Government Funding Programs

Government Funding Programs

What you need to know

There are a number of federal, provincial and regional government grant and credit programs that OKR will fund. When reviewing the various program descriptions below, please note that the percentages and ranges referenced are based on the current terms of the following Government Financing Programs at April 2019.

SR&ED

The SR&ED Program is administered by the CRA. Companies qualify by demonstrating they are conducting R&D where the outcome is novel, unique and uncertain. 

Generally, a Canadian controlled private corporation (“CCPC”) can earn a refundable Investment Tax Credit (“ITC”) at the enhanced rate of 35% on qualified SR&ED expenditures, up to a maximum threshold of $3 million in Eligible Expenses(1). (An “Eligible Expense” is typically the salary of a scientific worker and a proxy currently set at 55% of his or her salary attributed to the SR&ED Program).

Additionally, Provincial Governments offer SR&ED Credits on Eligible Expenses, normally ranging from 10% to 20%(2) with the net result that a typical CCPC involved in high technology development can have 60% of their salaries dedicated to R&D refunded (i.e., $0.60 of each $1 of Eligible Expenses).  Companies accrue Eligible Expenses throughout their financial year and thereafter typically take up to 6 months to file their tax return (which includes their claim for SR&ED Credits) and then a further 3-6 months to receive their refund, implying up to a 12-months delay to receive a SR&ED Credit refund, thereby necessitating the need by CCPC’s to borrow against future receipt of a SR&ED Credit refund. 

The SR&ED Program provides more than $4 billion in tax incentives to over 30,000 claimants annually, making it the single largest federal program that supports business research and development in Canada(3)(4). 

(1) Source: http://www.cra-arc.gc.ca/txcrdt/sred-rsde/clmng/clmngsrd-eng.html#N101C2
(2) Source: https://www.canada.ca/en/revenue-agency/services/scientific-research-experimental-development-tax-incentive-program/summary-provincial-territorial-research-development-tax-credits-december-31-2016.html
(3) Source: Canada Revenue Agency. Overview of the Scientific Research and Experimental Development (SR&ED) Tax Incentive Program.  Article RC4472.  www.cra.gc.ca/sred 
(4) Source: Canada Revenue Agency.  Privacy Impact Assessment (PIA) summary – Scientific Research and Experimental Development Directorate, Compliance Programs Branch. www.cra.gc.ca/sred

IDMTC

A IDMTC credit is calculated on eligible salary and wages incurred in the tax year and ranges from 10% to 40% depending on the province. Applicants must conduct development relevant to the interests of the province in which the IDMTC credit is being applied for.  For example, in British Columbia, the IDMTC focuses on the following sectors(5):

  • Video games
  • Educational software
  • Edutainment products
  • Simulators

The British Columbia DMTC Program, which was scheduled to end August 31, 2018 has been extended for another five (5) years to August 31, 2023.

The qualification process is similar to SR&ED except that companies need to demonstrate their applicability to the inductor sector of interest (i.e., one of the four areas of interest by British Columbia as above).  The time period to receive the funding for DMTC credit’s is identical to SR&ED leading to a similar need for applicants to leverage the receipt of future credits.

(5) Source: http://www2.gov.bc.ca/gov/content/taxes/income-taxes/corporate/credits/interactive-digital-media

CMF

The CMF announced a program budget of $353 million in 2019-2020(6) to support the Canadian television and digital media industries through two streams of funding: (a) the “Convergent Stream”, which supports the creation of convergent television and digital media content for consumption by Canadians anytime, anywhere; and (b) the “Experimental Stream”, which encourages the development of innovative, interactive digital media content and software applications. The CMF Program operates a multitude of funding programs over both Streams, some on a first come first served basis and others on an annual or bi-annual basis. Companies access the CMF Program through an open tender process by demonstrating their applicability on a competitive basis.

The majority of the CMF Program funding takes the form of repayable contributions (under certain conditions) of up to 75% of the eligible costs. Under the CMF Program there is a timing delay between when a Borrower incurs and accrues the expenses, files the reimbursement claim and receives the funding from the Government, creating a bridge finance opportunity for the Partnership.

SDTC

Since 2001, the Government of Canada has committed $1.364 billion to SDTC(7). 

The SDTC Program accepts applications through their SD Tech Fund on a continuous basis, with approvals throughout the year . (8) The Fund typically supports 33% to 40% of eligible expenses on a milestone basis. 25% of the eligible costs must be funded through private sector contributions. Borrowers apply for funding under the SDTC Program through an open tender process by demonstrating their qualifications with other applicants on a competitive basis. Typically, 3-5 milestones or activity periods (sequential, non-overlapping time periods) are established for which funding will be provided under the SDTC Program. Funding for each milestone payment typically ranges between 1 and 6 months from the end of each milestone period.

