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Canada's Pitch to Tech Entrepreneur: We'll Pay 80% of Your Salaries
- VonGuard 12y agoCanada was already doing this for the games industry, though not at 80%. It worked. Look at all the studios in Montreal. Perhaps it could work again for the startup culture. It's cold enough up there in the winter that going outside is horrible, so why not stay inside and code!
- stormbrew 12y agoThe article is really light on details, but I'm pretty sure it's not describing anything new. It's just SR&ED (lovingly called shred colloquially) and related provincial programs, which have been around for a long time (in their modern form since at least 1994). In fact, it's probably fair to say that almost every tech employee (and many non-tech employees) in Canada has been under an SR&ED grant whether they knew it or not. There's actually quite a bit of overhead in reporting on how your work qualifies as research, and it's gotten more strict in recent years. Apparently there have been cases in the past of things like restaurants claiming their chefs were doing research and such.
- danielsiders 12y agoI believe the company also needs to be majority owned by resident Canadian citizens. There are a number of accounting firms that specialize in SRED claims, but most take a cut of your return in exchange for their services.
- amscanne 12y agoCanadian Controlled Private Corporation: http://www.cra-arc.gc.ca/tx/bsnss/tpcs/crprtns/typs/ccpc-eng.html http://www.cra-arc.gc.ca/tx/bsnss/tpcs/crprtns/typs/ccpc-eng... I believe that permanent residents would also qualify under the requirements, citizenship is not strictly necessary.
- teamonkey 12y agoThe requirements are quite specific. As a designer I didn't qualify for shred when I got here, but programmer colleagues (with an appropriate degree) did.
- stormbrew 12y agoThe requirements are, but enforcement isn't always particularly strong. There's a LOT of companies using SR&ED and relatively not a lot of bureaucrats checking up on it. It's extremely valuable to a company, so some will go to some pretty ridiculous lengths to get it.
- caissy 12y agoActually it's the province of Quebec and it is a tax credit for video game studios. The incentive was put in place around 1998-1999 and it is said to have been paying itself since 2005 or so from the influx of high paying job in the industry. And winter isn't that bad, we only get -30C for a week or two in January!
- api 12y agoIt'll be interesting to see how well this works. Silicon Valley did not pop into existence from nowhere. https://www.youtube.com/watch?v=ZTC_RxWN_xo https://www.youtube.com/watch?v=ZTC_RxWN_xo
- tormeh 12y agoWow. Really cool. The Silicon Valley essentially started as a defence supplier network during the cold war centered on Stanford.
- jgh 12y agoThe kill or be killed attitude they mention in this article is interesting because I almost immediately noticed the difference when moving from Canada to California. It's a different animal, that's for sure.
- null_ptr 12y agoIs the work atmosphere more relaxed in Canada? For that matter, do the East Coast/West Coast culture stereotypes hold true for Canada?
- elchief 12y agoIt's more relaxed in Vancouver and Halifax. Less so in Toronto.
- jgh 12y agoI would say Toronto is only slightly more relaxed than California in terms of deadlines and workload and number of hours expected to work. Definitely less relaxed in terms of dress code. However business does seem less ruthless up there.
- CoolGuySteve 12y agoOne of the worst things about tech in Canada is that the salaries are ridiculously low compared to the US. I made 2-3x as much by moving to California and then another integer coefficient greater than one when I moved to New York. But really, I want to say this: as a Canadian, I find that image of poutine extremely offensive. What is that yellow stuff on top, Curry? Are those even proper cheese curds? They're not melted. Is that scallion? How can this article be trusted when their choice of stock photo is so wrong I question if they've ever even had the dish?
- stormbrew 12y agoIt's especially worth noting that this is true even though these tax credits already exist. The benefit has largely gone to the companies that use them, not so much to their employees. Of course, it can be argued that there would be fewer jobs for them without it, so that is not to say that there has been no benefit -- it's just kind of hard to quantify. But it has not helped make salaries in Canada more competitive.
- sillysaurus3 12y agoI made 2-3x as much by moving to California and then another integer coefficient greater than one when I moved to New York. Another 2x? 3x? 4x? Why make us guess? It's valuable info that helps inform people's decisions for the future. Thank you for the datapoints.
- jgh 12y agoI can vouch for the 2x from Canada->California, I'm making more than 2x what I did in Canada (Toronto) now. I don't know about the 3x or 4x, maybe sillysaurus was making like $30k in Canada before, or maybe he's just some kind of superstar that gets paid $250k/year.
