Tax Credits Consulting for Businesses (SR&ED, OIDMTC)

Technical vs. Technological: what the CRA is saying: Part 2

noreply@blogger.com (Tania Samsonova, M.Sc., MCAD) — Fri, 18 May 2012 18:08:00 +0000

This article is by Bruce Madole who kindly agreed to provide some interesting materials related to SR&ED.

Part 1 of this article talked about some of the extra nuances and baggage that the Canada Revenue Agency (CRA) has recently begun adding to terminology that we use in the assessment and preparation of SR&ED claims, along with some of the implications (reduced claims). In this part, I’m going to examine one of the CRA’s favourite policy documents to highlight and discuss some of the current differences.

The Information Circular IC86-4R3 Scientific Research and Experimental Development was published May 24, 1994 (approximately 17 years ago), and has served as CRA’s main reference document for SR&ED ever since, even among the proliferation of additional policy and application documents, and sometimes, it appeared, preferred over referencing the income tax act itself.
Bear with me as I’m going to quote a couple of sections from IC 86-4R3. The definition of scientific or technological uncertainty as described in Section 2.10.2   (bolding/underlining is mine):

2.10.2 The criterion of scientific or technological uncertainty is as follows:
•    Whether or not a given result or objective can be achieved, and/or how to achieve it, is not known or determined on the basis of generally available scientific or technological knowledge or experience. This criterion implies that we cannot know the outcome of a project, or the route by which it will be carried out without removing the technological or scientific uncertainty through a program of scientific research or experimental development. Specifically, scientific or technological uncertainty may occur in either of two ways:
- it may be uncertain whether the goals can be achieved at all; or
- the taxpayer may be fairly confident that the goals can be achieved, but may be uncertain which of several alternatives (i.e., paths, routes, approaches, equipment configurations, system architectures, circuit techniques, etc.) will either work at all, or be feasible to meet the desired specifications or cost targets, or both of these.
•    The scientific or technological uncertainty, rather than the economic or financial risk, is important in characterizing scientific research and experimental development -- and, hence, eligible activities.
•    Sometimes there is little doubt that a product or process can be produced to meet technological objectives when cost targets are no object. In commercial reality, however, a reasonable cost target is always an objective, and attempting to achieve a particular cost target can at times create a technological challenge which needs to be resolved. A technological uncertainty may thus arise that is imposed by economic considerations. Otherwise, the more general question of the commercial viability of the product or process is not relevant to whether or not a technological uncertainty is present and, hence, to whether a project is eligible or ineligible.
•    This criterion applies equally to work on new or existing processes or products. The description of technological uncertainty contained in this subsection applies wherever the text of this circular refers to the criterion.

And later in the same document:

2.11 Application of criteria
The three criteria of IC 86-4R3 must be applied within the context of the taxpayer's business environment.

Scientific research and experimental development varies in content as well as in the complexity of the technology in a given field. The technical uncertainties encountered by one taxpayer may well be looked upon as facts easily obtained by another. The judgment as to eligibility should be made within the context and environment of a single company and its field of business. Specifically, the activities undertaken to resolve technical uncertainties are eligible if the taxpayer cannot obtain the solutions through commonly available sources of knowledge and experience in the business context of the firm. We expect that any firm claiming expenditures for scientific research and experimental development activities will have or will access the expertise necessary to carry out a viable program.
These sections contain a number of wordings or approaches that are quite foreign to the CRA’s current message.
Variance 1 – Uncertainty as Doubt. The notions of uncertainty expressed as to overall approach (Uncertainty Whether), or a doubt about potential success, or as to which of several approaches is best used, as in, “we didn’t know if this approach would work.” (Call this one: Uncertainty Which.) This allows considerably more latitude than the current definition (Uncertainty How) which expects the problem to be already clearly understood and the technology gap or barrier to be already precisely defined, thus leaving a lot of early exploratory work off the table.
Variance 2 – Uncertainty re Approach. Uncertainty whether a thing can be achieved, or uncertainty about which is the best of several alternatives, are both materially more inclusive, from an eligibility perspective, than uncertainty about how to overcome a more narrowly defined and specified problem. Of these two variants (uncertainty whether, uncertainty which), it is the uncertainty whether, which I have also described as “uncertainty as doubt”, that is more inclusive and allows greater scope for eligible activity. However, the uncertainty about which approach is best applies even in situations where CRA is insisting on it’s current, narrower definition – once the problem is totally and clearly defined and understood, there would still be a need to consider multiple experimental approaches. Otherwise, there would be no experimental development. But this uncertainty, when linked with the first, enables the claimant to include a whole range of explorative and analytical activity previously used to help in understanding and clarifying the nature of the technology barrier or gap. This is work which, even if experimental in its nature, the CRA would currently seek to exclude, because the technology barrier or gap had not yet been narrowed to a single, clearly focused problem.

