SR&ED for the Medical Devices, Health & Medical Sciences Industries: R&D Tax Credits and Incentives
Canada's medical devices, health and medical sciences industries continue to advance through developments in biotechnology, pharmaceutical research, diagnostic technologies, medical imaging, surgical equipment, biomedical materials, wearable health devices and digital healthcare innovations. Medical device manufacturers, pharmaceutical companies, biotechnology firms, biomedical engineering businesses, medical research organizations and health technology developers regularly encounter complex scientific and technological challenges as they work to improve device performance, diagnostic accuracy, treatment effectiveness, patient safety, manufacturing capabilities and overall healthcare outcomes.
Canada's Scientific Research and Experimental Development (SR&ED) tax incentive program provides tax incentives for eligible research and development activities undertaken to achieve scientific or technological advancements. Businesses developing new medical technologies, experimenting with advanced materials, conducting experimental research, investigating biological processes, developing new therapies or addressing unresolved scientific and engineering challenges may qualify for SR&ED tax credits when their work meets the program's eligibility requirements.
What Type of Medical Devices Activities and Technological Challenges May Qualify?
- Medical device design and development: Experimenting with new medical instruments, devices or components to overcome technological challenges involving precision, functionality, reliability, durability or performance.
- Diagnostic and medical imaging technologies: Investigating new imaging methods, diagnostic sensors or signal-processing technologies to address unresolved challenges involving image quality, measurement accuracy, sensitivity or detection capabilities.
- Wearable and remote monitoring devices: Developing new wearable sensors, patient monitoring technologies or connected medical devices to overcome technical limitations involving data accuracy, connectivity, power consumption or system reliability.
- Biomedical materials and biocompatibility: Conducting experimental work involving polymers, coatings, implants or other biomaterials to investigate unresolved challenges involving material performance, degradation, durability or interactions with biological systems.
- Surgical instruments and robotic technologies: Developing new surgical devices, robotic assistance systems or precision instruments to overcome technical challenges involving movement accuracy, force control, miniaturization or system integration.
- Medical electronics and embedded systems: Investigating new electronic circuits, sensors, firmware or hardware-software integrations to improve device functionality, reliability or performance.
What Type of Health and Medical Sciences Activities and Technological Challenges May Qualify?
- Therapeutic and Pharmaceutical development: Conducting experimental research involving new drug formulations, therapeutic compounds or drug delivery methods to overcome uncertainties involving stability, effectiveness, absorption or biological interactions.
- Diagnostic and laboratory testing technologies: Developing new diagnostic assays, analytical methods or laboratory technologies to overcome challenges involving sensitivity, specificity, accuracy or reproducibility.
- Drug formulation and delivery systems: Experimenting with new formulations, carriers or delivery mechanisms to improve drug stability, bioavailability, controlled release or targeted delivery.
- Cell and gene therapy research: Investigating new approaches to cell manipulation, gene delivery, genetic modification or therapeutic production to overcome unresolved biological or technological challenges.
- Bioprocessing and biological manufacturing: Developing or improving fermentation, cell culture, purification or biological production methods to address technical challenges involving yield, consistency, scalability or product stability.
The key question is whether your business is working to overcome a technological challenge that could not be readily resolved using existing knowledge or standard practices.
What costs may qualify for SR&ED?
Once a project has been identified as potentially eligible for SR&ED, the next step is determining which expenditures are associated with the eligible R&D work. Depending on the nature of the project, potentially qualifying expenditures can include employee labour, materials, contractors, specialized equipment and certain lease or capital expenditures.
Labour
Materials
Contractors and Specialized Services
Lease and Capital Expenditures
Recent changes to the SR&ED program have made certain qualifying capital expenditures incurred after December 15, 2024, eligible for SR&ED.
If your project involves these types of activities and costs, it may be worth assessing whether the work and associated expenditures qualify for SR&ED.
Not all activities or modifications qualify for SR&ED. To be eligible, activities must address scientific or technological uncertainty, involve a systematic investigation or search through experimentation or analysis, and aim to achieve scientific or technological advancement. Routine medical device manufacturing, standard product modifications, established laboratory procedures, conventional clinical testing, quality assurance activities and regulatory compliance processes do not automatically qualify for SR&ED incentives.
Other Funding Opportunities for Medical Devices, Health and Medical Sciences Businesses
Beyond SR&ED tax incentives, additional government funding opportunities may be available to businesses operating in Canada's medical devices, health and medical sciences industries. Depending on the project, company, location and activities involved, eligible businesses may access financial support through federal, provincial and regional programs. These opportunities can help support medical device development, biomedical research, diagnostic innovations, advanced manufacturing, clinical technologies and collaborative research initiatives.
Potential funding sources may include:
NRC IRAP (Industrial Research Assistance Program):
Provides expert advisory services and potential financial support to eligible Canadian small and medium-sized businesses developing innovative technologies, products and processes. Medical device manufacturers, biomedical engineering firms and health technology companies may qualify for assistance with diagnostic equipment, medical imaging technologies, wearable health devices, medical electronics, prototype development and other technical R&D activities.
CIHR (Canadian Institutes of Health Research):
Supports eligible health and medical research projects through competitive funding opportunities aimed at advancing scientific knowledge, improving health outcomes and strengthening Canada's health research capacity. Potential research areas include biomedical sciences, diagnostic technologies, disease mechanisms, clinical research, therapeutic development and healthcare innovation. Funding is generally directed toward eligible researchers and institutions rather than unrestricted business grants.
Mitacs Accelerate:
Supports collaborative research internships connecting businesses with academic researchers to address technical and innovation challenges. Medical device manufacturers, biotechnology firms and health technology developers may benefit from research partnerships involving medical device design, biomedical materials, diagnostic technologies, medical imaging, wearable sensors, therapeutic innovations and healthcare technology development.
NSERC Alliance Grants — Industry-Academic Research:
Supports eligible collaborative research projects involving Canadian academic researchers and partner organizations. Medical device businesses and health technology developers may participate in research involving biomedical engineering, medical imaging, advanced materials, diagnostic systems, medical electronics, biotechnology and emerging healthcare technologies.
NGen (Next Generation Manufacturing Canada):
Supports eligible collaborative advanced manufacturing projects involving innovative production technologies, automation, robotics and smart manufacturing systems. Medical device manufacturers and biomedical technology companies may benefit from funding opportunities supporting precision manufacturing, additive manufacturing, automated assembly, advanced materials processing and innovative medical equipment production technologies.
CanExport Innovation:
Supports eligible Canadian organizations pursuing international research and development partnerships to develop, adapt or validate innovative technologies. Medical device manufacturers, biomedical engineering firms and health technology developers may benefit when establishing international collaborations involving diagnostic technologies, medical electronics, biomedical materials, medical imaging systems or other healthcare technology development projects.
Additional federal, provincial and regional programs may also be available depending on the company's location and project objectives.
Funding programs can have specific eligibility requirements, application periods and eligible-cost rules. In some cases, SR&ED and government funding may interact, so businesses should consider their available incentives when planning and documenting a project.
Government funding programs change frequently. Eligibility, application windows and available funding should be reviewed based on the specific project and timing.
How EVAMAX Can Help
Navigating Canada's tax incentives and grants can be complex. A single project may involve R&D activities, capital investment, manufacturing, commercialization and expansion, each of which may have different eligibility requirements.
EVAMAX can help you assess your project and identify the SR&ED, tax credit, grant and funding opportunities that may be available to your business.