Canada SR&ED Tax Credit Programme 2026

SR&ED is Canada's cornerstone R&D tax incentive programme, administered by the Canada Revenue Agency. For AI companies, SR&ED provides substantial tax relief for experimental development of new AI algorithms, models, and applications.

Eligible AI R&D activities include experimental development of novel machine learning algorithms and architectures, development of new AI training techniques or optimization methods, research into AI safety, fairness, and interpretability challenges, creation of new computer vision or NLP capabilities solving technical uncertainties, development of AI infrastructure requiring technical innovation (MLOps, serving systems), and applied research adapting existing AI to solve novel technical problems.

The programme provides 15% non-refundable tax credit for large corporations (revenue >$500M CAD), 35% refundable tax credit for Canadian-Controlled Private Corporations (CCPCs) on first $3M expenditures, and 15% refundable tax credit for CCPCs on expenditures above $3M. Refundable credits mean you receive cash even with no tax liability.

Eligible expenses include salaries of employees performing or supervising AI R&D (data scientists, ML engineers, researchers), materials consumed in R&D (cloud computing costs, datasets, compute clusters), 55% of contractor payments for AI R&D work, and overhead calculated at 55% of salaries or proxy method.

Applications require documenting technical uncertainties being addressed, systematic investigation and experimentation approach, technological advancement pursued, and contemporaneous records of R&D activities. SR&ED can be claimed retroactively for previous 2 years if R&D was performed but not claimed.