimental Development (SRampED ) Expenditure Claim . For more information, please refer to section 7.1 of the SRampED Salary or Wages Policy . Within the context of SRampED. work that is directly in support is work that was carried out specifically to perform the related basic research. applied research or experimental development . Directly related to the prosecution of160SRampED 160 Directement li233e160224 des160activit233s de RSampDE To be directly attributable to the prosecution of SRampED in Canada under the traditional method. an expenditure, or a portion of the expenditure, must first be an expenditure directly related to the prosecution of SRampED in Canada. For an expenditure to be considered directly related to the prosecution of SRampED. the expenditure must connect with (that is, be related to) the SRampED work, the SRampED staff, or the machinery equipment used by staff to perform SRampED. and there must be no intervening step or intermediary between these elements and the expenditure (that is, directly). In other words, there must be a direct linkage of the expenditure to specific SRampED work, staff, or machineryequipment. Whether an expenditure is directly related to the prosecution of SRampED is a question of fact. If the expenditure is directly related to the prosecution of SRampED in Canada and also incremental to such prosecution, it can be claimed as SRampED overhead and other expenditures . EDCP refers to the context of the production run when experimental development work is carried out in conjunction or simultaneously with commercial production. When scientific research and experimental development (SR38ED ) is involved in a production run, but the context of that production run is not EDEP. the context of the production run must be EDCP . Engineering is the practice of designing, composing, evaluating, advising, reporting, directing, or supervising the construction or manufacturing of tangible products, assemblies, systems, or processes that requires in-depth knowledge of engineering science and the proper, safe, and economic application of engineering principles. By definition, and according to sound professional practice, engineering practice does not involve scientific or technological uncertainty and is thus not eligible on its own. However, engineering work that is commensurate with the needs and directly in support of basic research. applied research. or experimental development is eligible. It is important to distinguish between work with respect to engineering and the work that engineers perform. Even though engineering practice is not eligible on its own, engineers can still be carrying out basic research. applied research. and experimental development . Note The following are the explanation of changes to this term as of April 24, 2015. routine engineering was removed as there is no differentiation between engineering and routine engineering. A paragraph was added to clarify that even though engineering practice on its own is not eligible, engineers could still be performing basic research, applied research, or experimental development. Enhanced SR38ED investment tax credit rate (35) Taux major du crdit dimpt linvestissement pour la RS38DE (35 ) Some Canadian-controlled private corporations (CCPCs ) that meet certain requirements may earn investment tax credits at the enhanced rate of 35 (20 basic rate 15 enhancement before 2014) and (15 basic rate 20 enhancement after 2013). This enhanced rate may be earned on their qualified SR38ED expenditures up to a maximum threshold of 3 million. The qualified SR38ED expenditures in excess of the expenditure limit for the tax year earn ITC at the basic rate. Any production beyond what is required for the SR38ED is called excess production. The work identified in paragraphs (e)-(k) of the definition of SR38ED is typically referred to as excluded work and, collectively, these paragraphs are referred to as the exclusions. This work is not SR38ED . Expenditures of a capital nature are those expenditures that result in the acquisition of capital property, which is depreciable property or property that would result in a gain or loss if disposed. The comments in the current version of Interpretation Bulletin IT-128R, Capital Cost Allowance Depreciable Property. may be of assistance in determining whether a particular property is depreciable property. Expenditures of a current nature made before 2014 are considered to be those expenditures that do not result in the acquisition of land, a leasehold interest in land, or property that would otherwise be depreciable property to the taxpayer. For SR38ED purposes, expenditures of a current nature made after 2013 include any expenditures made by the claimant other than an expenditure for: the acquisition of capital property of the claimant, or the use of, or the right to use, capital property, that would be capital property of the claimant if the capital property were owned by the claimant. An experiment is the test of a hypothesis under controlled conditions. Experimental development is 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. Experimental production is defined as the production output of experimental development that is required to verify whether the objectives of the SR38ED work have been met or if a160technological advancement is achievable. The purpose of the production run. in which the output is experimental production, is to evaluate the technical aspects of the SR38ED project. The income tax return filing-due date for a tax year is the day on or before which a income tax