Bruce Madole
Other articles by Bruce Madole in SRED Unlimited blog

Technical vs. Technological: what the CRA is saying: Part 1

noreply@blogger.com (Tania Samsonova, M.Sc., MCAD) — Fri, 18 May 2012 18:04:00 +0000

This article is by Bruce Madole who kindly agreed to provide some interesting materials related to SR&ED.

If you have come to the world of SR&ED expecting that the CRA will treat you and your claims in a manner consistent with their published information, you will be sadly disappointed, and probably frustrated. It’s no wonder companies look to the assistance of consulting firms for help. It certainly doesn’t help matters when the definitions applied to words are being shifted, and loaded up with some unwelcome and extra freight in the form of additional meanings and implications that most of us just wouldn’t use.
I attended a CRA public information session recently, just to see what the current training session includes, and I noticed them applying a particular set of definitions and interpretations that could really spoil your day.
When we speak of technology, we usually refer to the set of tools, equipment, systems, networks, machinery, and so on, with which the business creates or delivers the goods, products or services on which the business is based. (Note that we are not speaking here about the goods, products or services themselves, but the technology set that underlies or enables them.)
To most people, talking about “technical uncertainty” would appear to mean the same thing as “technological uncertainty”. To the CRA, currently, these phrases carry materially different meanings. (I’m not sure if the rest of the world embraces these definitions and assumptions.) However, we need to equip ourselves for the discussion. Are the different definitions, discussed below, purely a clarification of old intentions? Do they represent a mostly academic debate about historically equivalent expressions? Or is this some kind of a semantic shell game designed to slash the definitions of eligible work, and organized around a nuance of language that CRA is alone in perpetuating?

What technical means… to CRA
What the CRA is teaching now is that the word “technical” refers generically to a domain of activity – technical content, technical issues, technical questions, and technical uncertainty – many of which are perhaps purely routine in nature. (Though, perhaps not, although CRA now tries to taint the word “technical” with an implied additional meaning of “probably routine”.)

What technical uncertainty means… to CRA
Technical uncertainty, as they now characterize it, means “not knowing what to do next,” or “how best to approach” an un-clarified problem or a technology issue that is not yet fully understood. The phrase implies a need for more detailed investigation to more fully penetrate to the specific technology gap or barrier that represents what CRA calls the “technological uncertainty.” So to CRA, technical uncertainty means ambiguity, unrefined or unfocussed enquiry, doubt, ignorance, confusion, lack of clarity. It implies ineligible work or due diligence activities, carried out in hope of finding some root cause or problem that can then be tackled as a SR&ED project. Technical uncertainty, to the CRA, means that you don’t yet know what you’re doing.
To CRA (I paraphrase here), you have not penetrated to the real SR&ED project until you have “moved beyond the technical uncertainty and have uncovered and fully understood all the dimensions of the “underlying technology gap”. In CRA’s opinion, you have to move beyond the pursuit of “know what” to the pursuit of “know-how”, as in, “How do we experimentally approach the solution to this very specific technology gap or barrier?”
Until the problem is fully understood, they would argue that your efforts are reconnaissance, and due diligence (using standard approaches, probably), and not experimental development.
Despite the Canada Revenue Agency’s current position, there is a long history of claiming SR&ED projects on the basis of “technical uncertainty”, and the scope of such projects was larger because the starting point for the SR&ED was significantly less restrictive.
The tax authorities themselves have historically used “technical” and “technological” more or less interchangeably when talking about the more vital part of that phrase: uncertainty. Part 2 of this article will examine that aspect in more detail, along with some other troubling implications of this new approach.

