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     Friday, September 30, 2016
Minister of Finance

The Saskatchewan Research and Development (R&D) Tax Credit is designed to encourage private-sector R&D investment in Saskatchewan.  It is available in respect to qualifying R&D expenditures incurred by corporations in Saskatchewan.

Effective April 1, 2015, all qualifying R&D expenditures incurred in Saskatchewan will be eligible for a 10 per cent non-refundable R&D Tax Credit. Non-refundable tax credits earned in a year can be applied against Saskatchewan Corporation Income Tax otherwise payable for that year or in any of the subsequent ten taxation years (or the previous three years). This change will maintain a sustainable level of support for innovation and research activities in the province. 

For further information on the changes to the Research and Development Tax Credit, contact the Ministry of Finance at 306-787-6722.

General Information

Saskatchewan introduced the R&D Tax Credit in the 1998-99 Budget as a non-refundable credit against Saskatchewan CIT otherwise payable, to encourage private-sector corporations to invest in research and development and the expansion of knowledge-based industries in the province.

The Saskatchewan R&D Tax Credit is available to all corporations filing a T2 CIT return and having a permanent establishment in Saskatchewan.  It is a non-refundable credit equal to 10 per cent of all eligible expenditures on scientific research and experimental development incurred in the province.

For qualifying expenditures made after March 19, 1998 and before March 19, 2009, the R&D Tax Credit was non-refundable. Credits earned could only be used to reduce current-year Saskatchewan CIT otherwise payable.  Companies unable to utilize the credit in the current year could choose to either renounce it or apply it to another taxation year.  Carryforward provisions allow corporations to carry their unused credits back up to three taxation years or forward up to ten taxation years.  Tax credits may be carried through trusts and partnerships, and through certain corporate wind-ups and amalgamations, but cannot be carried back to predecessor corporations.

For qualifying expenditures made between March 19, 2009 and March 31, 2012, the R&D Tax Credit was fully refundable for all corporations, and may be used to reduce Saskatchewan CIT and other tax liabilities and/or to create a tax refund.

For qualifying R&D expenditures incurred during the period of April 1, 2012 to March 31, 2015, the 15 per cent R&D Tax Credit continued to be refundable for Canadian-controlled private corporations, subject to a maximum annual limit of $3 million in qualifying expenditures.  Qualifying expenditures in excess of this annual limit, as well as all qualifying expenditures by other corporations, remained eligible for a 15 per cent non-refundable R&D Tax Credit.  Non-refundable tax credits earned in a year could be applied against Saskatchewan CIT otherwise payable for that year or in any of the subsequent ten taxation years (or the previous three taxation years).

For qualifying R&D expenditures made on or after April 1, 2015 the R&D credit is a ten per cent non-refundable tax credit for all corporations. Non-refundable tax credits earned in a year can be applied against Saskatchewan CIT otherwise payable for that year or in any of the subsequent ten taxation years (or the previous three taxations years).

Definition of Research & Development

Eligible activity for the purposes of the Saskatchewan R&D Tax Credit is determined by reference to the definition of "scientific research and experimental development" in subsection 248(1) of the federal Income Tax Act.  It is defined as systematic investigation or search that is carried out in a field of science or technology by means of experiment or analysis and that is:

  • Basic research (i.e., work undertaken for the advancement of scientific knowledge without a specific practical application in view);
  • Applied research (i.e., work undertaken for the advancement of scientific knowledge with a specific practical application in view); or
  • Experimental development (i.e., 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).

Subsection 248(1) further includes in the definition of scientific research and experimental development 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, basic research, applied research or experimental development that is undertaken in Canada by or on behalf of the taxpayer.

Finally, subsection 248(1) excludes from the definition of scientific research and experimental development work with respect to market research or sales promotion; quality control or routine testing of materials, devices, products or processes; research in the social sciences or the humanities; prospecting, exploring or drilling for, or producing, minerals, petroleum or natural gas; the commercial production of a new or improved material, device or product or the commercial use of a new or improved process; style changes; or, routine data collection.

Definition of Eligible Expenses

Eligible expenses for the purposes of the Saskatchewan R&D Tax Credit are determined by reference to the definition of "qualified expenditures" in subsection 127(9) of the federal Income Tax Act.  Qualified expenditures are further defined to include amounts described in subsection 37(1)(a) and subsection 37(1)(b)(l) of the federal Act.  This includes amounts incurred in respect of eligible salaries and wages and eligible capital property.

It is important to note that the Saskatchewan R&D Tax Credit is considered to be government assistance under the federal Income Tax Act.  As such, it reduces the amount of the expenditure that is eligible for the federal R&D tax credit.  Both the provincial and federal credits reduce the amount added to the R&D expense pool for normal income tax deduction purposes.  For qualifying expenditures made prior to March 19, 2009, companies are permitted to renounce their claim to the Saskatchewan R&D Tax Credit to maximize their federal R&D credit.

Administration

The Saskatchewan R&D Tax Credit is administered by Canada Revenue Agency (CRA) on behalf of Saskatchewan under the Canada-Saskatchewan Tax Collection Agreement.  Under the terms of this agreement, definitions in the federal Income Tax Act apply for the purposes of the Saskatchewan R&D Tax Credit.  As such, official rulings on the Saskatchewan R&D Tax Credit can be provided only by CRA.

Additional information on the details of eligible R&D activity and expenditures may be obtained by consulting CRA Interpretation Bulletin IT151R4 - Scientific Research and Experimental Development Expenditures, and CRA Information Circular IC86-4R3 - Scientific Research and Experimental Development.

The Saskatchewan R&D Tax Credit may be claimed by including with the annual T2 CIT return a completed Schedule 403 describing all eligible expenditures and the total credit claimed.  The amount of the credit should be recorded on line 631 in Part 2 of Schedule 5, and then included as part of total net provincial taxes payable on line 760 of the T2 return.  Copies of all returns and schedules are available from CRA Tax Services Offices or the CRA website.

 

Related Links

Schedule 403

IT-151R5



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