Funding a software project in Quebec: SR&ED, NRC IRAP and the CDAE

A program does not fund a project in general: it funds a type of expense, made by a type of company. Before counting on support, ask who does the work, whether it is ordinary development or research, and what your company's profile is.

Building a client portal with proven technology is rarely research. Solving a technical problem whose solution is not known in advance can be.

The Scientific Research and Experimental Development (SR&ED) tax incentive program lets businesses deduct expenses or earn an investment tax credit, according to the Canada Revenue Agency.

Per the CRA, most Canadian-controlled private corporations (CCPCs) can earn a refundable credit at the enhanced 35% rate on qualified expenditures, up to an expenditure limit. That limit is $3 million for tax years beginning before December 16, 2024, and $6 million for tax years beginning after December 15, 2024. The basic rate is 15%.

The credit earned at 35% on current expenditures is fully refundable. The limit starts to decrease when prior-year taxable capital reaches $15 million and becomes nil at $75 million.

The CRA also lets you have work assessed for eligibility before starting it, which helps when it is unclear whether the project counts as research.

The National Research Council's Industrial Research Assistance Program provides advice, connections and funding to Canadian small and medium-sized businesses that innovate.

Per the NRC, support comes through industrial technology advisors, and financial support can target technology innovation, hiring young graduates, intellectual property or artificial intelligence. To start, the NRC suggests calling 1-877-994-4727.

Note: the NRC states the program will be integrated into the future Canada Innovation Corporation no later than 2026-27.

Quebec's e-business development tax credit (CDAE) is often presented as help to “build an app”. For most SMEs, that is wrong.

Per Investissement Québec, the CDAE targets companies in the information technology sector: at least 75% of their gross revenue must come from IT activities, and they must keep at least six eligible employees. The credit is calculated on those employees' salaries, not on a development invoice.

For calendar years 2024 and 2025, the total rate was 30%: 24% refundable and 6% non-refundable in 2024, then 23% and 7% in 2025. Investissement Québec's sheet covers fiscal years beginning before January 1, 2026; the rules changed afterwards. Check with Revenu Québec or Investissement Québec for the current year.

Claims are rarely lost on substance, often on evidence. A few habits to adopt from day one:

• aTalk to a tax advisor before starting, not after.
• bDocument technical uncertainties and experiments as you go, with dates.
• cTrack hours by activity, to separate research from routine development.
• dAsk your development team for technical notes you can reuse in a claim.