Monday, May 10, 2010

Tax credits (RS&DE): the new reality = good news for startups

Last month, I went to the CEIM (centre d'entreprises et d'innovation de Montréal) to see a presentation on the new reality of tax credit program in Canada starting in 2009. RS&DE tax credit for scientific research & experimental development has changed drastically. Initiate in 1986, the program claims reached 1.5 billion in 2000 and ~4 billions in 2008 at the federal level. Due to the increase of claims (20K claims 2008), non standard claims and unwritten need to reduce tax credits, an important change happened. Many companies can't send anymore non standard endless novel to lost government officials. Corporation need to send 1400 words to explain the scientific advancements, the problems/technical incertitudes/risk and the technology and scientific content. With 15% more staffs and 1400 words limit per claim, way more people can validate your claims. Knowing we are back in deficit, there will be pressure to reduce accepted claims. It will be way harder for cheaters to try to loose the reader because endless novels is no more possible (romans fleuve). Btw, CEIM offers interesting services.
It will be an harder sell for lawyers firms specialized in R&D tax credit paperwork who can't use their government bodies as easily as before to ensure their clients get their tax credits. This is a good news for startups and bad news for the ones who are making things up because it means less useless work for us, more time and more money to create real wealth.

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