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So it means that indirectly, developers' salaries are not a taxable income in Canada if they are working on R&D? Meaning, they do pay taxes on their income, but

So it means that indirectly, developers' salaries are not a taxable income in Canada if they are working on R&D? Meaning, they do pay taxes on their income, but their employer gets those taxes back, so if tax is 60%, the employer could pay 250% of what they'd pay otherwise, get 150% back, then the developer pays 150% of taxes, and gets 100%, so in effect the salary is tax-free. Is that what you meant to say? If so, it sounds almost too good to be true. Why aren't all startups in Canada?

nickff 1y ago
There are many limits on SR&ED, and the reporting/auditing process is burdensome. Canada also suffers from a variety of other inconveniences, mostly related to its dependence on resource extraction-related industries.
- ttul 1y ago
  It’s not terrible in comparison to the scale of the benefit. Just outsource the report writing to KPMG or another capable and reputable accounting firm and you’ll survive audits and it won’t kill your team. I would say over the years, SRED has helped us become better at managing the efficiency of dev.
throwawaysleep 1y ago
Canada's lack of startups is heavily cultural. We adopt new products less. We are far more risk averse about purchasing goods or services from startups, far more risk averse about funding them (founders often give personal guarantees to get the investment), value the equity startups offer at far less, etc. Government is far more fussy about accountability with that refundable R&D money, so lots of time is spent filling out paperwork and hiring consultants to do it. Here is a video that explains a lot about Canadian purchasing: https://www.cbc.ca/player/play/video/1.4596459 https://www.cbc.ca/player/play/video/1.4596459
- tormeh 1y ago
  I don’t think this is uniquely Canadian. And it’s usually semi-rational, if you really hate dealing with switching. Most cheaper subscription providers will give you a good deal at first, then jack up the prices when they’re bought by a major provider. New cheaper providers are founded, and the cycle continues. The cheaper prices last for two or three years, or similarly short. Most people would rather take the loss than having to pay attention to this stuff.
- throwaway2037 1y ago
  The cultural bit is underrated. Tobias Lütke from Germany is the co-founder and CEO of Shopify has written about this issue of Canadian business culture extensively. Also, the ecosystem of VCs in the US are unmatched globally. And, the internal market in US is f'ing huge.
Canada 1y ago
Yeah, I never thought of it that way. Your plan sounds great, but, in practice how it works is you get paid about half of what you would get in the US. Currently less than half due to the unusual currency exchange rates.
__turbobrew__ 1y ago
There is lots of paperwork for SR&ED, enough so that companies opt not to do it.
- ttul 1y ago
  Honestly, this is a not true. If you work with a decent accounting firm like KPMG’s Vancouver practice, and maintain a decent dev task management system like JIRA, you will be fine to hand over your payroll register and a CSV dump every January. A few weeks later, you have your claim. Once in a while, you have to sit there and talk with the CRA’s auditor.
  - __turbobrew__ 1y ago
    > Honestly, this is a not true You have a conjecture that all companies keep good jira task tracking and payroll, AND that all companies contract out big accounting firms like KPMG. From my personal experience I have been at two Canadian companies who didn’t claim SR&ED and therefore your conjecture is disproven with counter examples. Some companies don’t keep good enough task tracking, some companies don’t know about SR&ED, some companies think the paperwork and auditing is burdensome, some companies are just lazy.
    - ttul 1y ago
      Okay, well... if your CEO is too lazy to use JIRA etc.. to save 60% of development costs then I don't see much of a future for the company...

nickff 1y ago

There are many limits on SR&ED, and the reporting/auditing process is burdensome. Canada also suffers from a variety of other inconveniences, mostly related to its dependence on resource extraction-related industries.

ttul 1y ago
It’s not terrible in comparison to the scale of the benefit. Just outsource the report writing to KPMG or another capable and reputable accounting firm and you’ll survive audits and it won’t kill your team. I would say over the years, SRED has helped us become better at managing the efficiency of dev.

throwawaysleep 1y ago

Canada's lack of startups is heavily cultural. We adopt new products less. We are far more risk averse about purchasing goods or services from startups, far more risk averse about funding them (founders often give personal guarantees to get the investment), value the equity startups offer at far less, etc. Government is far more fussy about accountability with that refundable R&D money, so lots of time is spent filling out paperwork and hiring consultants to do it. Here is a video that explains a lot about Canadian purchasing: https://www.cbc.ca/player/play/video/1.4596459 https://www.cbc.ca/player/play/video/1.4596459

tormeh 1y ago
I don’t think this is uniquely Canadian. And it’s usually semi-rational, if you really hate dealing with switching. Most cheaper subscription providers will give you a good deal at first, then jack up the prices when they’re bought by a major provider. New cheaper providers are founded, and the cycle continues. The cheaper prices last for two or three years, or similarly short. Most people would rather take the loss than having to pay attention to this stuff.
throwaway2037 1y ago
The cultural bit is underrated. Tobias Lütke from Germany is the co-founder and CEO of Shopify has written about this issue of Canadian business culture extensively. Also, the ecosystem of VCs in the US are unmatched globally. And, the internal market in US is f'ing huge.

Canada 1y ago

Yeah, I never thought of it that way. Your plan sounds great, but, in practice how it works is you get paid about half of what you would get in the US. Currently less than half due to the unusual currency exchange rates.

__turbobrew__ 1y ago

There is lots of paperwork for SR&ED, enough so that companies opt not to do it.

ttul 1y ago
Honestly, this is a not true. If you work with a decent accounting firm like KPMG’s Vancouver practice, and maintain a decent dev task management system like JIRA, you will be fine to hand over your payroll register and a CSV dump every January. A few weeks later, you have your claim. Once in a while, you have to sit there and talk with the CRA’s auditor.
- __turbobrew__ 1y ago
  > Honestly, this is a not true You have a conjecture that all companies keep good jira task tracking and payroll, AND that all companies contract out big accounting firms like KPMG. From my personal experience I have been at two Canadian companies who didn’t claim SR&ED and therefore your conjecture is disproven with counter examples. Some companies don’t keep good enough task tracking, some companies don’t know about SR&ED, some companies think the paperwork and auditing is burdensome, some companies are just lazy.
  - ttul 1y ago
    Okay, well... if your CEO is too lazy to use JIRA etc.. to save 60% of development costs then I don't see much of a future for the company...