The SR&ED (Scientific Research and Experimental Development) program offers significant tax credits for Canadian companies doing R&D. But can you claim it for work done by offshore teams? The answer is nuanced — here's what you need to know.
SR&ED Eligibility for Offshore Work
SR&ED credits generally apply to work performed in Canada by Canadian employees. However, up to 10% of total SR&ED-eligible expenditures can include foreign-performed work (subcontractor payments). The key is structuring the engagement so that the technological advancement direction and decisions happen in Canada.
Documentation Requirements
Maintain contemporaneous records: technical uncertainty descriptions, hypotheses tested, iterations performed, and results achieved. Keep all Slack/email communications showing Canadian-based direction of the R&D work. Document which specific technical problems were solved through systematic investigation.
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Maximizing Your SR&ED Claim
Structure your offshore engagement with a Canadian technical lead who directs the R&D. Keep AI model training, algorithm design, and architecture decisions in Canada. Use offshore teams for implementation under Canadian technical direction. Consult an SR&ED advisor before starting — proper structure from day one maximizes claims.
📥 Free Download: Vietnam Offshore Dev Cost Guide 2026
Real developer rates, project cost breakdowns, and a budget planning template. Used by 200+ startup founders.
Ready to build?
NKKTech delivers AI Automation projects from $20K.
Fixed scope. Senior Vietnam engineers. 14-day kickoff.
10+ years building AI systems for Toyota, Sony, and Rakuten in Japan. Founded NKKTech in 2018 with a senior-only engineering model.
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