New Brunswick's Research and Development (R&D) tax credit has been increased from 10 percent to 15 percent of eligible expenditures effective January 1st, 2003, and made fully refundable.
The New Brunswick tax credit for R&D was introduced in 1994. The 10% credit was non-refundable, meaning that the credit could only be used to reduce provincial taxes owing. The unused credit could be carried forward seven years and carried back three years.
The enhanced NB R&D tax credit of 15% is fully refundable, meaning that the credit benefits New Brunswick corporations even if the corporation does not have provincial taxes owing. The refund amount is equal to the amount of the credit in excess of tax otherwise payable under the New Brunswick Income Tax Act . The new credit no longer has 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 could not 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, is applied to Scientific Research and Experimental Development (SR&ED) expenditures as defined by the federal Income Tax Act. The credit is 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:
- operations research;
- mathematical analysis;
- computer programming;
- data collection;
- testing; and
- psychological research.