How is overhead and proxy amount calculated?
It may sometimes be difficult to determine eligible overhead for SR&ED purposes. In order to facilitate this exercise, the ITA provides that taxpayers may elect an alternative method of calculating the overhead. This alternative method, the proxy method, basically allows taxpayers to include as overhead a proxy amount equal to 65% of salaries and wages of employees directly engaged in SR&ED, instead of the actual overhead incurred , for purposes of calculating the SR&ED tax credits. What are the benefits of the SR&ED program? • Deductions and tax credits: SR&ED expenditures generate a favourable tax treatment since current and capital SR&ED expenditures can be deducted in the year incurred or can be carried forward indefinitely as is deemed necessary to minimize a taxpayer’s tax liability. In addition to the flexibility regarding the timing of the expenditures’ deduction, a taxpayer may also obtain the benefit of an investment tax credit (“ITC”) which, depending on the situation, may b