Bruce Madole
Other articles by Bruce Madole in SRED Unlimited blog

Dealing with technology? You might be eligible for government funding

noreply@blogger.com (Tania Samsonova, M.Sc., MCAD) — Wed, 27 Oct 2010 03:43:00 +0000

What is SR&ED?

SR&ED (Scientific Research & Experimental Development) is an incentive program by the Canadian government that refunds companies involved in Research and Development (R&D). (See the information about the program on the CRA website.)

Who is eligible for SR&ED?

Canadian-controlled private corporations (CCPC) that spend money on creating or modifying products or processes through experimenting. Any company that deals with technology (software and hardware development, machinery, printing etc.) may qualify. If you created an entirely new industrial process or improved an existing one, if you took a database driver and rewrote it so its performance doubled, if you came up with a fuzzy logic algorithm to facilitate scheduling - all of this may be eligible.

Innovation, uncertainties you overcame, and technological advancement are the criteria for eligibility.

Even failed experiments may qualify.

Non-Canadian owned companies also qualify, if they pay salary in Canada. Canadian public companies and non-incorporated entities are eligible too, but they are entitled to smaller refunds.

The SR&ED program is available to companies involved in Research and Development (R&D). Eligible expenditures include your time, employees' labour, materials and equipment. SR&ED money is given as a refund for work already done.

If you are interested in government incentives for current or future work, have a look at this list: Other Canadian government financial incentives for businesses

If you are interested in Ontario Digital Media tax credit (OIDMTC), go here: OIDMTC.

Amounts and deadlines

The refund is calculated based on the amount of salary paid in the fiscal year related to the qualified project.

	Maximum refundable amount
Expenditure	Canadian-controlled private corporations	Canadian public companies and non-incorporated companies (solo proprietorships and partnerships)
Labour (salary)	68.5%	33%
Materials and subcontracts	41.5%	20%

The projects do not have to be completed: if you did part of the work in 2012 and completed the project in 2013, you will claim the 2012 part with your tax return of 2012 and the rest with your tax return of 2013.

What if I already submitted my tax return for a past fiscal year? Is it too late to claim SR&ED?
You may submit your SR&ED claim for a particular fiscal year within 18 months after the end of that fiscal year. If you have already submitted your taxes, you may submit the SR&ED claim later, as a part of the tax amendment, as long as you are within the 18-months window.

What expenses qualify?

Employees' wages, subcontracts and owner’s labour represent the bulk of all claim expenses.

Materials and capital expenses are also allowed if they are used only for eligible projects, up to a certain cap.

How will I help you?

I will prepare a SRED claim for you and do everything that is in my power so the claim succeeds. This includes:

Pre-screening and projects identification
Preparation of a detailed technical report on the work you did and your accomplishments
Preparation of all tax schedules and accounting reports detailing the costs associated with the project.
Dealing with SR&ED financial and technical reviewers.

We charge a share of a successful claim amount. We do not charge any upfront fees or retainers. If the claim does not qualify, there is no fee.

Contact me at tania@sred4you.com for further information.

Other Canadian government financial incentives for businesses

SR&ED tax incentive program - A War Chest for Small and Mid-size businesses

noreply@blogger.com (Tania Samsonova, M.Sc., MCAD) — Wed, 05 May 2010 22:08:00 +0000

The ongoing economic recession and environmental concerns - these two issues make it more challenging for small and mid-size businesses in Canada not only to succeed, but in many cases to survive.