(7) Source: https://www.sdtc.ca/en/about-sdtc/about-us
(8) Source: https://www.sdtc.ca/en/apply/funds/
 

SIF

In late February 2018, changes to the SIF Program were announced as part of the Federal Budget and the SIF Program will now focus its support on projects over $10 million(9).

The SIF Program will be expanded to support high-growth sectors such as clean technology, information and communications technology and agri-food. To support SIF Program expansion, the Fall 2018 Economic Statement proposed an additional $800 million over the next five (5) years(10).

The SIF Program is open to all industries and will support five streams of innovation activities: stream 1 is R&D and commercialization, stream 2 is firm expansion and growth, stream 3 is Investment attraction and reinvestment stream 4 is Collaborative technology development and demonstration, and stream 5 is National Ecosystems. . The first three streams require applicants to be for-profit, private corporations. The fourth and fifth could be a non profit, an academic institution, network, research institute or a private company. 

The SIF Program offers financial contributions both repayable and non-repayable and can vary between 10-50% of project costs(11). As announced in the 2018 federal budget, the SIF Program will now focus its support on projects requesting at least $10 million in contributions. Applicants for funding are asked to submit a high-level overview or Statement of Interest of their project. If approved, applicants will be invited to complete a full, more detailed project application which will be reviewed for due diligence and a benefits/contribution assessment. The SIF Program covers non-recurring costs specifically related to the project, including: direct labor, overhead, subcontracts and consultants, direct materials and equipment and land and building costs. The amount and type of financial support will be allocated on a case-by-case basis and the Minister for Innovation, Science and Economic Development, Canada will exercise discretion on which projects to fund. The delay between project approval, executing the contribution agreement and receipt of funding is dependent on the project and Borrowers potentially have a need to finance future receipt of funds.

(9) Source: https://www.canada.ca/en/innovation-science-economic-development/programs/strategic-innovation-fund.html
(10) Source : https://www.budget.gc.ca/fes-eea/2018/docs/statement-enonce/toc-tdm-en.html
(11) Source: http://www.ic.gc.ca/eic/site/125.nsf/eng/00001.html#g5

IRAP

The National Research Council of Canada’s (“NRC”) IRAP Program works with over 11,000 SMEs each year. Program grants come in the form of a salary contribution normally in the range of 50% to 80% of the successful company’s eligible expenses and is intended to support Canadian companies conducting novel, innovative and risky development. 

In order to be considered for possible IRAP funding, the basic eligibility criteria are(12):

  1. a small and medium-sized enterprise in Canada, incorporated and profit-oriented;
  2. have 500 or fewer full-time equivalent employees; and
  3. have the objective to grow and generate profits through development and commercialization of innovative, technology-driven new or improved products, services, or processes in Canada.

Canadian Borrowers apply to the IRAP Program through filing an application through an Industrial Technology Advisor. Upon an application being approved, Canadian Borrowers will file claims as approved expenses are incurred and then wait for the reimbursement of the expenses on an established percentage basis. The delay between a claim and receipt of funding under the IRAP Program can be anywhere between 1 and 6 months. 

In March 2020, NRC IRAP have launched their Youth Employment Program which offers financial assistance to offset the cost of hiring your talent to work on projects with R&D, engineering, multimedia or market analysis components, or to help develop a new product or process. (13)

(12) Source: https://nrc.canada.ca/en/support-technology-innovation/financial-support-technology-innovation-through-nrc-irap
(13) Source: https://nrc.canada.ca/en/support-technology-innovation/nrc-irap-funding-hire-young-graduates

SIDIT

In 2006, the Government of British Columbia enacted legislation to launch the Southern Interior Development Initiative Trust, a $50 million one-time allocation paid in the regional account. The mission is to support long term strategic investments in economic development projects that will have lasting and measurable benefits within a specific geographical location. 

The SIDIT Program targets funding toward investment in self-sustaining projects that support ten themes. The SIDIT Program provides two broad types of funding:

  • Loans/equity financing for business ventures that meet SIDIT’s objectives and criteria; and
  • Grant Funding for programs and projects.

The following areas are mandated as the primary targets for funding support:

  • Agriculture
  • Economic Development
  • Energy
  • Forestry
  • Mining
  • Olympic Opportunities
  • Pine Beetle Recovery
  • Small business 
  • Tourism
  • Transportation

SIDIT has developed strategic goals to target its funding programs. Goals that will lead to increased commercial activity; preserve jobs, attract new capital, contribute to the diversification of the economy, and have a positive Regional impact(14).

