Innovation isn’t just for private firms. Under recent proposals, public corporations and publicly held enterprises in Canada may now have new access to SR&ED tax credits, opening possibilities to fund R&D without diluting equity.
Here’s what you need to know, from eligibility to strategy.
What’s changing for SR&ED tax credits in public corporations?
On August 15, 2025, the Department of Finance released draft legislative proposals that would extend the enhanced 35% refundable SR&ED tax credit to eligible Canadian public corporations.
Currently, most public corporations are limited to a 15% non-refundable credit, but the draft would allow them to qualify for the 35% refundable rate up to an expenditure limit of $4.5 million, subject to new phase-out rules based on gross revenue.
Crucially, capital expenditures acquired after December 15, 2024 would again become eligible under SR&ED, a reversal of rules that had been removed years ago.
Key requirements & phase-outs for public corporations
Public corporations would qualify as eligible if they:
- Are resident in Canada
- Have a class of share listed on a designated stock exchange
- Are not controlled (directly or indirectly) by non-resident persons
Once they meet eligibility, the Scientific Research & Experimental Development program regime imposes limits based on gross revenue:
- Full 35% refundable credit up to $4.5M of qualified expenditures
- A phase-out of that limit when average gross revenue (over previous 3 years) rises between $15 million and $75 million
- Above $75 million, the enhanced rate may no longer apply
Public corporations will also face partial refundability on capital expenditure-based credit amounts (typically 40%) under the draft rules.
How public enterprises can take advantage
| Strategy | Details |
|---|
| Review past and ongoing R&D projects | Identify which activities would have qualified under private SR&ED rules. |
| Track capital acquisitions | For capital property acquired after Dec 15, 2024, document intended use in R&D. |
| Choose between revenue or capital phase-outs | Public firms must monitor gross revenue to avoid losing eligibility. |
| Align documentation with CRA requirements | Track hypotheses, tests, experiments, resource allocation and outcomes. |
Use the same robust documentation approach that private firms use, the goal is to make your public-entity SR&ED claims defensible.
Risks and considerations
- These proposals are not yet law, you must watch for final enactment.
- CRA’s enforcement powers are being expanded in draft legislation, non-compliance will carry greater penalties.
- Public corporations should plan their R&D expenditure thresholds carefully to not overshoot phase-out ceilings
Final word
These draft changes could lead to a new era where public enterprises can fully tap into SR&ED tax credits, turning their R&D into more sustainable funding streams. It’s a transforming moment, but speed, precision and documentation will be your allies.
Connect with a Leyton expert to review whether your public entity qualifies and how to structure your R&D claims under these evolving rules.