Did you know that the Government of Canada developed and implemented a unique program to help small and mid-size businesses operate successfully?
The SR&ED tax incentive program is a great “war chest” resource, especially during the current economic downturn.

Each year, the SR&ED program provides over $4 billion in refunds and tax credits to over 18,000 claimants. Of these, approximately 75% are small businesses.

Naturally, there are questions you might be asking yourself now. Some of those might be:

Your Question: What is the SR&ED program?

Our Answer: The Scientific Research & Experimental Development (SR&ED) program is a Canada Revenue Agency (CRA) initiative that provides incentives in the form of refunds and tax credits to Canadian businesses of all sizes, and in all sectors for R&D conducted in Canada.

Your Question: How does my business benefit from this program?

Our Answer: The SR&ED program helps you to:

- fund technological and environmental advances that keep your company competitive: http://www.sredunlimited.com/environment.html
- maximize the return on your investment for the above initiatives
- better position your company for future R&D and experimental projects

Your Question: How much do I get?

Our Answer: Typically, SR&ED refunds range between $20,000 and $500,000.

Here is an example: Assuming your company spent $ 100,000 on salaries and $ 60,000 on consulting fees, and 75 percent of the labour and consulting fee was attributed as Experimental Development expenses, your claim size is as follows:

100,000x0.75x0.685 + 60,000x0.75x0.415 = $ 70,050

Have a look at some case studies here: http://www.sredunlimited.com/testimonials.html

Now it’s our turn to ask you: Are you interested in getting $20,000- $500,000?
If yes, do you qualify for the SR&ED refund?

To qualify for the refund, you must:
- be an incorporated Canadian company
- have a payroll (the salary paid through T4), or consulting fees
- have production (it can be anything — software development, bakery, printing, metal forming, chemical manufacturing, etc.)

To determine if you qualify for an SR&ED refund, contact us: http://www.sredunlimited.com/contact.html

Author: Dmitry Brusilovsky
Founder & Technical Director at SRED Unlimited
LinkedIn profile: http://www.linkedin.com/pub/dmitry-brusilovsky/1/68/3bb
Follow SRED Unlimited on Twitter: http://twitter.com/SREDUnlimited

Canadian tax incentives for the creative industries

noreply@blogger.com (Tania Samsonova, M.Sc., MCAD) — Mon, 04 May 2009 02:24:00 +0000

The Canadian government offers a variety of tax incentives for the creative industries such as new media, film and television production, book publishing and sound recording:

Government incentives for businesses - resource list

noreply@blogger.com (Tania Samsonova, M.Sc., MCAD) — Sat, 14 Feb 2009 04:22:00 +0000

These resources are mostly for technology and/or design-related Canadian small businesses (some are applicable to other types of businesses as well).

SR&ED – government refund for companies doing research and development
http://www.cra-arc.gc.ca/txcrdt/sred-rsde/menu-eng.html

(Check here for more details on SR&ED or contact me at tania@sred4you.com for further information. I can help your company obtain SR&ED refunds.)

OITC (Ontario Innovation Tax Credit) – rider to federal SR&ED http://www.rev.gov.on.ca/english/forms/ct/pdf/0329f.pdf

A comprehensive searchable database of over 250 government programs and services that can help you implement your technology http://www.ic.gc.ca/eic/site/com-inv.nsf/eng/Home

Export Market Access (EMA) is a cost-sharing grant designed to help small to medium sized organizations take advantage of opportunities in foreign markets beyond the US. You can also get a grant for holding an event if it is export-related.

