SR&ED $6M Limit 2026: CCPC Refundable Credit Guide

Quick answer

Why the SR&ED cash refund just doubled for Canadian innovators

The most generous federal R&D tax break in over a decade just became twice as generous. The Scientific Research and Experimental Development (SR&ED) tax credit program has long given Canadian-controlled private corporations (CCPCs) a 35% refundable investment tax credit on qualifying R&D spending. Until recently, that enhanced rate stopped at $3 million of expenditures, capping annual cash refunds at $1.05 million.

That cap has now doubled. A CCPC investing $6 million in qualifying SR&ED work may receive up to $2.1 million back in refundable credits, an extra $1.05 million in non-dilutive funding compared to the old rules. For a tech startup, manufacturer, or life-sciences company burning cash on R&D, that money can extend runway by quarters. The change traces back to the Canada federal Budget 2025: expert insights for Canadians, enacted through Bill C-15 in March 2026.

Quick start: pick your path through the new rules

For background on how corporate rates differ by entity type, see Canada’s corporate tax rates explained.

What Bill C-15 actually changed in the SR&ED program

Bill C-15, the Budget 2025 Implementation Act, received Royal Assent on March 26, 2026. According to the Canada Revenue Agency (CRA), the four changes break down as follows.

The expenditure limit doubled. CCPCs may now claim the 35% enhanced refundable investment tax credit (ITC) on the first $6 million of qualifying SR&ED expenditures each tax year. For an associated group, the $6 million limit is shared across all members.

The phase-out band widened. The $6 million limit now begins to reduce when prior-year taxable capital employed in Canada hits $15 million and is fully phased out at $75 million.

Public companies gained access. Eligible Canadian public corporations (ECPCs) can now access the enhanced refundable rate, subject to a phase-out based on average gross revenue over the previous three years.

Capital expenditures are eligible again. R&D equipment acquired on or after December 16, 2024 and used 90% or more for SR&ED once again qualifies. For program background, see our foundational SR&ED tax incentives explainer.

Who qualifies for each rate: CCPC vs ECPC vs other claimants

The CCPC and ECPC paths now look broadly similar at the top, both receiving the 35% refundable rate on up to $6 million in qualifying expenditures, but they reach the phase-out through different tests. CCPCs use taxable capital employed in Canada, or may elect a gross revenue method. ECPCs use a three-year average gross revenue test.

For non-CCPC corporations, the 15% basic rate is non-refundable, so it can only reduce tax otherwise payable. Unused credits can generally be carried back three years or carried forward up to 20 years.

Step-by-step roadmap: claiming the new $6 million limit

Many claimants leave money on the table not because their R&D fails to qualify, but because the documentation is thin. Here is a six-step approach for tax years starting on or after December 16, 2024.

1. 1
   Confirm CCPC or ECPC status Your corporation must meet the CCPC tests under the Income Tax Act, or qualify as an ECPC under the new rules. Status is assessed at year-end.
2. 2
   Identify qualifying SR&ED work The CRA applies three tests: technological uncertainty that could not be removed through routine engineering, a systematic investigation by qualified personnel, and a search for technological advancement.
3. 3
   Track time and costs in real time Have R&D staff log hours by project, week by week. Maintain documentation contemporaneously: lab notebooks, test results, design iterations, source-code commits, and problem-solving emails.
4. 4
   Pool eligible expenditures Include eligible salaries and wages, materials consumed or transformed, subcontractor costs with appropriate netting, overhead via the proxy or traditional method, and capital expenditures acquired after December 15, 2024.
5. 5
   Apply the right rate Run the $6 million expenditure limit and the $15M–$75M phase-out against your prior-year taxable capital or gross revenue to see how much of the limit you keep.
6. 6
   File T661 and Schedule 31 on time The reporting deadline for the prescribed SR&ED forms is generally 18 months after fiscal year-end. Late claims may be denied. For deeper planning ideas, see our SR&ED tax planning strategies for Canadian innovators.

