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RESEARCH AND DEVELOPMENT TAX CREDIT

New Brunswick's Research and Development (R&D) tax credit will be increased from 10 percent to 15 percent of eligible expenditures incurred on or after January 1st, 2003 and made fully refundable.

The New Brunswick 10% tax credit for R&D research was introduced in 1994. The existing credit is non-refundable meaning that the credit can only be used to reduce provincial taxes owing. The unused credit can be carried forward seven years and carried back three years.

The new enhanced NB R&D tax credit will be 15% and fully refundable meaning that the credit will benefit New Brunswick corporations even if the corporation does not have provincial taxes owing. The refund amount will be equal to the amount of the credit in excess of tax otherwise payable under the New Brunswick Income Tax Act. The new credit will no longer have to be carried forward or carried back because it is fully refundable.

Many businesses and particularly smaller enterprises involved in R&D activity do not have taxable income and therefore cannot take advantage of a non-refundable tax credit. These businesses sometimes have cash flow challenges and often do not earn taxable income in the first few years of operation. The new refundable tax credit will help fund their research activity.

The new enhanced NB R&D tax credit, as with the previous tax credit, will be applied to Scientific Research and Experimental Development (SR&ED) expenditures as defined by the federal Income Tax Act . The credit will continue to be administered by the Canada Revenue Agency (CRA) 1-800-959-5525.

Eligible expenditures for SR&ED Incentives:

• Experimental development - This is the work done to achieve technological advancement to create, or improve, new materials, devices, products, or processes. Most SR&ED claims involve experimental development.
• Applied research - This is work done to advance scientific knowledge with a specific practical application in view.
• Basic research - This is work done to advance scientific knowledge without a specific practical application in view.
• Support work - This is work that directly supports and is commensurate with the needs of experimental development, applied research, and basic research. This includes only the following 8 specific types of work:
  • engineering;
  • design;
  • operations research;
  • mathematical analysis;
  • computer programming;
  • data collection;
  • testing; and
  • psychological research.

Source: CRA "An Introduction to the Scientific Research and Experimental Development Program" T4052(E) Rev. 01

Eligible current and capital SR&ED expenditures include wages & salaries, materials, equipment, overhead costs and other expenditures incurred as a result of SR&ED initiatives.

To view "An Introduction to the Scientific Research and Experimental Development Program" in full: Website: http://www.cra-arc.gc.ca/E/pub/tg/t4052/t4052-04e.pdf

© 2002
Department of Finance
P.O. Box 6000
Centennial Building
Fredericton, N.B. E3B 5H1
tel.: (506) 453-2451 fax: (506) 457-4989
e-mail: wwwfin@gnb.ca
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