- mcpherrinm 12y ago60k/yr to 180k/yr are not unbelievable salaries for a junior Canadian moving to a now more senior position at a big silicon valley tech company.
- xux 12y agoSo... what's the catch? Sounds too good to be true. Can anyone think why they would do that? Can I just move there and get the benefit?
- clubhi 12y agoYou have to live in Canada.
- maaku 12y agoWhy the downvotes? Seriously that's why the incentive exists. Not enough skilled people wanting to live in Canada.
- michaelochurch 12y agoMany immigrants prefer the US over Canada because (a) there are major benefits to the US passport, and (b) there are unexpected prestige factors. In some parts of Asia, Canada still has the stigma of being "for people who couldn't get in to the US" even though, for the past 20 years or so, it's been as hard to get into Canada as the US (if not harder). If you take away New York and Silicon Valley and the unique opportunities those places offer, the appeal isn't living in the U.S. It's having an American passport. All that said, I think there are plenty of skilled people who'd live in Canada. You see the same thing in the U.S. Midwest. There are a lot of smart people who'd love to stay in, or move to, Chicago and Minneapolis. But the job markets aren't nearly as strong there, so they move to the coasts, settle down, and never return. Properly deployed, programs like this can change that (although it tends to take a long time).
- pugsawakening 12y agoI'm currently a beneficiary of SRED in a startup context in Canada. The first thing to note is that it doesn't solve many major problems. The lack of development talent is the biggest one; trying to get someone to move from California to Canada isn't something that's solved as simply as offering more money. And in my experience (as a recent graduate), the talent that would have studied computer science or has an interest in programming moves onto "safer" education and career options (in the local context) - usually engineering or commerce/finance. There's simply a lack of talent, or more realistically, a lack of talent with no better options. The money here is being used to attempt to make up for the extreme economies of scale that places like Silicon Valley have. It's not enough to make Canada a competitive place to start a startup, really, but it may have some effect on the total amount of expatriation by talented individuals.
- fidotron 12y agoI think if you're in computing this is true. The tax credit "successes" in Canada are groups like the hundreds of artists on videogames or mechanical engineers in aerospace. Software development that way does exist, but it doesn't account for a very high proportion of jobs in these programs. As an outsider in Canada I've been told it's easier to get foreigners to join startups due to how risk averse Canadians are, and what I've seen would tend to back that up.
- balls187 12y agoTalent is one problem. What about access to customers and financing?
- xtrumanx 12y ago> The lack of development talent is the biggest one; trying to get someone to move from California to Canada isn't something that's solved as simply as offering more money. Actually it would take a lot less money than you would think to get many people to move to Canada and take a job offer. There's a whole world of immigrants out there who would love to move to Canada. They're mostly not located in California however, but east and south of Europe.
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- oldspiceman 12y ago1. Is it this? http://www.cra-arc.gc.ca/txcrdt/sred-rsde/menu-eng.html http://www.cra-arc.gc.ca/txcrdt/sred-rsde/menu-eng.html 2. If I were to start a new company, can I use this rebate when paying myself?
- eigenvector 12y ago1. Yes 2. Yes, but only for the portion of your time that was SR&ED activities, which if you're the only employee couldn't conceivably be anywhere near 100%.
- doctorwho 12y agoIf you are an owner in the company you only can claim a maximum of 75% of your salary. So if 100% of your time was eligible work and you made $100K you could only claim $75K of that and you'd get a percentage of that $75K back, not the whole thing.
- brennanm 12y agoA lot of the talk is on SRED credits. SRED is a large part of the credit program for startups in Canada. Though it's not as simple as "Canada pays 80% of your salaries" You can get up to (off the top of my head) 75% of salaries paid back on hours worked "advancing technology". That means it's only for true R&D. That means UI, business logic, API, App anything, expenses, costs, etc... don't count. It's only for when you embark on a project that truly advances the worlds state of technology where you can really reap the benefits of SRED. Most startups, as sad as it may be, don't truly advance technology. A lot create value, yes, but advance technology? not really. Certainly not all year. So they'll only get 75% of salaries paid for the hours they worked on advancing technology. You'll get that back at the end of the year as one lump sum. It's awesome. However, it goes to the company and the company has to have already funded the salaries -- it wont fund salaries, it will reimburse them. On top of that the system is so hard to navigate that you'll end up requiring a consultant to navigate it. They'll take a cut, between 10-20%, of the return. It's not as simple as the article states, and our poutine doesn't look like that.