(14) Source: https://www.sidit-bc.ca/application/files/3115/8255/8352/SIDIT_Strategic_Plan_2021-2023.pdf

Federal Goods and Services Tax (“GST”), Harmonized Sales Tax (“HST”) and Provincial Sales Tax (“PST”)

Businesses throughout Canada frequently find themselves with a federal or provincial government sales tax refund due, either on a quarterly or annual basis.  Examples include where a company pursues an asset purchase program for business or development purposes or indeed contract delivery. 

In such a case, the company calculates their net tax for each GST/HST reporting period and reports this on their GST/HST return. To do so, they calculate:

  • the sales tax collected or that became collectible by the company on taxable supplies made during the reporting period; and
  • the sales tax paid and payable on the business purchases and expenses for which they are able to claim an ITC.

The net result may be a refund due to the claiming company.  For organizations with an annual filing date, purchasing equipment early in their financial year results in a significant sales tax refund due, which remains un-claimable for the balance of the year.  Similarly, even quarterly filing companies can have a sales tax refund outstanding for several months.

CPTC

The Canadian Film or Video Production Tax Credit (“CPTC”) is jointly administered by the Canadian Audio-Visual Certification Office (“CAVCO”) and the Canada Revenue Agency. Companies qualify by demonstrating the production of a “Canadian film or video production” certified by CAVCO. CPTC provides eligible production with a fully refundable tax credit, available at a rate of 25% of the qualified labour expenditure(15).

For International Film or Video Production companies, the Film or Video Production Tax Credit (PSTC) is a tax credit at a rate of 16% of the qualified Canadian labour expenses. The purpose of which is to enhance Canada as a location of choice for film or video productions employing Canadians(16).

Additionally, all provinces and territories (except for Prince Edward Island) provide tax credits. For example the British Columbia Film and Television Tax Credit(18) offer tax incentives with a basic refundable credit of 35% of qualified provincial labour expenditures with additional regional, distance location, training, digital animation, visual effects and postproduction (DAVE) tax credits. Depending on the province/territory, producers can access combined federal and provincial tax credits ranging from 30 % to 70 % of eligible labour.

Companies can accrue labour expenditure throughout their financial year with claims up to 36 months after their year-end with then a further two to four months for the refund to be issued, therefore necessitating the need to borrow against future receipt of a credit refund.

The Partnership will not lend more than 25% of its AUM with respect to CPTC or PSTC based Loans.

(15) Source: https://www.canada.ca/en/canadian-heritage/services/funding/cavco-tax-credits/canadian-film-video-production.html
(16) Source: http://www.cra-arc.gc.ca/tx/nnrsdnts/flm/pstc-cisp/menu-eng.html
(17) Source: http://www.cra-arc.gc.ca/tx/bsnss/tpcs/crprtns/prv/bc/flm-eng.html

 

 

Western Economic Diversification Canada (“WD”)

The WD is a Canadian federal department. In 2018/19 planned spending increased to $242.4 million and is planned to decrease to $187.3M in 3 year’s time(18). WD’s core responsibility is to work towards achieving three departmental results: businesses that are innovative and growing in Western Canada; Communities that are economically diversified in Western Canada and businesses that invest in the development and commercialization of innovative technologies in Western Canada. 

The strategic priorities in 2019-20 will focus on two priorities:

  • Cluster Growth: WD will make strategic investments to advance selected clusters in western Canada
  • Inclusiveness: WD will help to increase economic participation by Indigenous peoples, women and youth.

WDP offer funding in the form of repayable contributions for small business enterprises and not-for-profit organizations respectively, with a call for proposals on an annual basis. WD will reimburse costs after applicants have paid for them with claims for reimbursements submitted every quarter. As with other Government Financing Programs, there is frequently a delay between accruing and/or filing a reimbursement claim and receipt of payment from WD resulting in the need for Borrowers to finance future receipt of WD funding.

(18) Source: https://www.tbs-sct.gc.ca/ems-sgd/edb-bdd/index-eng.html#orgs/dept/140/infograph/financial

Indigenous Services Canada (“ISC”)

In August 2017, the Prime Minister announced the dissolution of Indigenous and Northern Affairs Canada (INAC) and a plan to create two new departments; Indigenous Services Canada (“ISC”) and Crown-Indigenous Relations and Northern Affairs Canada (“CIRNAC”)(19).

(19) Source: https://www.canada.ca/en/indigenous-northern-affairs.html


Budget 2018 renews the Government of Canada’s commitment to building a new relationship with Indigenous peoples and builds on significant investments of $11.8 billion in the previous two budgets, with further steps towards reconciliation by investing in priority areas identified by First Nations, Inuit and Métis Nation partners, specifically for families, health care and job opportunities(20).

