Canadian Tech Startup to Canadian Tech Giants
Canadian stats are known for showing that there are a large number of small startup companies, a few mid-sized tech companies and very few Canadian tech giants.
The government has come up with a new “supercluster” program which is handing out $950 million towards technology such as, 5G networks, clean technology, self-driving cars and even more. The reason for this is to support specific technology where Canada can win on an even bigger level- globally. On the other hand Scientific Research and Experimental Development Tax Incentive Program (SR&ED) has $4 billion that is given to support any small company that is willing and can prove that they are investing in new technology development.
Something that is both good and bad for Canada is the North American free-trade agreement and the Comprehensive Economic and Trade agreement with Europe. We have access to their markets, but at the same time they are fighting to take ours over. The competition is strong, and Canada needs to find a way to sell farther than just to the United States. This meaning these mid-market companies have to be able to sell and market internationally. With the help of the SR&ED tax rebate this would then free up money within these companies to be able to market internationally and invest in global sales.
The idea is to invest SR&ED money into the mid-market winners that have the potential to grow into a global tech company instead of investing money into the endless startups. The mid-market winners have shown that they are capable of making successful business plans and have a means to go forward.
It is said that the SR&ED “grind down” is something we need and will be powerful to make Canada’s mid-market winners into Canadian tech giants, globally with SR&ED funding. The “grind down” could be great, if it is decreased. This term means the SR&ED program decreases the amount of cash returned once a company becomes more profitable. The “grind down” will need to be decreased in regards to the percentage of sales in order to have these tech companies become successful on a global scale and benefit even more from the SR&ED tax incentive.
If you would like to find out more about how your company could benefit from SR&ED, contact a Swanson Reed R&D Tax Advisor today.