Federal Grants, Subsidies and Contributions Info-Guide with a special focus on entrepreneurs and start-ups http://www.canadabusiness.ca/servlet/ContentServer?pagename=CBSC_ON/display&c=GuideInfoGuide&cid=1184729523117&lang=en

http://www.trra.ca/en/reports/BusinessPrograms.asp - list of federal and provincial business programs

MINISTRY OF RESEARCH AND INNOVATION (Ontario) http://www.mri.gov.on.ca/english/programs/mri.asp

Ontario Business Program Guide http://www.ontario.ca/businessprograms

http://www.2ontario.com/software/government_programs.asp - list of programs with summary information, so you don't have to check each link separately

City of Toronto incentive programs (plus a limited summary of others)
http://www.toronto.ca/invest-in-toronto/incentives.htm

Ontario New Technology Tax incentive (ONTTI) http://www.rev.gov.on.ca/english/credit/ONTTI/

Ontario Business Research Institute Tax Credit (OBRITC) http://www.rev.gov.on.ca/english/notices/ct/6024.html

Apprenticeship training tax credit
http://www.rev.gov.on.ca/english/credit/attc/index.html

Other Ontario tax incentives
http://www.rev.gov.on.ca/english/credit/index.html

Canadian tax incentives for creative industries

Other Canadian resources for business

	Province of Ontario	Federal Government
Grants	Champions of Innovation http://www.oce-ontario.org/Pages/Rchamp.aspx Other Ontario Centre of Excellence programs http://www.oce-ontario.org/Pages/Home.aspx	NRC-IRAP technical advice grants http://irap-pari.nrc-cnrc.gc.ca/main_e.html Precarn – supports intelligent ICT commercialization http://www.precarn.ca/about
Subsidized Loans		Canada Small Business Financing Program (CSBF) http://www.ic.gc.ca/epic/site/csbfp-pfpec.nsf/en/Home Export Development Canada http://www.edc.ca/english/index.htm Business Development Bank of Canada http://www.bdc.ca/en/home.htm Canadian Commercial Corporation http://ccc.ca/eng/home.cfm
Idea Incubators	MaRS Discovery District (MaRS) http://www.marsdd.com/	Communication Research Centre Canada (CRC) – advanced telecommunications focused http://crc.ca/en/html/crc/home/home
Venture Capital	Ontario Innovation Demonstration Fond (IDF) – venture capitals and loans http://www.mri.gov.on.ca/english/programs/idf/guidelines.asp Investment Accelerator Fund (IAF) http://www.oce-ontario.org/Pages/CInvest.aspx	Business Development Bank of Canada http://www.bdc.ca/en/home.htm Canadian Youth Business Foundation http://www.cybf.ca/

(This most helpful resource list is based on the one prepared by Michael Williams from TRRA and distributed during Toronto Tech Week 2008.)

Not involved in R&D? You can still benefit from SR&ED!

noreply@blogger.com (Tania Samsonova, M.Sc., MCAD) — Thu, 12 Feb 2009 10:42:00 +0000

SR&ED is a government program that refunds companies their expenditures on research and development. (Some information on SR&ED)

How can you benefit from SR&ED if you are not involved in R&D?

If you are an accountant, a business management consultant, or do something else that brings you in touch with many businesses, you may want to let your clients know about SR&ED. Some of your clients may be involved in research and development (technical, software and hardware development, printing, machinery engineering and any other technology-related activity may qualify). If you let them know about the program, they might get a very significant refund. We pay commission if you send someone to us and their claim is successful.

I am going to hold an information session on SR&ED sometime soon, targeting accountants and management consultants. Are you interested? If you know any other accountants or management consultants, please let them know about the session, too. The session will be held sometime in February and will be about 1 hour long. (If you are interested, contact me at tania@sred4you.com for further information.

OK, we decided to apply for SR&ED. What do we do?

noreply@blogger.com (Tania Samsonova, M.Sc., MCAD) — Thu, 06 Mar 2008 23:33:00 +0000

Q. I want to apply for SR&ED but my project is not all R&D. Am I still eligible?
A. It's OK. You can claim a part of the project. It does not have to consist of 100% major breakthrough in science and technology to be SR&ED claimable. If, for example, part of your project consisted of developing a new algorithm or optimizing an existing industrial process, and the rest was routine development, you can claim the innovation part only.

