Capitalizing on grants and incentives for your private business 14 June, 2017
Presenter Dharmesh Gandhi, B.Eng, MBA Partner, Business Tax Incentives EY, Toronto Tel.: +1 416 932 5755 Email: Dharmesh.Gandhi@ca.ey.com • National Private Client Services (PCS) Research and Experimental Development (SR&ED) and Business Tax Incentives Practice Leader • Focused full time on SR&ED and other government grants and incentives since 2005 • Background in Electrical Engineering and Applied Physics • Extensive experience facilitating CRA reviews specifically with client and tax authority dispute resolution Page 2
Presenter Chris Chipman, B.Sc. Senior Manager EY, Kitchener Tel.: +1 519 581 5445 Email: Chris.Chipman@ca.ey.com • EY’s National Grants and Incentives Leader • National Automotive Sector Leader and the BTI practice Leader for EY in Southwestern Ontario • Focussed full time on SR&ED and other government grants and incentives since 1997 • Experience across multiple industries, including: • Manufacturing (including automotive, aerospace, and high-tech manufacturing) • Life Sciences • Engineering services Page 3
Presenter Matt Pearson, Ph.D. Associate Partner EY, Ottawa Tel.: +1 613 598 4354 Email: Matthew.Pearson@ca.ey.com • EY’s National Technology Sector Leader and BTI practice Leader for EY in Ottawa / Gatineau • Focused full time on SR&ED and other government grants and incentives since 2012 • Matt has a Ph.D. in Engineering Physics, followed by 12 years in the Technology industry • Experience in multiple sectors, including: • Telecommunications / ICT – Hardware & Software • Aerospace & Defence • Advanced Manufacturing • Financial Services Page 4
Agenda Overview Government Incentives Landscape in Canada Funding Programs Budget Announcements Page 5
Grants & Tax Incentives Recent History Expert Panel Review – Oct 2011 Innovation activity in Canada lagging other nations ► Despite one of the most generous R&D incentive schemes in the world ► (i.e. SR&ED) ► Objectives: To review the effectiveness of federal support for innovation in ► Canada, including R&D ► Impact: Incentive funding for industrial R&D a priority ► Funds directed towards direct funding (grant) programs ► Page 6
Grants & Tax Incentives Landscape – Current ► Currently almost 400 programs available to Canadian businesses ► Forms: Direct – Incentive grant programs and favourable loans ► Indirect – Tax Credits ► ► General categories: Business and Market Expansion ► Innovation Development ► People Development ► Environmental Sustainability (CleanTech) ► Film, Video and Digital Technology Development ► Page 7
Regional Development Agencies Across Canada Page 8
Incentive Program Examples Page 9
Government Incentives Landscape Business and Market Expansion Innovation Development ► Facility expansions ► Significant R&D expenditures ► Expansion to new foreign markets ► Acquisition of new equipment ► New product line development ► Universities/colleges collaboration Fundability Indicators People Development Environmental Sustainability ► Hiring new staff ► Green house gas reductions ► Training ► Energy consumption reductions ► Co-op student/interns Page 10
Funding for Hiring and Training Support hiring and/or training of staff Hiring recent graduates from STEM programs ► Hiring summer students ► Training new staff or upskilling/retraining of existing staff ► Accessing Masters/Ph.D. students ► Program examples: Youth Employment Program (IRAP) ► Canada Summer Jobs ► Canada Job Grant ► NSERC Engage R&D ► Mitacs Accelerate, Elevate ► Page 11
Example: Canada Job Grant ► Provides training to help improve skills or develop new skills in areas such as: Truck and transport mechanics ► Carpentry ► Computer science ► Engineering ► Other workplace skills ► ► Funding: Provides up to 2/3 of the cost of training, up to $10k per trainee ► ► Supports the following training costs: Tuition fees or fees charged by training providers ► Textbooks, software and other required student fees and materials ► Examination fees ► Page 12
Research & Development Grants and Incentives Support for: Development of new technologies, products or processes ► Particular focus on Clean Technologies and energy efficiency solutions ► Program examples: Scientific Research & Experimental Development (SR&ED) ► Industrial Research Assistance Program (NRC-IRAP) ► Build in Canada Innovation Program (BCIP) ► Sustainable Development Technology Canada ► SD Tech Fund (All provinces) ► Innovative Clean Energy Fund (BC) ► Target GHG Program (Ontario) ► AgriInnovation ► Page 13