return under Part I of the ITA is required to be filed for the year or would be required to be filed if tax under Part I of the ITA was payable. For more information, please refer to section 5.0 of the SR38ED Filing Requirements Policy . To qualify as first term shared-use-equipment, a property must be: depreciable property acquired after December 2, 1992, and before January 1, 2014 equipment that does not meet the ASA criteria for SR38ED capital expenditures equipment that is not prescribed depreciable property (PDP ) equipment other than general purpose office equipment or furniture (GPOEF ) new equipment (the equipment must not have been used or acquired for use or lease, or for any other purposes before the claimant acquired it) and equipment that is used by the claimant during its operating time in the period starting with the time the equipment was acquired and available for use. and ends at the end of the first tax year that was at least 12 months after the time the equipment was acquired and available for use, and was used primarily for the prosecution of SR38ED in Canada. General-purpose office equipment of furniture (GPOEF ) includes all furniture, such as desks, chairs, lamps, filing cabinets, and bookshelves. It also includes photocopiers, fax machines, telephones, pagers, and calculators. Computers, including hardware, software, and ancillary equipment, are not considered to be general8209purpose office equipment or furniture. Government assistance is defined in the ITA as assistance from a government, municipality, or other public authority whether as a grant, subsidy, forgivable loan, deduction from tax, investment allowance, or any other form of assistance other than the federal investment tax credit (ITC ) . Government assistance also includes assistance provided by a crown corporation or a foreign government. The humanities are branches of knowledge that concern human beings and their culture or analytic and critical methods of inquiry derived from an appreciation of human values and the unique ability of the human spirit to express itself. Academicians generally categorize knowledge into four main areas: physical sciences, biological sciences (or natural sciences), humanities, and social sciences, although others recognize only two categories: natural sciences and social sciences. As a group of educational disciplines, the humanities are distinct in content and method from the physical and biological sciences and, somewhat less decisively, from the social sciences. The humanities include the study of all languages and literatures, the arts, history, and philosophy. Work with respect to research in the humanities is specifically excluded from the definition of SR38ED . A hypothesis is an idea, consistent with known facts, that serves as a starting point for further investigation to prove or disprove that idea. Note The following are the explanation of changes to this term as of April 24, 2015. The explanation has been simplified to improve understanding and readability. In Canada (for SR38ED expenditures) Au Canada (pour les dpenses de RS38DE ) Subsection 37(1.3) of the ITA provides that scientific research and experimental development (SR38ED ) expenditures that are incurred, in the course of a business otherwise carried on by a taxpayer in Canada, in the zone identified by the Oceans Act as the exclusive economic zone (EEZ ) of Canada (or in the airspace above or the subsoil or seabed below that zone) will be considered to have been incurred by the taxpayer in Canada. Generally, the Oceans Act provides that the EEZ of Canada consists of the area that is up to 200 nautical miles from the Canadian coastline. Coastline refers to the low-water line along the coasts of Canada. Incremental means that the expenditure would not have been incurred if SR38ED had not occurred. Investment tax credit (ITC ) Crdit dimpt linvestissement (CII ) An investment tax credit (ITC ) may be earned in respect of various investments or expenditures. The definition of ITC within the Act determines the amount of ITC that is available to a taxpayer at the end of a tax year. There are additional provisions in the Act that adjust the ITC amount available to the taxpayer at the end of a particular tax year. Unless otherwise noted, any reference to ITC within the SR38ED program is a reference to an ITC earned on qualified SR38ED expenditures . Investment tax credit (ITC ) applied Crdit dimpt linvestissement (CII ) appliqu Investment tax credit (ITC ) applied refers to an ITC amount the taxpayer applied against Part I tax otherwise payable. Investment tax credit (ITC ) carryback Crdit dimpt linvestissement (CII ) Report rtrospectif Investment tax credit (ITC ) carryback refers to an ITC amount the taxpayer earned in a tax year and carried back and applied against Part I tax otherwise payable in any of the 3 previous tax years. Investment tax credit (ITC ) carryforward Crdit dimpt linvestissement (CII ) Report prospectif Investment tax credit (ITC ) carryforward refers to an ITC amount the taxpayer has not applied, refunded, or carried back that can be carried forward and applied against Part I tax otherwise payable in a subsequent tax year. The carry-forward period is generally 20 tax years. The ITC expires if it is not applied to reduce Part I tax otherwise payable within the applicable number of tax years. Investment tax credit (ITC ) recapture Rcupration des crdits dimpt linvestissement (CII ) The ITC recapture rules will reverse all or a portion of the SR38ED ITC earned by adding an amount to a claimants tax payable