SR&ED for Chemical Industries: R&D Tax Credits and Incentives
Can Your Chemical Industry Development Qualify for SR&ED?
For SR&ED purposes, the important question is what technological problem your company is trying to solve and how you are attempting to solve it.
Eligible work generally involves an attempt to achieve a technological advancement through systematic investigation or experimentation. This can include developing new or improved materials, processes, products, equipment or technologies where there is technological uncertainty that cannot readily be resolved using existing knowledge or practices.
Importantly, routine commercial operations are not automatically SR&ED.
Examples of Potential SR&ED Activities in Chemical Industry
Chemical manufacturers may conduct SR&ED when developing new products, formulations or production processes.
Potential activities may include:
- Developing new chemical formulations
- Improving reaction efficiency or yield
- Developing new catalysts
- Investigating alternative raw materials
- Developing processes to reduce waste or energy consumption
- Improving the stability, purity or performance of a product
- Developing new separation or purification processes
- Testing materials under previously unresolved operating conditions
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
Employee wages can be a significant component of an SR&ED claim when employees are directly involved in eligible research and development activities for chemical industry. This may include engineers, scientists, technicians, and process specialists.
Materials
Contractors and Specialized Services
Chemical companies may rely on external specialists, laboratories, engineering firms and testing facilities during their R&D activities. Certain contractor expenditures may qualify where the contractor is performing eligible SR&ED work on behalf of the company.
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.
What activities may qualify?
Consider whether your company is:
Dive deeper- Developing or improving a product, process, material or technology
- Attempting to solve a technological problem that cannot readily be resolved using existing knowledge
- Conducting experiments or systematic testing
- Developing prototypes or pilot processes
- Testing new materials, formulations or equipment
- Improving process efficiency, reliability, yield or performance
- Developing new environmental or emissions-reduction technologies
- Using engineering, software, data analysis or testing to support experimental development
If your project involves these types of activities, it may be worth assessing whether the work and associated expenditures qualify for SR&ED.
Other Funding Opportunities for Oil & Gas and Mining Businesses
SR&ED is only one potential source of government support. Depending on the project, industry, location, company size and stage of development, businesses may also be eligible for grants and funding supporting R&D, technology demonstration, commercialization, clean technology, critical minerals, emissions reduction and industrial innovation.
Potential programs and funding sources include:
NRC Industrial Research Assistance Program (NRC IRAP)
NRC IRAP provides Canadian SMEs with technical advice and, where eligible, financial support for technology innovation and R&D projects. Eligible businesses can use the program to support the development and commercialization of innovative, technology-driven products, services or processes.
Natural Resources Canada – Energy Innovation Program (EIP)
The EIP supports research, development and demonstration projects involving innovative energy technologies. Current and recent areas of activity include clean fuels, CCUS, mining decarbonization, renewable energy and other energy technologies.
Strategic Response Fund (SRF)
The SRF supports larger-scale innovative projects and currently identifies areas such as critical minerals and cleantech among its investment priorities. The program is generally designed for significantly larger projects, with a minimum contribution of $10 million for projects with total costs of at least $20 million.
Additional federal, provincial and regional programs may also be available depending on the company's location and project objectives.
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 helps businesses identify and pursue opportunities across SR&ED, tax incentives, grants and government funding programs.