The Alberta SR&ED tax credit program was previously terminated as of December 31st, 2019. This was a 10% refundable tax credit on expenditures carried out in Alberta, up to a maximum credit of $400,000 per fiscal year, for all qualifying corporations.
Opened in January 2021, Alberta has decided to re-introduce a new and improved credit called the Alberta Innovation Employment Grant (IEG). In reality, it’s the new Alberta SR&ED Tax Credit and not a grant.
The program is designed to promote investment and diversification by incentivizing all R&D spend in Alberta regardless of industry. It focuses on small and medium-sized firms that are in in the early stage and might not yet be profitable.
What is the tax credit worth?
The refundable tax credit is an 8% recovery on eligible expenditures, (up to a maximum of $4 million in eligible expenditures per year) in respect to Scientific Research & Experimental Development (SR&ED) carried out in Alberta.
A corporation is eligible to claim an additional 12% credit in excess of ‘the base amount’. The base amount is determined by the average eligible expenditures for the two preceding taxation years. In other words, Alberta will reward corporations that increase their year-over-year Alberta SR&ED spend. MNP believes this is a great enhancement to the program that encourages additional innovation in Alberta. As a CCPC qualifying for the 35% federal rate, with the enhanced Alberta rate, this is a 74% recovery on T4 wages. The base 8% credit results in a 62% recovery on T4 wages.
A corporation that qualifies for the full 20% credit (8% + 12%) on the entire $4 million of eligible expenditures can recover a maximum of $800,000. This can only be achieved with a base amount of zero.
When does the credit start?
Eligible Alberta expenditures incurred after December 31st, 2020.
Corporations that have a permanent establishment in Alberta at any time during the taxation year.
Who doesn’t qualify?
Corporations with taxable capital (for federal tax purposes) over $50 million, partnerships, trusts, or individuals are not eligible to claim the IEG. Due to the taxable capital limit, the program is focused on funding mostly Small to Medium Private Corporations (CCPC).
When do you file the claim ?
The AT4970 form is prepared on a project by project basis at the end of the taxation year and filed with the corporation’s tax return.
For more information on how to apply, visit this page.