Nova Scotia Department of Finance
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Nova Scotia Research and Development Tax Credit


Introduced in 1984, the Nova Scotia Research and Development Tax Credit (R&D credit) offers tax relief to incorporated Nova Scotia firms that incur qualified scientific research and experimental development (SR&ED) expenditures made in Nova Scotia, as defined by the federal Income Tax Act. The credit is administered by Canada Customs and Revenue Agency (CCRA) and claimed in conjunction with federal SR&ED tax credits. The Nova Scotia credit should be claimed on Schedule 340 for taxation years 1998 and later.

The Nova Scotia R&D Credit is based on the qualified expenditures eligible for the federal SR&ED tax credit. Therefore the R&D credit filer is advised to prepare the federal SR&ED credit filing in preparation for the provincial credit. The federal credit rules are detailed and rigorous and potential claimants are advised to review closely federal documentation regarding the SR&ED credit.

The federal credit is claimed on form T661. CCRA publishes several useful guides and informative documents in support of the credit application process such as T4088 Claiming Scientific Research and Experimental Development Expenditures: Guide to Form T661, T4052 An Information Guide to the Scientific Research and Experimental Development Tax Incentive Program, Interpretation Bulletin 151R4 and Information Circular 86-4R3.

R&D Rate

In the April 29, 1994, Budget, the Minister of Finance announced that the credit rate was increased, for all qualified expenditures incurred in taxation years ending after December 31, 1993, to 15% from 10%. The rate is applicable to all corporations that incur SR&ED expenditures in Nova Scotia, regardless of size.

Refundability

In addition, the credit was made refundable in respect of expenditures made in taxation years ending after December 31, 1993. Corporations that incur qualified SR&ED expenditures will be eligible for a refund of the tax credit where the tax credit exceeds Nova Scotia tax payable. The refund amount is equal to the amount of the credit in excess of tax otherwise payable under the Nova Scotia Income Tax Act. Refundability is available to all corporations that incur qualified SR&ED expenditures in Nova Scotia where the corporation has or would have taxable income allocated to Nova Scotia.

Recapture

In the April, 2002 Budget, the Minister of Finance announced the introduction of a credit recapture similar to the federal recapture for change of use or sale or transfer of assets charged under a prior credit.

More Information

Information on eligible expenditures, eligible projects, claiming the credit, and appropriate forms can be obtained from your local Canada Customs and Revenue Agency (CCRA) Taxation Centre. In many cases the guides, documentation and contacts may be located on CCRA's Website.