14 June, 2017 Presenter Dharmesh Gandhi, B.Eng, MBA Partner, - - PowerPoint PPT Presentation

Capitalizing on grants and incentives for your private business 14 June, 2017

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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

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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

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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

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Overview Government Incentives Landscape in Canada

Agenda

Funding Programs Budget Announcements

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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

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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

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Regional Development Agencies Across Canada

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Incentive Program Examples

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Government Incentives Landscape

Business and Market Expansion

► Facility expansions ► Expansion to new foreign markets ► New product line development

Fundability Indicators

Environmental Sustainability

► Green house gas reductions ► Energy consumption reductions

Innovation Development

► Significant R&D expenditures ► Acquisition of new equipment ► Universities/colleges collaboration

People Development

► Hiring new staff ► Training ► Co-op student/interns

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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

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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

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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

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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

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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

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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

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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

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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

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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

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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

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Project Funding Example

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Project funding plan

►

Project assumptions:

►

Southwestern Ontario based company

►

Development of new product line

►

Innovative R&D activities

►

Facility expansion

►

Will require hiring of new staff

Jan 2017 Jan 2018 Jan 2019 Jan 2020

Hiring event New equipment

Project start Project end

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Jan 2017 Jan 2018 Jan 2019 Jan 2020

Hiring event New equipment

Project start Project end

Project funding plan

►

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

SR&ED SR&ED SR&ED

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Project funding plan

►

Overall project funding:

►

Southwestern Ontario Development Fund (SWODF) – 15% Grant to $1.5M

►

Ontario Jobs & Prosperity Fund (OJPF) – 20% Grant, 40% Loan + Grant

►

Capital Asset Review (CAR) – cash tax savings

Jan 2017 Jan 2018 Jan 2019 Jan 2020

Hiring event New equipment

Project start Project end

SWODF OJPF CAR SR&ED SR&ED SR&ED

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Project funding plan

►

New equipment funding:

►

Southwestern Ontario Development Fund (SWODF) – 15% Grant to $1.5M

►

FedDev Ontario – Investing in Business Growth & Productivity (IBGP) – 25% loan to $20M max.

Jan 2017 Jan 2018 Jan 2019 Jan 2020

Hiring event New equipment

Project start Project end

SR&ED SR&ED SR&ED

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Project funding plan

►

Funding for hiring & training:

►

Canada-Ontario Job Grant (COJG) – 2/3 Grant to $10K per trainee

►

Yves Landry AIME Initiative (AIME) – 50% of training costs to a max of $50,000

►

OCE Talent Edge (OCE-TE) - $10K Grant for each 4-mo. internship

►

IRAP – Youth Employment Program (IRAP-YEP) - 80% Grant to $15K max

Jan 2017 Jan 2018 Jan 2019 Jan 2020

Hiring event New equipment

Project start Project end

SR&ED SR&ED SR&ED

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Project funding plan

►

Export to new markets:

►

CanExport - 50% Grant to $100K max

►

Export market access - 50% Grant to $50K max

New export markets?

Jan 2017 Jan 2018 Jan 2019 Jan 2020

Hiring event New equipment

Project start Project end

SR&ED SR&ED SR&ED

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Project funding plan

SWODF FedDev – IBGP COJG AIME OCE-TE IRAP-YEP

New export markets?

CanExport EMA

Jan 2017 Jan 2018 Jan 2019 Jan 2020

Hiring event New equipment

Project start Project end

SWODF OJPF CAR SR&ED SR&ED SR&ED

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Incentives Planning

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Government Funding Approach

Scope, Identify and Analyze Apply Report Strategize

Preparation of desired funding applications Facilitation of application process Post-approval compliance support Identify available funding programs Identify opportunities and risks On-going support for past applications, reporting and new funding opportunities

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On-going Compliance

& Reporting

► Most programs require some level of public disclosure as a condition

• f the grant

►

Content and timing of that release can often be negotiated

► All programs have some level of on-going compliance

►

Some programs more onerous than others – but typically monthly or quarterly reporting requirements

►

Updates on technical progress, project costs, hiring targets, etc.

►

Cost/benefit analysis needs to be considered

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Optimizing Multiple Incentives

► How to optimize SR&ED + other government incentives?

►

Do not assume that 1 + 1 + 1 = 3

►

Consider stacking rules and look for complementary programs

►

E.g. SR&ED + SMART Green + AIME

► Expenditures prior to grant approval are not eligible ► Need help on the technology side?

►

Consider working with Canadian universities/colleges

►

Subsidized support – and could still qualify for SR&ED

►

Could also qualify for refundable credits (e.g. OBRITC = 20%)

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Looking Forward: 2017 Budget Announcements

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2017 Federal Budget Announcements

► Innovation agenda remains a dominant focus for the gov’t

►

Strategic Innovation fund, Artificial Intelligence, Agriculture Science

► Cleantech sector particularly well supported

►

Investments in SDTC, Smart Cities, & Impact Canada cleantech stream

► Skills and youth initiatives to improve training & new jobs

►

Renewed commitment to Mitacs, and Youth Employment Fund

► Access to capital and new markets

►

Funds for Superclusters, and late-stage venture capital and project funding through BDC and EDC

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Noteworthy Provincial Programs

Alberta:

► Capital Investment Tax Credit (CITC)

►

2-year $70M incentive to stimulate investment in capital-intensive industries

►

A non-refundable credit of 10% of the value of machinery, equipment and buildings

►

Alberta Investor Tax Credit (AITC)

►

3-year $90M tax credit program to investors who provide venture capital to small Alberta businesses in non-traditional sectors

►

30% non-refundable tax credit – Tourism, R&D, Digital Media, Post-Production

Saskatchewan:

► Saskatchewan Commercial Innovation Incentive (SCII)

►

Among 1st provinces to introduce “Patent box” regime

►

Decrease the Saskatchewan corporate income tax rate to 6% on income earned from the commercialization of qualifying IP for 10 years

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Summary

► Direct funding programs will continue to increase ► Be proactive

►

Create an incentives strategy as part of your business plan

► Canadian incentives landscape is complex and constantly changing ► Remember ► Expansion ► Hiring/training ► R&D ► Sustainability/CleanTech

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Questions?