Q. I would like to apply for SR&ED for the past fiscal year. I have a project that I think is eligible. What do I do?
A. First of all, please note that in order to have any SR&ED refunds you need a payroll (indicated on the T4 forms), or at least some contractor fees. All refunds are calculated based on the amount of payroll you had in the fiscal year, directly related to the project you claim SR&ED for. (You can claim indirect expenses, but only as a limited percentage of the aforementioned payroll amount).

Another important thing you must realize is that SR&ED is a refund program. This means that the amount you get is based on your expenditures for the past fiscal year. If you need to get some funding before you start working on the project, there are some other government incentive programs. You can find a list of them here: http://www.sred4you.com/2009/02/government-incentives-for-businesses_13.html.

Q. OK, we'd like to contract your company as SR&ED providers. What kind of input is required from us?
A. I will have to talk to you or one of your employees (the most technical one) once or twice for 1.5 - 2 hours. I will also need supporting documentation: diagrams, notes, possibly white papers and design documents. E-mails you or your employees wrote in the course of the development process, describing it, might be very helpful - something like "I tried this approach and it did not work, then I tried that approach and it worked, increasing the throughput by 30%". Any other documents that may help me to tell the story of your work on the project in the SR&ED claim are welcome.

I will also need the financial information related to the project (the amount of salary paid to the employees participating in SR&ED claimable projects, the subcontractor fees if you have any, cost of materials etc.)

In the process of my work I may send you e-mails if I need any additional information. I will then send the final claim for your approval.

Q. Should I go for OITC or for SR&ED?
A. OITC is a provincial rider for the federal SR&ED. This means that you don't go for one or the other - you apply for SR&ED, and if it is granted, you receive OITC automatically.

Q. How much do you charge? Is it on contingency basis?
A. We usually charge 25% of the refund, payable when you get the refund. If there is no refund, there is no fee.

Q. Do I need to wait for filing my income tax before we apply for SR&ED?
A. You cannot file SR&ED for a given year before you file the corporate tax for this year. Ideally you do both together, at the same time. If you have already filed your taxes but not SR&ED, you can still make a SR&ED claim for this year within 18 months of the end of the fiscal year.

Q. Do I need to complete the project before I claim SR&ED?
A. No, you don't have to wait until it is completed to apply for SR&ED. You can claim the work you have done in the fiscal year when this year is over.

Q. How long does it take to get the refund?
A. It may take a few weeks or a month to prepare a claim, depending on the complexity, and usually about 4 months to receive the refund if you file your T2 together with your SR&ED form. The CRA may set up a review which means they will want to meet you to verify the work that has been done. If this happens, we will come along and support you during the review (defending your claim). Only the information related to the SR&ED project you claim will be reviewed, not your entire financial information.

Q. What if I only got incorporated this year and functioned as a sole proprietor before that?
A. Companies other than CCPC (Canadian-Controlled Private Corporations), which includes sole proprietors, are entitled for significantly lower refunds. This basically means that claiming SR&ED for your past fiscal year may not be worth it, especially if you were the only person working on the project and had little or no payroll. Your corporation's next fiscal year will be a different story. I would like to have a look at your figures for the past year anyway, just in case (payroll if you had any, project expenses etc.)

Q. What would you recommend to facilitate getting SR&ED refund in the future?
A. As to your future work, here's some advice to ensure success of your SR&ED claim:
1. Incorporate if you haven't done that yet.
2. Have a payroll.
3. Create a paper trail, otherwise 6 months later you will not be able to remember when and what you did. It is especially helpful to create a separate SRED e-mail account and cc: to it all the e-mails that may be related to experimental development. Thus, 6 months later you will not have to browse madly through hundreds and thousands of e-mails looking for one particular conversation.

However many of these steps (incorporating, having a payroll) will cost you, so talk to your accountant and to us to determine the scenario that would maximize your tax return.