for the year in which the sale or conversion to commercial use of an SR38ED property takes place. For more information, please refer to the Recapture of SR38ED Investment Tax Credit Policy . Investment tax credit (ITC ) refund Crdit dimpt linvestissement (CII ) rembours The investment tax credit (ITC ) of certain claimants that is not applied against Part I tax otherwise payable, or carried back to a previous tax year and applied against Part I tax otherwise payable in the previous tax year, may be refundable. In this context, the term refundable goes beyond a reimbursement of Part I tax already paid and refers to the credit that is reimbursed to the claimant. Key individuals are individuals who are directly involved in the project and are essential to the progress of the project. These are individuals who will have a good understanding of the scientific or technological aspects of the project. Market research is the process of gathering and analyzing information for the purpose of marketing a specific product, especially a new or proposed product. Market research is a major discipline of marketing whose main function is intelligence gathering and analysis on a particular market, industry, geography, customer group, competitors, or specific product or service area. The main uses of market research are: to position a business or strategic program to assist in new product or service launches to evaluate a product or services strengths and weaknesses to help determine how to improve a product or service to determine customer wants, needs, and desires and to analyze competition. Market research includes work such as: examining such factors as buying habits, use of leisure time, consumer needs or wants, and attitudes toward existing products and new products being test-marketed market development and market verification general market identification market demonstration identifying market preference developing customer acceptance gathering and evaluating data about consumers preferences for products and services and studying the requirements of specific markets, the acceptability of products, and methods of developing and exploiting new markets. Work with respect to market research is specifically excluded from the definition of SRampED . Materials consumed in the prosecution of SRampED basically means the material was destroyed or rendered virtually valueless as a result of the SRampED . For more information, please refer to section 5.0 of the Materials for SRampED Policy . CRA s interpretation of the term materials for SRampED is all the raw materials, substances, or other items that compose the body of a thing at a given moment in the SRampED process. For more information, please refer to the Materials for SRampED Policy . Materials transformed in the prosecution of SRampED generally means, material for SRampED. that has been changed or incorporated into another material or product as a result of the SRampED and the material still has some value either to the claimant or to another party. For more information, please refer to section 6.0 of the Materials for SRampED Policy . Mathematical analysis is the examination of a set of observations by means of mathematical tools, principles, methods, or techniques. Non-arms length refers to a situation where two related parties that deal with each other and one party exerts control over the other. In other words, the parties are not dealing at arms length . Non-government assistance is an amount that is received as an inducement, refund, reimbursement, contribution, allowance, grant, subsidy, forgivable loan, deduction from tax, or any other form of assistance. When SRampED carried out in Canada is undertaken on behalf of a claimant, this normally refers to a situation where the SRampED work is contracted out to another party under circumstances where the claimant (the payer) typically maintains ownership of the SRampED work performed. Whether the payer requested the contractor to perform SRampED on behalf of the payer under the terms of the contract is a key element for determining an amount as being a contract payment. This determination is made on the basis of the terms of the contract read as a whole and by reviewing all the facts surrounding the particular situation. The term operating time is not defined in the ITA but, generally, operating time means the time the equipment usually runs or functions during the tax year. For more information, please refer to section 4.2 of the SRampED Capital Expenditures Policy . Operations research is an approach involving the mathematical treatment of a process, problem, or operation to determine its purpose and effectiveness, and to gain maximum efficiency. Within the context of the SRampED Program, the term overhead and other expenditures is often used to refer to certain expenditures of a current nature that are directly related to the prosecution of SRampED in Canada and that are incremental. or to certain expenditures that are directly attributable to the provision of premises, facilities, or equipment for the prosecution of SRampED in Canada. A pilot plant is a production facility that is developed for the primary purpose of carrying out SR38ED during its useful life. It is used solely for its technical or experimental content and not for the purposes of commercial operations. A pilot plant is a non-commercial scale plant in which processing steps are systematically investigated under conditions simulating a full production unit. Usually, it is used to obtain engineering and other data needed to evaluate hypotheses. establish