Not many people would dispute innovation needs investment and that R&D is as necessary, as it can be challenging, for companies trying to compete on a global scale. Governments have long developed programs to help incentivize companies to invest in updating and advancing their technology. However, even for large companies understanding where they fit into incentive categories, what type they are eligible for, and even when to apply is complex. Jacqueline Gustafson with KPMG helps us explore different options by explaining the categories of R&D incentive programs and highlighting various bodies that make the final decisions of who gets funded. Here is some basic incentive information and government targets that every business should know.
Direct vs. Indirect Government Programs
Government incentive programs for businesses come in many forms but essentially breakdown into two categories, direct and indirect. Direct includes picking winners, grants, loans, application processes, and even requests for spending. Indirect comes in the form of access to all, tax credits, accelerated depreciation, corporate returns, etc. Each with its own eligibility criteria.
Canada has a goal to become a global leader in innovation?
Over the years Canada has begun to shift from indirect (tax credits, preferred tax rates etc.) to direct (picking winners, grants etc.) which allows them to directly fund where they see demand including sector specific challenges and bottlenecks. It also allows them to lay our specific targets for industries while supporting innovation. Direct funding also opens up the opportunity for direct industry-government collaboration.
Innovation Superclusters – Industry and Government Collaboration
Innovation Superclusters have two primary roles. Allocate government incentive funds and provide a nationwide platform for collaboration. These clusters are made up of companies and their representatives who are leaders in a specific area of industry. Superclusters currently have $950 million in available funding, they are made up of 450 companies, 60 post-secondary institutions, and 180 other supporting bodies. They are divided up into 5 clusters which includes…
It should be noted that although these groups are headquartered regionally across Canada they are not region limited for companies that want to work with them. For example a Halifax tech company can work directly with “BC: (TELUS) Canada’s Digital Technology Supercluster”. It is also important to understand that these groups are not simply a funding platform nor is that a requirement, companies can simply use them as a way to team up with major players in a given space to collaborate and expand their market reach or penetration.
SR&ED – Government Tax Incentive
SR&ED is (Scientific Research and Experimental Development program (pronounced “SHRED”) is the largest source of Federal government support for research and development in Canada, providing over $4 billion to claimants each year. It also makes up 67% of the government’s tax incentive programs. These incentive programs are divided up into 6 economic tables
These 6 are not limited to one per company. For example, if a mining company was researching sensor based technology for increased efficiency and lower emissions for IoT they may fall under Clean Technology, not necessarily under Resource of the Future, but may apply for incentives or tax credits under an additional category specific to mining.
How Companies Can Take Advantage of Incentive Programs
Some programs are as simple as saving receipts and applying for tax credits during the company’s year end. Others such as the Innovation Superclusters are a full application process and eventually lead to in-person reviews. Others are only open for short windows while others can be applied after an R&D investment has already been made. If a company is considering applying for any incentive program it is important to know where your opportunities are and the process required to successfully apply. According to Jacqueline many programs can be applied for by the company themselves (some actually require no third-party assistance to be eligible) but in many cases companies such accounting firms and auditors who are always staying updated on these programs can help a company identify if and where they will qualify. In a world of global innovation; productive industry and government collaboration will be the key to not only being competitive but in becoming a global leader.
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