SR&ED Software Companies: What Canadian Founders Should Know

Canadian software companies, SaaS businesses, and tech startups are among the most common claimants of SR&ED credits. But not all software work qualifies — only the work that meets CRA's three criteria.

What software work qualifies for SR&ED

Software development qualifies for SR&ED when it involves genuine technical challenges that couldn't be solved using standard practice or publicly available knowledge. The work must advance the state of the art in a way that wasn't known in advance.

• Novel architecture or algorithm development where the best approach wasn't known in advance
• Machine learning model research and training beyond standard library usage
• Integration of systems where the outcome wasn't known in advance due to technical complexity
• Performance optimization that goes beyond standard practice and required systematic experimentation
• Prototyping new technical capabilities where the feasibility was uncertain

What software work does NOT qualify

Routine software development does not qualify for SR&ED. CRA explicitly excludes work that uses known techniques, standard frameworks, and established methodologies without genuine technical uncertainty.

• Routine coding using standard frameworks and libraries without technical uncertainty
• Bug fixes that restore intended functionality rather than advance technical knowledge
• UI/UX implementation using established design patterns and tools
• Code refactoring that doesn't address a technical uncertainty or advance knowledge
• API integration where the approach is well-documented and the outcome is predictable
• Standard DevOps, CI/CD, and infrastructure setup using known tools and practices

How software companies should document SR&ED

Software companies have a natural advantage in SR&ED documentation: they already create technical records in their development workflow. The key is to make these records SR&ED-aware.