finished product technical specifications, write product or process formulae, or design special equipment and structures that are required by a new or improved fabrication process. More specifically, when carrying out SR38ED. pilot plants may be used to study the behaviour of certain raw materials, develop an economically viable manufacturing process, modify equipment for new applications, test unproven equipment, test new conditions, produce samples for research, or determine environmental effects. The term pool refers to a tax mechanism whereby an amount (the pool) is calculated by identifying additions and reductions to the balance. Pool of deductible SR38ED expenditures Compte de dpenses de RS38DE dductibles It is possible to pool expenditures of a current nature (and expenditures of a capital nature incurred prior to January 1, 2014) on SR38ED carried out in Canada, and deduct them when calculating the income from a business you carried on in the tax year you made the expenditure or in any later tax year. A negative balance is usually brought into income, and a positive balance (or portion thereof) may usually be deducted from income. For more information, please refer to the Pool of Deductible SR38ED Expenditures Policy . Prescribed depreciable property (PDP ) Biens amortissables viss par rglement (BAVR ) The depreciable property of a claimant that is prescribed for the purposes of the definition first term shared-use-equipment is: a building of the claimant a leasehold interest of the claimant in a building a property or part of a property of the claimant if, at the time the part was acquired by the claimant, the claimant or a person related to the claimant intended that the part would be used in the prosecution of SR38ED during the assembly, construction, or commissioning of a facility, plant or line for commercial manufacturing, commercial processing or other commercial purposes (other than SR38ED ), and intended:13 that it would be used during its operating time in its expected useful life primarily for purposes other than SR38ED or that its value would be consumed primarily in activities other than SR38ED . Prescribed expenditures within the meaning of the Regulations are not qualified SR38ED expenditures and, therefore, do not earn investment tax credit (ITC ) . Prescribed information is the information to be provided on a form or the manner of filing a form as authorized by the Minister of National Revenue. For more information, please refer to section 4.0 of the SR38ED Filing Requirements Policy . Prescribed proxy amount (PPA ) Montant de remplacement vis par rglement (MRVR ) The prescribed proxy amount is a notional amount on which SR38ED ITC can be earned. It is calculated as a percentage of a salary base. The PPA is only applicable when the claimant elects to use the proxy method . The PPA is used in lieu of actual SR38ED overhead and other expenditures when calculating qualified SR38ED expenditures to earn SR38ED ITC. The PPA is not included in the pool of deductible SR38ED expenditures . For SR38ED purposes, the term primarily means more than 50 but less than 90. Generally, production refers to the output from the process as well as the act of operating the process. Production output refers to the output from the process (in other words, the product). In a commercial environment, companies run processes and equipment for certain periods of time in order to achieve specific objectives. This is generally referred to as a production run. For example, a production run could involve the period of time during which a particular grade of material is produced for sale. A production run could also be a period of time during which changes to the process are validated. Prospecting, exploring or drilling for, or producing, minerals, petroleum or natural gas is field work carried out as part of business operations in the oil 38 gas and mining industries. A prototype is an original model on which something new is patterned and of which all things of the same type are representations or copies. It is a basic experimental model that possesses the essential characteristics of the intended product. A prototype is normally understood to be a trial model or preliminary version. It is developed to test the feasibility of a concept or hypothesis within a systematic investigation or search and generally has no lasting value. The proxy method is an alternative method to the traditional method in computing SR38ED expenditures. Specifically, the proxy method involves calculating a notional amount for SR38ED overhead and other expenditures called the prescribed proxy amount (PPA ) . Psychological research is research into the functions of the mind and the behaviour of humans or animals in relation to their environment. The definition of SR38ED specifically excludes work with respect to research in the social sciences or the humanities. Psychology is a social science however, paragraph (d) of the definition of SR38ED lists psychological research work as eligible work when it is undertaken directly in support of an SR38ED project in a field of science or technology other than the social sciences or humanities. Only the work with respect to psychological research that is commensurate with the needs and directly in support of an SR38ED project can be claimed. For example, in many projects involving interaction between human and machine, the interaction between a human operator and the device that he or she is controlling poses a complex technological problem. Major contributing factors are the physiological, neurological, and