Research and Development Tax Credits for App Developers

The outbreak of smart phones in the past decade has resulted in the technological convergence that will likely define an era. To compliment this new technology has been the creation of mobile applications, “apps,” that aid and entertain over a billion users around the world.

Canadian app developers are at the forefront of these modern conveniences-turned-essentials, and are already benefiting from Scientific Research and Experiment Development (SR&ED) tax credits. Here is how your business can reap the SR&ED rewards, as well.

Why is app development important to the federal government?

Once considered just a facet of the software and communication industries, app development has blossomed into a sector of its own. Economists project global app sales to eclipse $25 billion this year, nearly $1 billion from Canada’s 50,000-employee app workforce alone.

The federal government is recognizing the impact that app development has on the economy and the potential to attract highly-skilled app creators to Canada. This opportunity to become a leader in the global app marketplace has the Canadian Revenue Agency (CRA) rewarding those contributing to the industry.

How is creating apps considered “research and development?”

The CRA rewards Canadian companies that undertake experiments for the sake of advancing technology—whether or not there is an intended use after the fact.

Software developers do this on a daily basis when trying to create apps that overcome technical barriers. For example, cached turn-by-turn GPS navigation solved drivers’ difficulty of navigating roads outside of cell phone service range.

In addition to creating public direct-to-sales apps for Android, Apple, BlackBerry, and Windows devices, businesses that produce apps for another company’s specific use are also eligible. Perhaps your firm was approached to create an app that allows your client to share inventories through their smart phones.

These examples and others are instances where research and development is used in creating apps. As per general SR&ED criteria, market research, sales promotions, routine testing, and stylistic changes are not eligible for funding.

What expenses can be recovered?

Since all research and experiments must be conducted systematically and not at random, there must be a specific technical barrier in mind prior to developing the app. Once this requirement is satisfied, a variety of expenses can be recovered through the SR&ED program

The CRA funds “wages, materials, machinery, equipment and some overhead.” This means app developers may claim salaries for employees who directly worked on the project, hardware necessary to create the app, and other related fixed costs.

If you are a Canadian app developer—or a business in an unrelated industry that created or improved software to solve a technical uncertainty—contact Enhanced Capital Recovery with SRED consulting offices in Vancouver, Edmonton and Toronto today. Our no-risk consultation will allow you to discover how much SR&ED funding you are eligible to receive!

For a free consultation, complete our contact form, call us at 1-800-470-0235, or email us at