If your business conducts research and development in Nova Scotia, you may be missing out on valuable tax savings. The Nova Scotia Research and Development Tax Credit lets eligible corporations recover 15% of qualifying R&D costs—but only if you claim it correctly on Schedule 340. Many businesses miss the credit because they misunderstand the link to federal SR&ED or file the wrong forms.
The Nova Scotia Research and Development Tax Credit is a provincial corporate income tax credit for businesses that carry out scientific research and experimental development (SR&ED) in Nova Scotia.
Key facts:
To claim the Nova Scotia R&D Tax Credit, all of the following must be true:
If you do not file the federal SR&ED claim, you cannot claim the provincial credit. The Nova Scotia program mirrors federal SR&ED rules and relies on the Canada Revenue Agency (CRA)’s technical review.
Eligible expenses generally follow federal SR&ED definitions, including:
Only expenditures incurred in Nova Scotia qualify for the provincial credit, even if your company operates elsewhere.
Before you can touch Schedule 340, you must complete:
Identify the portion of your federal SR&ED costs that were:
Schedule 340 calculates your 15% provincial credit based on eligible SR&ED expenditures. The schedule is filed with your Nova Scotia T2 return, not separately.
Schedule 340 must be filed with your corporate tax return for the year the R&D costs were incurred. Late or amended filings can delay or reduce your credit.
Tools like GrantHub’s eligibility matcher can help you confirm whether your R&D activities also qualify for other provincial or federal programs.
The Nova Scotia R&D Tax Credit is a non-refundable tax credit. This means:
For early-stage startups with little or no taxable income, the credit may have limited immediate value. In those cases, combining it with refundable programs like federal SR&ED is often critical.
Skipping the federal SR&ED claim
Without Form T661, Schedule 340 will be denied—even if your R&D is legitimate.
Including out-of-province costs
Only SR&ED expenditures incurred in Nova Scotia qualify for the provincial credit.
Missing the filing deadline
Schedule 340 must be filed with your T2. Late submissions can trigger reassessments.
Overstating eligible activities
Routine software development or product customization often does not qualify as SR&ED.
Q: Do startups with no profits qualify for the Nova Scotia R&D Tax Credit?
Yes, if they are corporations with SR&ED expenditures in Nova Scotia. However, the credit is non-refundable, so it only helps once the company has provincial tax payable.
Q: How much is the Nova Scotia R&D Tax Credit worth?
The credit equals 15% of eligible SR&ED expenditures incurred in Nova Scotia. As of June 2024, there is no published maximum cap on the amount that can be claimed.
Q: Do I need to be incorporated in Nova Scotia?
You must be a corporation with taxable income allocated to Nova Scotia. Extra-provincial corporations may qualify if they have a permanent establishment in the province.
Q: What tax forms are required?
You must file Form T661 for federal SR&ED and Schedule 340 with your Nova Scotia T2 return.
Q: Are software companies eligible?
Yes, if the work meets the Canada Revenue Agency (CRA)’s SR&ED criteria, such as technological uncertainty and experimental development.
Claiming the Nova Scotia R&D Tax Credit correctly can reduce your corporate tax bill, but only if your SR&ED claim is solid and your forms are accurate. GrantHub tracks hundreds of active grant and tax credit programs across Canada, including R&D incentives, so you can see which ones align with your business before you file.
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