Stacking Ontario credits: OITC and ORDTC on top of federal SR&ED

The federal $6 million doubling does not change the OITC’s separate $3 million Ontario expenditure limit. The OITC remains an 8% refundable provincial credit, claimed by filing Schedule 566 with your T2 return. Associated corporations must share the $3 million Ontario limit.

The ORDTC is a 3.5% non-refundable provincial credit on Ontario-incurred qualifying SR&ED expenditures. Because it is non-refundable, it can only reduce Ontario corporate income tax otherwise payable, though unused amounts may typically be carried forward.

For an Ontario CCPC with significant Ontario R&D, the combined effective recovery rate may approach roughly 43% on qualifying expenditures, before interaction adjustments. Provincial credits are typically treated as government assistance and reduce the federal expenditure pool. Quebec, Alberta, and British Columbia each have their own provincial layers. For broader context, see Ontario small business tax rate 2026.

Capital expenditures are back: what equipment-heavy R&D shops should know

For more than a decade, capital expenditures were excluded from SR&ED. Bill C-15 reversed that exclusion. Equipment, machinery, and apparatus acquired on or after December 16, 2024 may once again qualify for both the SR&ED deduction and the investment tax credit.

To qualify, the property must be intended at the time of acquisition to be used all or substantially all, generally 90% or more, for SR&ED in Canada over its expected useful life. This change matters most for advanced manufacturers, life-sciences labs, and clean-tech firms whose R&D depends on specialized hardware.

One caveat: the ITC earned on qualifying capital expenditures is typically up to 40% refundable for CCPCs, compared to up to 100% refundable for current expenditures like wages. Even so, the restoration adds meaningful value. For broader 2026 small-business context, see small business tax relief shifts in 2026.

Common mistakes that shrink or trigger a reassessment of your SR&ED claim

Even with the new limits, the most common claim errors have not changed. Avoiding these can be the difference between a strong refund and a denied claim.

• →Weak project narratives on T661 that fail to clearly establish the three CRA criteria: technological uncertainty, systematic investigation, and technological advancement.
• →No contemporaneous time tracking by R&D staff. Reconstructing hours after year-end rarely survives a CRA technical review.
• →Treating routine product development or troubleshooting as SR&ED when there is no underlying technological uncertainty being investigated.
• →Mishandling contractor costs by not netting against assistance, mixing arm’s-length and non-arm’s-length treatment, or claiming the wrong percentage.
• →Missing the 18-month reporting deadline for T661 and Schedule 31. Late claims are generally denied even if otherwise valid.
• →Forgetting to file Schedule 566 for the Ontario OITC, leaving up to $240,000 in provincial refunds on the table.
• →Failing to document the 90%-or-more SR&ED-use test for capital expenditures acquired after December 15, 2024.

Frequently asked questions about the 2026 SR&ED changes

Sources & references

• Canada Revenue Agency — SR&ED news and updates: https://www.canada.ca/en/revenue-agency/services/scientific-research-experimental-development-tax-incentive-program/sred-updates.html
• Canada Revenue Agency — Ontario Innovation Tax Credit: https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/corporations/provincial-territorial-corporation-tax/ontario-provincial-corporation-tax/ontario-innovation-tax-credit.html
• Canada Revenue Agency — Provincial and territorial R&D tax credits: https://www.canada.ca/en/revenue-agency/services/scientific-research-experimental-development-tax-incentive-program/provincial-territorial-research-development-tax-credits.html
• Department of Finance Canada — Reforming and Enhancing the SR&ED Tax Incentive Program: https://www.canada.ca/en/department-finance/news/2024/12/reforming-and-enhancing-the-scientific-research-and-experimental-development-sred-tax-incentive-program.html
• Department of Finance Canada — Bill C-15, Budget 2025 Implementation Act, No. 1 (Royal Assent March 26, 2026): https://www.canada.ca/en/department-finance/news.html
• Income Tax Act, Section 127 (Investment Tax Credit), Government of Canada: https://laws-lois.justice.gc.ca/eng/acts/i-3.3/