- 001sky 12y agoYeah, they immediately start parsing and backpedaling the headline: "the Canadian government is paying almost 80% of his <developers>' salaries.". Still disapointing they don't delve into the actual program structure though.
- 9oliYQjP 12y agoIn theory SRED is supposed to be for R&D. You'd be surprised what can count for R&D. Doing A/B testing to solve the problem of which UI is more preferred/efficient? That can count for SRED work.
- brennanm 12y agoWhat works in practice wouldn't be held up in an audit. Depending on the mood of your approving agent they can deny the whole application if you mention specific interface words. You'd be better off creating and Irap project to cover UI and business logic items. IRAP is out of the same government fund but pays slightly less for a project as you go, not one lump at the end of the year. IRAP and SRED are mutually exclusive but if you spend time thinking about it you'd be able to decide work to fit into both nicely.
- hluska 12y agoThis article is light on facts (which is surprising to see in the wsj). This program is called Scientific Research and Experimental Development Tax Incentive Program. And, qualifying for a full SR&ED isn't as easy as they make it sound. To learn more, visit: http://www.cra-arc.gc.ca/txcrdt/sred-rsde/menu-eng.html http://www.cra-arc.gc.ca/txcrdt/sred-rsde/menu-eng.html
- 9oliYQjP 12y agoThe trick to SRED is to hire an outside expert who will work on contingency to get a percentage of the SRED rebate they generate. There are many companies providing this service. These folks are experts on writing the necessary reports/forms given your engineers have written detailed logs of their work. Don't try to do SRED yourself. It's just one of those things, like hiring a lawyer, where it's complete lunacy to do it yourself.
- personZ 12y agoThe trick to SRED is to hire an outside expert who will work on contingency to get a percentage of the SRED rebate they generate. This is the scam of SRED. It is unfortunate that we are at this place. There is absolutely nothing difficult about SRED (it is absolutely no more difficult than any other completely banal corporate submission), beyond understanding the magic terminology and phrasing that will get your submission accepted as is. That a whole business of vampire consultants exist around exploiting that, with agreement from Revenue Canada, is the real lunacy. It undermines the efficacy of the program.
- 9oliYQjP 12y agoOh I completely agree. SRED shouldn't be difficult. I think the actual practice is more complicated though, having had to go through it. If you do it on your own you risk leaving a whole lot of money on the table, opening yourself up to a filing which won't stand up to an audit, or both. It's just one of those things I'd rather leave to somebody who deals with Revenue Canada on the same issue day in and day out. There are pretty scummy companies doing SRED returns but there are also decent ones who are professional and above board.
- arecurrence 12y agoWe're talking about a program that dates back to 1944 as if it's some new idea...
- deleted 12y ago[deleted]
- amscanne 12y agoPerhaps he used a technique known as "fraud". It sucks when programs like this are abused.
- slajax 12y agoMy co-founder was one of the first 3 people accepted to Canada from the US via the Startup Visa program (I'm Canadian, made him move) - We're fully realizing the benefits of operating in Canada as a CCPC. This article doesn't even touch on how much is actually going on here. Not only was the cover photo offensive, I question if they even researched the topic because they barely touched on IRAP which is just as beneficial as SRED. Talk to any founder from Canada and you'll likely get more reliable info then was in this article. The compelling reasons to start a company here are many and they are no secret.
- general_failure 12y agoI don't understand why all countries require startups to have investment. For one, most tech start ups don't need significant investment and can be boostrap. The average 30 year old has enough saving to get by for a year or two without any investment. I feel require investment is really a cruft of the past and shouldn't be a necessity for visas.
- treelovinhippie 12y ago26. $3k in the bank.
- logfromblammo 12y agoI had more at that age, but now have less. I probably would have been better off marrying a startup instead of a spouse. Either one alone can drain away all the time and money you have, and then some, but only one is likely to make your bank account any larger later on. Now they say that money can't buy happiness, but not having enough of it is a great way to get miserable. Think about that before you choose.
- perfunctory 12y agoDo I get it right? I set up a startup. Declare my own salary to be $100. Canadian gov pays me $80. I take $20 of that amount and pay it to myself as the remainder. Sounds like basic income.