Ontario Interactive Digital Media Tax Credit (OIDMTC)

noreply@blogger.com (Tania Samsonova, M.Sc., MCAD) — Tue, 22 Jan 2008 01:25:00 +0000

Ontario Interactive Digital Media Tax Credit

Program Responsibility:

Ontario Media Development Corporation, administered jointly with the Canada Revenue Agency

Program Description:

The Ontario Interactive Digital Media Tax Credit (OIDMTC) is a refundable tax credit based on eligible Ontario labour expenditures and eligible marketing and distribution expenses claimed by a qualifying corporation to create eligible interactive digital media products in Ontario. The OIDMTC is calculated as:

25% of eligible expenditures
30% of eligible expenditures for “qualifying small corporations” (applies to qualifying expenditures of eligible products and not specified products, please see below for all the definitions).

Expenditures for which the qualifying corporation has made a claim under the Ontario Film and Television Tax Credit, the Ontario Production Services Tax Credit, or the Ontario Computer Animation and Special Effects Tax Credit may not be claimed for the OIDMTC. In addition, expenditures incurred in carrying out scientific research and experimental development activities eligible for a tax deduction under the Income Tax Act (Canada) may not be claimed under the OIDMTC.

Eligibility Criteria:

Qualifying Corporations

A qualifying corporation generally is a Canadian corporation (that is Canadian or foreign-owned), that develops an eligible product at a permanent establishment in Ontario operated by it, and is not exempt from income tax.

A qualifying small corporation is a corporation that meets these criteria and had during the preceding taxation year (on an associated company basis) neither annual gross revenues in excess of $20 million nor total assets in excess of $10 million.

Eligible Products
There are two types of products for which the OIDMTC may be claimed: eligible products and specified products.

Eligible products are interactive digital media products whose primary purpose is to educate, inform, or entertain, and achieve this purpose by presenting information in at least two of the following forms: (i) text, (ii) sound and (iii) images. This includes (but is not limited to) games, educational products and informational products. Operating system software is not eligible for the tax credit, nor are products whose primary purpose is to present, sell or promote the qualifying corporation or its products or services.

Specified products are interactive digital media products that are developed under a fee-for-service arrangement, under the terms of an agreement between the qualifying corporation and an arm's length purchaser corporation for the purpose of sale or license by the purchaser to one or more persons who deal at arm's length with the purchaser. All or most of the product must be developed in Ontario by the qualifying corporation. The contract can be entered into before March 23, 2006, however the development of the product must be completed by the qualifying corporation after March 23, 2006.

Eligible Labour Expenditures

Eligible labour expenditures are 100% of salaries and wages for employees incurred after June 30, 1998 and 50% of remuneration incurred after May 4, 1999 paid to arm's length persons who are not employees. "Persons" may include individuals, partnerships and corporations.

For specified products, qualifying expenditures are restricted only to wage amounts which were incurred by the corporation after March 23, 2006 on account of salaries and wages of its Ontario employees.

Eligible labour expenditures must be paid to individuals resident in Ontario at the end of the calendar year prior to the calendar year in which the services were rendered. The labour expenditures must also be directly attributable to the development of the eligible product.

If the product is completed after March 25, 2008 eligible expenditures would include those incurred in the 37-month period ending at the end of the month in which development of the product is completed. For products completed before March 26, 2008 eligible expenditures would include those incurred in the 25-month period ending at the end of the month in which development of the product is completed. The labour expenditures must also be paid in the taxation year or within 60 days after the end of the taxation year, and paid for services rendered at a permanent establishment in Ontario.

Eligible Marketing Expenditures
Up to $100,000 of eligible marketing and distribution expenditures related to an eligible product that is not a specified product can be included. Eligible marketing and distribution expenses are those incurred after May 2, 2000, and are limited to those incurred in the 24-month period prior to the completion of the eligible interactive digital media product, and those incurred in the twelve months following the completion of the product. Expenditures that have already been claimed as eligible Ontario labour expenditures cannot be claimed as marketing and distribution expenditures.

OIDMTC facts and figures (courtesy of SRED Unlimited)

(The information is taken from http://www.investinontario.com)