Example: NRC-IRAP NRC - Industrial Research Assistance Program: Focused on technology development projects at SMEs (< 500 staff) ► Similar to SR&ED ‘in reverse’ – i.e. projects approved before they are started, ► instead of after year-end IRAP will focus as much - or more - on the business as on the tech ► Business plan, founders, technology, timing – use their advice, if not their ► cash Relatively small in size (e.g. $200k), but high percentages: ► ► Up to 80% of eligible salary costs, 50% of sub-contractor costs Regular reporting requirements during the project ► Page 14
Business Expansion / Technology Adoption Support for: Facilities expansions ► Acquisition of new equipment and/or technology ► New product manufacturing line development ► ► Program examples: Western Innovation Initiative (WINN) ► SD Tech Fund ► Southwestern/Eastern Ontario Development Fund (SWODF/EODF) ► ACOA - Atlantic Innovation Fund or Business Development Program ► Page 15
Example: Eastern Ontario Development Fund (EODF) ► Assistance to promote the expansion and attraction of investment/business in E. Ont. through support for: Capital spending (facility & equipment expansion) ► Skills development ► Productivity enhancements (technology acquisition) ► ► Funding: Up to 15% of eligible project costs to a maximum grant of $1.5M ► ► Eligibility: Employ at least 10 people ► Commit to creating at least 10 new jobs ► Invest at least $500K in a project ► Priority sectors: advanced manufacturing, life sciences, processing, ICT, ► tourism, cultural industries Page 16
Export Expansion Programs Support for: Travel and accommodations ► Registration for participation at tradeshows and/or events ► Market research ► Translation of marketing materials ► Participation in trade missions ► Program examples: CanExport ► Going Global Innovation ► AgriMarketing ► Page 17
Example: CanExport ► Provides direct financial support to SMEs seeking to develop new export opportunities ► Eligible activities could include: Business travel ► Participation at trade fairs ► Market research ► Adaptation of marketing tools for a new market ► Legal fees associated with a distribution/representation agreement ► Activities must promote international business development beyond the ► applicant’s core activities and represent new initiatives ► Funding: Up to 50% of eligible expenses to a maximum of $100k ► Page 18
Environmental Sustainability Support for: Green house gas reductions ► Water use reduction ► Environmental remediation ► Clean Technology development or adoption ► Energy consumption reductions - saving upgrades in heating and cooling, ► refrigeration, lighting and controls Program examples: SD Tech Fund ► Canadian Industry Program for Energy Conservation ► NSERC - Applied Research and Development Grants ► Canadian Manufacturers & Exporters - SMART Green Program ► Page 19
Example: SD Tech Fund Sustainable Development Technology Canada Support the development and pre-commercial demonstration of cleantech ► solutions ► Priority areas Responsible natural resource development ► Carbon-free power generation and distribution ► Energy efficiency for industry and communities ► Next generation technologies ► ► Requires a consortium partner ► Funding: 33% non-repayable contribution ► Minimum project spend of $750k ► Page 20
Project Funding Example Page 21
Project funding plan Project Project end start New Hiring equipment event Jan 2017 Jan 2018 Jan 2019 Jan 2020 Project assumptions: ► Southwestern Ontario based company ► Development of new product line ► Innovative R&D activities ► Facility expansion ► Will require hiring of new staff ► Page 22
Project funding plan Project Project end start New Hiring equipment event Jan 2017 Jan 2018 Jan 2019 Jan 2020 SR&ED SR&ED SR&ED Scientific Research & Experimental Development (SR&ED): ► Max 35% Federal ITC, and many provincial ITC rates dropping. ► Tax credit – apply retroactively ► Ineligible expenditures for SR&ED ► Purchase of capital equipment ► Training of new hires ► New employees not performing SR&ED eligible activities ► Page 23
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