- kelvin0 12y ago"The downside is a more European attitude toward work— less intense, less ambitious, more likely to have wine with lunch, Mr. Adelman says" As a Montrealer and a Sotware Engineer having worked at various size companies in this city, I can say I've NEVER seen my collegues have wine at lunch. Working in video game industry and sleeping at the office at crunch time (back in the days) I couldn't say my collegues or I 'lacked' the famed Silicon Valley work ethos ... This article is fraught with stereotypes and coated with a few fragment of facts ...
- jebus989 12y agoAs a European (ish), ditto.
- myth_drannon 12y agoAlthough I worked for several startups that benefited from SRED credits, I always found the system appalling and prefer the way it works in US with VCs. No government should take hard working folks's money and give them to white middle-upper class, well educated founders that will possibly just get wealthy even more and the class division cycle will continue. I would bet if you pay this money directly to the engineers themselves they will create much more value. Anyways I found that writing everyday what I did in a way it looks more as a research just so SRED accountants don't question the company, as extremely annoying to my day flow.
- lazyant 12y agoI can agree with you in general but not on the "white middle-upper class", if you've ever been in any startup event in Toronto, about half of the people are not white, see for ex https://www.facebook.com/startupweekendtoronto/photos_albums https://www.facebook.com/startupweekendtoronto/photos_albums
- logfromblammo 12y agoA while ago, I daydreamed the possibility that some government could, by way of international competitive advantage, establish by law a favorable tax situation for corporations that had a "Gov Class" stock. This would represent no less than 10% of the total ownership interest, and would be proxyless and nonvoting, but would have preferred treatment for dividends. Any distributions to Gov Class shareholder would be deductable from any taxes otherwise owed to it, but would not be refundable. That would allow the government, or anyone in its federation or confederation or otherwise under it in the hierarchy, to invest in startup businesses in such a way that favors local development and limits tax jurisdiction shopping. If Chicago bought 15% of a new local company as Gov Class shares, it retains 15% of the value of the company and 15% of the profits, at the expense of tax revenues, even if the company moves to San Francisco. In that case, taxes would ordinarily drop to nothing, but as a stockholder, the municipal government retains its investment. But perhaps the State of California buys out City of Chicago to sweeten the deal. Chicago now has that money back to reinvest, instead of pissing away tax dollars to develop companies that just leave when they get big enough. Of course, that assumes governments could be responsible investors, which is a proposition very difficult to prove. As it is, straight subsidies seem like a far stupider and more bureaucratic way to just waste tax money and enrich business owners without producing the intended effects. If the government is enriching the business owners anyway, wouldn't it be more cost effective to actually be one of the owners?
- gotrecruit 12y agoI'm moving to Vancouver, BC soon to found a startup, so it's good to hear this. But from comments here, i'm hearing a lot of comments pertaining to Toronto and Waterloo region, but not much about Vancouver or BC in general. Why is that? Is Vancouver/BC not a good place for startups? Am I heading in the wrong direction? I'm still in a position to switch back to Toronto if necessary, so if someone can enlighten me that would be greatly appreciated.
- gyardley 12y agoI didn't have a startup in Vancouver, but a prominent angel investor in Vancouver put some money into my NYC-based startup, and I flew out there for a couple of 'portfolio summits', with companies largely-based in Vancouver. I liked the group I saw and people I met, but a) that was years ago, and b) I don't know if they were representative. Hey, if you want to talk to someone in Vancouver about the local start-up scene, why not shoot me an email? (It's in my profile.) I can ask my old investor if he's willing to hop on the phone and answer a few questions.
- gotrecruit 12y agohey, i will definitely shoot you an email. i would be curious to find out more about the vancouver startup scene!
- giarc 12y agoThe Waterloo region is popular because of U Waterloo (a tech heavy school) and RIM. However, it won't be hard to convince people to move to Vancouver, it's warmer there.
- Tiktaalik 12y agoVancouver seems like a fine place for a startup to me. Better weather than the rest of Canada, same timezone as SF, very short flight to SF. One of Canada's startup success stories, Hootsuite, is in Vancouver. There are lots of video game studios and branch offices of American tech companies (Amazon, MSFT) so there is tech talent around. (I live in Vancouver)
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- sxcurry 12y agoA caution if you're considering Quebec. You might be caught off guard by the draconian French language laws, and restrictions on where you can send your children to school. (Ex-Quebecer here)
- the_duck 12y agosigh (Current Quebecer here)