Federal SR&ED is only part of a Canadian claim. Most provinces, and one territory, offer their own R&D tax credit for work carried out within their borders, usually built on the federal definition of SR&ED and the federal expenditure base but with their own rates, limits and refund rules. This page explains how the provincial credits fit with the federal claim and lists the provinces and the body that administers each credit. It does not state rates or rules: those belong on the individual province pages, which follow once each province's facts have been verified against its official source.
How these credits interact with the federal scheme
| Element | Federal SR&ED | Typical provincial approach |
|---|---|---|
| Definition of SR&ED | Subsection 248(1) of the Income Tax Act | Adopted by reference in most provinces |
| Expenditure base | Qualified expenditures under subsection 127(9) | Federal qualified expenditures attributable to work in the province, with provincial adjustments |
| Rate and refundability | 35% or 15%; refundable for most CCPCs | Set by each province; see the pages for Ontario, Quebec, British Columbia and Alberta |
| Procedure | Form T661 and Schedule 31 with the T2 | A provincial T2 schedule administered by the CRA in most provinces; separate provincial filing in Quebec and Alberta |
| Effect on the federal claim | Not applicable | A provincial credit is government assistance and reduces federal qualified expenditures |
| Order of calculation | Second | First: the provincial credit is computed, then deducted from the federal base |
The division of labour is simple in principle. The province decides the rate, the limits, whether its credit is refundable and any provincial conditions, such as a minimum presence in the province or a cap tied to the company's size. The federal rules decide what counts as SR&ED and, in most provinces, what counts as an eligible expenditure, so a project the CRA accepts is accepted for provincial purposes and a project it denies is denied. Quebec and Alberta, which run their own systems, have their own forms and their own interpretations in some areas, and companies with work in those provinces coordinate two sets of filings.
Two consequences follow. The federal workpapers do most of the provincial work: the T661 project costs filtered by the location of the work give each province's base. And the provincial credit must be calculated before the federal one, because it reduces the federal qualified expenditures; a claim that omits the reduction overstates the federal credit and is corrected in review. The combined value of the two layers varies widely between provinces, which is why where the work is done matters in Canadian R&D planning.
Where they are offered
The table lists the provinces and territories and the body that administers the R&D credit in each. Rates, eligibility conditions and refund rules for Ontario, Quebec, British Columbia and Alberta are on their own pages, linked in the table.
| Province or territory | R&D tax credit offered | Administered by |
|---|---|---|
| Ontario | Yes: Ontario innovation tax credit and Ontario research and development tax credit | Canada Revenue Agency, through the T2 return |
| Quebec | Yes | Revenu Québec |
| British Columbia | Yes: BC scientific research and experimental development tax credit | Canada Revenue Agency, through the T2 return |
| Alberta | Yes: Innovation Employment Grant | Alberta offers the Innovation Employment Grant, delivered through the corporate tax system and administered by Alberta Tax and Revenue Administration |
| Saskatchewan | Yes | Canada Revenue Agency, through the T2 return |
| Manitoba | Yes | Canada Revenue Agency, through the T2 return |
| New Brunswick | Yes | Canada Revenue Agency, through the T2 return |
| Nova Scotia | Yes | Canada Revenue Agency, through the T2 return |
| Newfoundland and Labrador | Yes | Canada Revenue Agency, through the T2 return |
| Prince Edward Island | No general R&D tax credit | Not applicable |
| Yukon | Yes | Canada Revenue Agency, through the T2 return |
| Northwest Territories | No | Not applicable |
| Nunavut | No | Not applicable |
Ontario, Quebec, British Columbia and Alberta each have their own page with rates, eligibility and how to claim. For the other provinces and territories, the official source for rates and conditions is the administering body named above.
Planning points
- Record where the work is done. Provincial bases depend on the location of the work and, in some provinces, of the permanent establishment that bears the cost. Timesheets and contracts should carry the location.
- Calculate the provincial credit first. It reduces the federal qualified expenditures. Omitting the reduction is the most common error in multi-layer claims and is corrected in review with interest.
- Keep one project list. The provincial schedules should use the same project names and costs as the T661, so that a federal review outcome flows through cleanly.
- Check deadlines separately. Most provincial credits follow the federal reporting deadline because they are filed on T2 schedules, but Quebec and Alberta have their own rules.
- Model the combined value before choosing a location. The federal credit is the same across Canada; the provincial layer is what differs.
Common questions
Do we need a separate application for a provincial credit? In most provinces no: the credit is claimed on a T2 schedule with the federal return. Quebec and Alberta have their own filings.
Can we claim a provincial credit without a federal claim? In practice the provincial credits rest on the federal determination of SR&ED, so the two claims are prepared together.
Where are the rates? On the province pages once each has been verified against the administering body's published guidance. This page deliberately states none.
Related pages
Official sources
Educational content only, not tax advice. See the disclaimer.