Transfer of SR&ED Eligible Expenditures Between Associated Corporations For a company having SR&ED work performed by a third company, it can be hard to establish which are the expenditures that can be considered as eligible for the Investment Tax Credit, and more particularly in the case of associated corporations. Therefore, I decided to take this opportunity to clarify the transfer of eligible expenditures between a payer and a contractor in this precise circumstance. To this end, I must, however, start by defining what associated corporations are. I’m not a tax advisor, but here is a simple definition: corporations are said to be associated when both companies are controlled (or controlled de facto) by the same person (legal person) or the same group. In these circumstances, the CRA doesn’t consider the received or to be received amounts by the SR&ED executants as being a contractual payment. Therefore, the corporations have two choices concerning contract expenditures for SR&ED, they can be claimed by the contractor or be transferred to the payer. For this transfer to be made, both corporations must fill and sign the T1146 form. The indirect labour costs and the overhead expenditures represent expenditures that can be claimed. Since both corporations are administrated by the same ruling authority, it has access to this information. Therefore, it can easily compute these expenditures by using the proxy method. However, if the result of this calculation were revealed to be higher than the contract’s expenditures, the contractual payment would become the eligible amount and not the surcharge of the relative expenditures. On the other hand, an important element must be taken into account. What was just mentioned is only valid if a SR&ED contract was signed between the two parties and if a contractual payment was paid to the contractor. To know more about the way to calculate the amount to be transferred from the contractor to the payer, please consult the T1146 Form.