Canada: Tax-Efficient Sectors
Tax-Privileged Business Sectors
In the provinces and territories, there are a number of tax credits available for certain sectors, such as for farming, mining, and for investment in forestry and in oil and gas exploration, as well as for venture capital funds. Some provinces and territories also have enterprise zones that offer incentives to certain businesses, mainly in the form of property tax abatement.
At the federal level, there is the Canadian Film or Video Production Tax Credit Program, which gives a refundable tax credit of 25% on certain labour costs not exceeding 60% of total production expenditure. A tax credit is also available for film or video production services in order to stimulate job growth; the credit applies where Canadian and foreign-based film producers employ the services of Canadians. An accredited film or video production certificate must be obtained from the Canadian Audio Visual Certification Office to qualify for these credits.
Tax credits and cash refunds are available to businesses that undertake research and development in Canada, under the Scientific Research and Experimental Development Tax Incentive Program. For example, a CCPC can claim investment tax credits of 35% on the first C$3m of qualifying R&D expenditure, and 20% on expenditure over the C$3m threshold.
Measures announced in the 2012 budget relating to the Scientific Research and Experimental Development Tax Incentive Program include the following proposals:
- Reduction of the general SR&ED investment tax credit rate from 20% to 15% from January 1, 2014;
- Removal of capital expenditures incurred in 2014 and subsequent years from the base of SR&ED eligible expenditures;
- Reduction of the overhead calculation from 65% to 60% of direct labour costs in 2013 and 55% of direct labour costs in 2014;
- Effective January 1, 2013, only 80% of arm’s-length contract payments will be allowed to be used for calculating SR&ED tax credits.