other limitations of the human operator, considered as an element within a servo system. The effect of these limitations implies that changes to the purely physical elements comprised in the system may be necessary, and that these changes can be best undertaken by simulation or actual (or real) testing with the human operator in the servo loop. Adjustments or modifications to the system are made until a point is reached where the human operator can carry out a prescribed task without excessive physical or neurological effort. Certain aspects of psychological research may also be involved in this kind of development. Work with respect to this type of psychological research that is directly in support and commensurate with the needs of basic research. applied research or experimental development is considered eligible. A public authority is generally an entity that: has a duty to the public is subject to a significant degree of government control and uses its profits for the benefit of the public. Qualified individuals are personnel who have qualifications and or experience in science. technology or engineering. The qualifications and experience must be relevant to the science or technology involved in the projects claimed. The term qualified SR38ED expenditure is a term used on Form T661, Scientific Research and Experimental Development (SR38ED ) Expenditures Claim. The term represents all the amounts that qualify for calculating the investment tax credit in a tax year, except for repayments of assistance and contract payments made in that year. Qualifying corporation means: a corporation that is a Canadian-controlled private corporation (CCPC ) in a particular tax year, with a taxable income in the previous tax year that is not more than the corporations qualifying income limit for the particular tax year, or a corporation that is a CCPC in a particular tax year and is associated with one or more corporations and the total of the taxable incomes of the corporation and the associated corporations for their last tax year ending in the preceding calendar year that is not more than the corporations qualifying income limit for the particular tax year. The taxable income in the previous tax year or in the last tax year ending in the preceding calendar year is calculated before taking into consideration the specified future tax consequences for that previous year. Where a CCPC s qualifying income limit is reduced to zero because the CCPC s taxable capital is 50 million or greater in the immediately preceding year, the CCPC is not a qualifying corporation and would not be entitled to any refundable ITC . For the 2010 and later tax years, the qualifying income limit of a corporation for a particular tax year is the amount determined in the ITA by the formula: 500,000 x (40,000,000 A) 40,000,000 In this formula A is: nil if the taxable capital amount is less than or equal to 10 million or is the lesser of 40 million and the amount by which the taxable capital amount exceeds 10 million, in any other case. The taxable capital amount is the total of the corporations taxable capital employed in Canada for its immediately preceding tax year and the taxable capital employed in Canada of all associated corporations (if applicable) for the last tax year ending in the preceding calendar year that ended before the end of the particular tax year of the corporation. Taxable capital employed in Canada by the corporation has the meaning provided in the ITA. For more information on taxable capital, please refer to Interpretation Bulletin IT 532, Part I.3 Tax on Large Corporations . Quality control is the techniques and work that sustain the quality of a product or service to satisfy given requirements. Quality control consists of data collection. data analysis, and implementation, and applies to all phases of the product life cycle: manufacturing, delivery and installation, and operation and maintenance. Quality control is usually concerned with the functional merits of a material, device, product (for example, conformity to design specifications, including defining testing procedures and minimum quality standards), or process (for example, determining what changes must be made to achieve or maintain the required level of quality). Work with respect to quality control is specifically excluded from the definition of SR38ED . Related benefits include the employer8217s share of payments to the Canada Pension Plan (CPP ) or the Quebec Pension Plan (QPP ), Employment Insurance (EI ), the Worker8217s Compensation Board (WCB ), or the Commission de la sant233 et de la s233curit233 du travail du Qu233bec (CSST ), an approved employee pension plan, or employee medical, dental, or optical insurance plans, and premiums to a superannuation plan. For more information, please refer to section 5.1 of the SRampED Salary or Wages Policy . The words related to the business should be interpreted broadly. For SRampED to be related to a business carried on by a claimant, it is necessary to have some interconnection or link between the SRampED work and the general area of the claimants business. For greater certainty, SRampED related to a business includes any SRampED that may lead to, or facilitate, an extension of that business. The prosecution of SRampED. in and of itself is only considered a business of the claimant to which SRampED relates if the claimant derives all or substantially all (ASA ) of its revenue from the prosecution of SRampED . Where a claimant is a corporation, and the SRampED performed by the claimant relates to a