(20) Source: https://www.aadnc-aandc.gc.ca/eng/1520368281802/1520368298215


Budget 2018 proposes to invest an additional $5 billion(21) over five years to ensure that Indigenous children and families have an equal chance to succeed in life, to build the capacity of Indigenous governments, and to accelerate self-determination and self-government agreements with Indigenous Peoples based on the recognition and implementation of rights.

(21) Source: https://www.budget.gc.ca/2018/docs/plan/chap-03-en.html


As a new department ISC has five key priority areas(22):

  • Improving health outcomes
  • Quality education
  • Children and families together
  • Reliable infrastructure
  • Economic propserity
(22) Source: https://www.sac-isc.gc.ca/eng/1523808248312/1523808295687

Canadian International Innovation Program (CIIP)

The CIIP is a “seed fund” meaning that various other public and private partnerships and encouraged to contribute their expertise and funds. Partner countries are: Brazil, China, India, Israel and South Korea(25).

(25) Source: https://www.tradecommissioner.gc.ca/funding-financement/ciip-pcii/index.aspx?lang=eng


CIIP is targeted to small or medium size company (“SME”) with less than 500 employees, who is incorporated in Canada and engaged in developing technology for a new product process or service for civilian use (non-military).  The Industrial research and development projects eligible are: technology adaptation, technology validation and technology co-development.

Through CIIP, Canadian companies can access up to 50% of eligible project costs to a maximum of $600,000 in funding for research projects(26). Access to the funding is by open Requests for Proposals (RFPs) or to apply for a research grant, register online via IRAPs online CIIP portal. The Canadian government grants are received after project milestones are achieved.

(26) Source: https://www.mentorworks.ca/blog/government-funding/canadian-international-innovation-program-overview/

Alberta Innovates Program

Alberta Innovates annually invests $286 million dollars in a broad spectrum of funding and grant opportunities(27).  This support builds research capacity, innovation culture, talent supply and research infrastructure.  The programs support the development and delivery of innovations that meet industries “pull” for practical solutions to their biggest challenges.

The four areas are:

  • Agriculture, Forestry and Food
  • Clean Energy
  • Emerging Technologies
  • Entrepreneurial Investments
  • Health Innovation and Platforms
  • Post Secondary Investments
(27) Source: https://albertainnovates.ca/programs/alberta-small-business-innovation-and-research-initiative/

CanExport

CanExport can provide SMEs funding up to $75,000 to cover up to 75% of international market development activities. Applicants can chose up to 5 export markets to target, where the company has no or minimal business. (28)

Types of activities which can be funded include:

  • Business Travel
  • Market Research
  • Participation at trade events and fairs
  • Adaption and translation of marketing tools
  • Intellectual property protection, certification and adaption of contracts
  • Expert advice on business, legal or tax matters

CanExport have dispensed $21M in funding, with an average of $30K per project.

(28) Source: https://www.tradecommissioner.gc.ca/funding-financement/canexport/sme-pme/index.aspx?lang=eng

Tecterra

Alberta start ups (SMEs) working on innovative geospation technology products may apply for non-dilutive loans (0% interest), repayable after the product generates revenue.  The Tecterra BUILD program provides funding for projects with budgets greater than $300,000, with Tecterra providing funding of up to 50% of the development and commercialization costs, to a maximum of $500,000 per project(29).

Projects must include:

  • The development of innovative products that include geospaction technology in the value chain
  • Include a comprehensive technology commercialization plan
  • Have a well-defined target market of customer
  • Provide a regular full-time employment for at least one net new Highly Qualifified Personnel to work in Alberta on the development and/or commercialization of the project.

For a project to qualify for Tecterra funding, a minimum contribution for the applicant company representing 50% of the overall project cost.  The company must demonstrate it has the resources, financial and human in place at the start of the project.  Direct funding to support the project from other government programs is not permitted.

(29) Source: https://tecterra.com/programs/build/#1560787715657-5bed0991-f1fb

Innovation for Defense Excellence and Security – IDEaS

IDEaS was announced in Canada’s defense Policy “Strong, Secure, Engaged” (32) and commits to $1.6 billion of investment in innovations for defence and security over the next 20 years.  IDEaS program includes several elements, including competitive projects, innovation networks, sandboxes and contests.  The program promotes collaboration between innovators, developmental resources and provides opportunities to interact with DND’s science and military members.  Through which all innovators are on an even playing field to solve specific defense and security challenges.

(30)Source:https://www.canada.ca/en/department-national-defence/corporate/policies-standards/canada-defence-policy.html?utm_source=dgpaapp&utm_medium=referral&utm_campaign=redirect