SR&ED for AI projects: separate experiments from deployment
An AI project may contain eligible experimental work, but adoption financing and a custom software build do not establish SR&ED eligibility.
Using AI is not the eligibility test
CRA requires work conducted in Canada for scientific or technological advancement through systematic investigation or search by experiment or analysis. The uncertainty must arise from an insufficiency in the existing scientific or technological knowledge base, not simply your team’s unfamiliarity with a product.
Configuring an available AI service, connecting a CRM, building ordinary retrieval over documents or deploying a receptionist does not automatically satisfy that test. A project can contain both eligible experimental work and routine implementation; describe and cost them separately rather than claiming the entire rollout.
Document the experiment as it happens
- Record the technological uncertainty and the knowledge available at the start.
- State the hypothesis or approach you tested and why ordinary methods were insufficient.
- Keep test designs, measurements, failures, revisions and the knowledge gained.
- Track who did the work, where it was performed, dates, time and related costs.
- Separate deployment, support, sales and routine data processing from experimental activities.
Apply the rules for the claimant and tax year
CRA’s current guidance describes a basic 15% investment tax credit and an enhanced 35% rate for qualifying corporations and expenditures, with a maximum annual enhanced-rate expenditure limit of $6 million for relevant tax years beginning after December 15, 2024. Refundability, corporate status, associated corporations and limit reductions affect the outcome. Confirm which rules apply to your tax year rather than treating a percentage as a guaranteed refund.
Account for other assistance
IRAP or other assistance does not by itself prevent SR&ED eligibility, but assistance and contract payments can reduce qualified expenditures. Financing a project through LIFT does not certify its work for SR&ED. Have your tax advisor review the agreements and the expenditures instead of assuming every invoice receives both a contribution and a tax credit on its full amount.
Use CRA’s eligibility support before building a financial forecast around a claim. For the engineering work, define a clear boundary between experiments and a subsequent production deployment so the evidence, contracts and cost records reflect what actually happened.