business actively carried on by a related (non-arm8217s length ) corporation at the time when the SRampED was performed, the related to the business requirement is satisfied for the claimant. Remuneration based on profit means any remuneration to an employee that is conditional on the profit of the business or that is a portion of the profit of the business. A retiring allowance is an amount paid on or after the retirement of an employee in recognition of long service or in respect of the loss of an office or employment. A retiring allowance is not considered to be salary or wages by definition. As a result, a retiring allowance cannot be allowed as salary or wages under either the traditional method or the proxy method. A claimant may be able to treat a retiring allowance as overhead and other expenditures under the traditional method if it is directly related to the prosecution of SRampED and is incremental . The salary base is an amount used to calculate the prescribed proxy amount (PPA ). The PPA for a tax year is a percentage of the salary base, subject to the overall PPA cap. The salary base is composed of the salaries or wages (incurred and paid in the tax year or paid within 180 days of the tax year-end) of employees who are directly engaged in SR38ED and that are included in the pool of deductible SR38ED expenditures. However, the salary base cannot include taxable benefits. remuneration based on profits. or bonuses, or prior years unpaid salary or wages paid in the tax year. In addition, the amount of salary or wages that can be taken into account is further restricted for a specified employee . The term salary or wages is defined in the ITA and means income from an office or employment. Salary or wages generally includes any expenditure made in respect of a taxable benefit as well as vacation pay, statutory holiday pay, sick leave pay, pay in lieu of termination notice, bonuses, tips and gratuities, honorariums, directors fees, management fees and commissions. Salary or wages do not include amounts in respect of the employers shares of the related benefits, amounts for extended vacation or sick leave, stock options benefits and retiring allowance. These amounts must be incurred and paid in the tax year or paid within 180 days of the tax year-end. Sales promotion is work that supplements advertising and personal selling coordinating them, and making them effective. Sales promotion work generally includes stimulating sales through options such as: special offers demonstrations contests samples discounts exhibitions or trade shows games giveaways public relations and point-of-sale displays and merchandising. Work with respect to sales promotion is specifically excluded from the definition of SR38ED . Science is a branch of study in which phenomena are observed and classified and, usually, in which quantitative and qualitative relations are formulated and verified. Scientific or technological advancement is the generation of information or the discovery of knowledge that advances the understanding of scientific relations or technology. This definition encompasses the definition of scientific advancement, advancement of scientific knowledge and technological advancement. The only difference is that scientific advancement and advancement of scientific knowledge relate to science whereas technological advancement relates to technology . For more information, please refer to section 2.1.4 of the Eligibility of Work for SR38ED Investment Tax Credits Policy . Scientific or technological knowledge base refers to the existing level of technology and scientific knowledge, and consists of the knowledge of the resources within the company and sources available publicly. The resources within the company include: technical knowledge, education, training, and experience of its personnel and its technical capabilities typified by its current products, techniques, practices, and methodologies (for example, trade secrets and intellectual property). Publicly available sources generally include scientific papers, journals, textbooks, and internet-based information sources as well as expertise accessible to the company (for example, through recruiting employees or hiring consultants or contractors). The company is expected to have information that is common knowledge at the time the work is performed. Common knowledge is knowledge available to professionals familiar with the specific areas of science or technology in question. It is recognized that, although the knowledge available publicly is the same for all companies, the scientific or technological knowledge base may vary from company to company because the internal resources can vary from company to company. Note The following are the explanation of changes to this term as of April 24, 2015. The term technology base or level has been changed to scientific or technological knowledge base. The change is to clarify that the concept applies equally to basic research, applied research, and experimental development. publications has been removed from the list of sources generally included in as publicly available. This was considered redundant. consultants was added to the list of examples of expertise accessible to the company. The last paragraph was modified for readability. Scientific or technological uncertainty means whether a given result or objective can be achieved or how to achieve it, is not known or determined on the basis of generally available scientific or technological knowledge or experience. This definition encompasses the definition of scientific uncertainty, technological uncertainty and technological obstacle. The only difference is that scientific uncertainty relates to science whereas technological uncertainty and technological obstacle relate to technology . For more information, please refer to section 2.1.1 of the Eligibility of Work for SR38ED Investment Tax Credits Policy . Scientific research and experimental development (SR38ED ) Recherche scientifique et dveloppement exprimental (RS38DE ) SR38ED is160defined for income tax purposes in subsection 248(1) of the ITA as follows: scientific research and experimental development means systematic investigation or search that is carried out in a field of science or technology by means of experiment or analysis and that is (a) basic research, namely, work undertaken for the advancement of scientific knowledge without a specific practical application in view, (b) applied research, namely, work undertaken for the advancement of scientific knowledge with a specific practical application in view, or (c) 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, and, in applying this definition in respect of a taxpayer, includes (d) work undertaken by or on behalf of the taxpayer with respect to 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 paragraph (a), (b), or (c) that is undertaken in Canada by or on behalf of the taxpayer, but does not include work with respect to (e) market research or sales promotion, (f) quality control or routine testing of materials, devices, products or processes, (g) research in the social sciences or the humanities, (h) prospecting, exploring or drilling for, or producing, minerals, petroleum or natural gas, (i) the commercial production of a new or improved material, device or product or the commercial use of a new or improved process, (j) style changes, or (k) routine data collection To qualify as second term shared-use-equipment, a property must be: property that was first term shared-use-equipm ent equipment that is used by the claimant during its operating time in the period starting at the time the property was acquired and was available for use and ends at the end of the first tax year that was at least 24 months after the time the equipment was acquired and available for use (this is the second period ) and used by the claimant during its operating time in the second period primarily for the prosecution of SR38ED in Canada. Shared-use-equipment (SUE ) Matriel vocations multiples (MVM ) Investment tax credits (ITC )160are no longer available in respect to SUE for tax years ending after February 1, 2017. Expenditures of a capital nature for capital property acquired or available for use after 2013, no longer qualify for SR38ED tax incentives. However, because of the interaction of the definition first term SUE and second term SUE. ITCs on SUE may still be claimed until 2017. A SR38ED ITC can be earned on a portion of the cost of equipment used primarily for the prosecution of SR38ED. Equipment that qualified as first term shared-use-equipment or second term shared-use equipment can earn an SR38ED ITC . Social sciences are disciplines characterized by their concern with human beings, their culture, and their economic, political, and social relationships with the environment. Academicians generally categorize knowledge into four main areas: physical sciences, biological sciences (or natural sciences), humanities, and social sciences, although others recognize only two categories: natural sciences and social sciences. Generally, the social sciences include anthropology, economics, political science, psychology, sociology,160and sometimes160education, law, philosophy, religion, and history. Management is also considered a social science. Work with respect to research in social sciences is specifically excluded from the definition of SR38ED. However, under certain circumstances, work with respect to psychological research may be eligible. Note The following are the explanation of changes to this term as of April 24, 2015. criminology, geography, and psychiatry were removed from the definition. and sometimes was added to indicate that education, law, philosophy, religion, and history are not always considered social sciences. A specified employee is an employee who does not deal at arms length with the employer or who is a specified shareholder of the employer. A specified shareholder is a person who owns, directly or indirectly, at any time during the year, 10 or more of the issued shares of any class of the capital stock of the employer or of any corporation related to the employer. A specified employee could also be someone related to a specified shareholder e. g. a sister, a brother, a spouse, etc. For more information please refer to the Contract Expenditures for SR38ED Performed on Behalf of a Claimant Policy . SR38ED capital expenditure Dpense en capital de RS38DE SR38ED capital expenditures made after 2013, no longer qualify for SR38ED tax incentives. This includes capital expenditures made before 2014 for property that became available for use after 2013. A SR38ED capital expenditure is an expenditure made to acquire new or used depreciable property intended to be: used all or substantially all (ASA ) of the operating time in its expected useful life in the performance of SR38ED in Canada or consumed ASA of its value in the performance of SR38ED in Canada. SR38ED current expenditure Dpense courante de RS38DE A SR38ED current expenditure is an expenditure of a current nature made by a claimant on or in respect of SR38ED that is described in the following policies: SR38ED reporting deadline Date limite de production pour la RS38DE A claimants reporting deadline for an SR38ED expenditure is the last day for which a prescribed form containing prescribed information in respect of the expenditure is required to be filed for the year. The reporting deadline to file the prescribed Form T661, Scientific Research and Experimental Development (SR38ED ) Expenditures Claim. for an SR38ED expenditure is 12 months after the claimants filing-due date of the return for the year in which the expenditure was incurred. The reporting deadline to include an ITC amount earned in respect of an SR38ED expenditure on the prescribed Schedule T2SCH31, Investment Tax Credit Corporations or Form T2038(IND) , Investment Tax Credit (Individuals). is also 12 months after the claimants filing-due date of an income tax return for the year in which the expenditure was incurred. For corporations the SR38ED reporting deadline is generally 18 months after the tax year end. For more information, please refer to section 6.0 of the SR38ED Filing Requirements Policy . A style change is a change in the physical appearance or arrangement of an article without altering its utility, efficiency, function, or operating characteristics. Work with respect to style changes is specifically excluded from the definition of SR38ED . The work identified in paragraph (d) of the definition of SR38ED is usually referred to as support work. Work with respect to the eight categories listed in paragraph (d) does not constitute SR38ED on its own. However, if it is commensurate with the needs and directly in support of basic research. applied research or experimental development work undertaken in Canada, it falls within the meaning of SR38ED . System uncertainty is a form of technological uncertainty that can arise from or during the integration of technologies, the components of which are generally well known. This is due to unpredictable interactions between the individual components or sub-systems. For more information, please refer to section 2.1.1 of the Eligibility of Work for SR38ED Investment Tax Credits Policy . The systematic investigation or search called for in the definition of SR38ED is an approach that includes defining a problem, advancing a hypothesis towards resolving that problem, planning and testing the hypothesis by experiment or analysis. and developing logical conclusions based on the results. For more information, please refer to section 2.1.3 of the Eligibility of Work for SR38ED Investment Tax Credits Policy . Note The following160is the explanation of changes to this term as of April 24, 2015. scientific method has been removed from the explanation as it is no longer used in policy. Taxable benefits are benefits or allowances an employer provides to its employees that are taxable under the ITA. For example: automobile benefits housing, board, and meals gifts and awards interest-free or low-interest loans group term life insurance policies or tuition fees. For more information, please refer to section 3.0 of the SR38ED Salary or Wages Policy . A taxable supplier means: a person resident in Canada a Canadian partnership or a non-resident person or non-Canadian partnership that carries on a business through a permanent establishment in Canada. Technology is the practical application of scientific knowledge and principles. While technology can be represented in physical form (patents, procedures, design documents, manuals, etc.), it is not a physical entity. It is the knowledge of how scientifically determined facts and principles are embodied in the material, device, product, or process. Testing is the application of procedures designed to observe, measure, or verify attributes, properties, or performance. The term routine testing refers to testing performed during the course of normal business operations, for example, testing carried out primarily to determine user acceptance, suitability, marketability, or competitive assessment. Work with respect to routine testing is specifically excluded from the definition of SR38ED. Only the testing work that is commensurate with the needs and directly in support of basic research. applied research or experimental development is eligible. A third party payment is generally a payment made by a claimant to an entity to be used for SR38ED carried on in Canada, that is related to a business of the claimant and the claimant must be entitled to exploit the results of the SR38ED . For more information, please refer to the Third-Party Payments Policy . The traditional method involves specifically identifying and claiming all overhead and other expenditures, directly attributable to the SR38ED carried on in Canada, that the claimant incurred during the year. Virtually valueless means a value that is 10 or less of the cost. Year8217s maximum pensionable earnings (YMPE ) Maximum des gains annuels ouvrant droit 224 pension (MGAP ) The years maximum pensionable earnings (YMPE ) is an amount determined under section 18 of the Canada Pension Plan . It is used in the calculation of the maximum amount of salary or wages for a specified employee that can be included in the pool of deductible SRampED expenditures (5 times the YMPE ) and in the salary base for the calculation of the prescribed proxy amount (PPA ) (2.5 times the YMPE ). To obtain the YMPE for each year, use the Rates for Money Purchase limits, RRSP limits, YMPE. DPSP limits and Defined Benefits limits . Date modified: 2015-07-15 Secondary menu Site Information
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