Income Tax Act — I-3.3 37
 section 127 and Part XXIX of the Income Tax Regulations , the amount of a taxpayer’s expenditure for a taxation year determined under subsection (1.5) is deemed to be made in the taxation year in respect of scientific research and experimental development carried on in Canada by the taxpayer. Salary or wages outside Canada — limit determined (1.5) The amount of a taxpayer’s expenditure for a taxation year determined under this subsection is the lesser of (a) the amount that is the total of all expenditures each of which is an expenditure made by the taxpayer, in the taxation year and after February 25, 2008, in respect of an expense incurred in the taxation year for salary or wages paid to the taxpayer’s employee who was resident in Canada at the time the expense was incurred in respect of scientific research and experimental development, (i) that was carried on outside Canada, (ii) that was directly undertaken by the taxpayer, (iii) that related to a business of the taxpayer, and (iv) that was solely in support of scientific research and experimental development carried on in Canada by the taxpayer, and (b) the amount that is 10 per cent of the total of all expenditures, made by the taxpayer in the year, each of which would, if this Act were read without reference to subsection (1.4), be an expenditure made in respect of an expense incurred in the year for salary or wages paid to an employee in respect of scientific research and experimental development that was carried on in Canada, that was directly undertaken by the taxpayer and that related to a business of the taxpayer. Research outside Canada (2) In computing the income of a taxpayer for a taxation year from a business of the taxpayer, there may be deducted expenditures of a current nature made by the taxpayer in the year (a) on scientific research and experimental development carried on outside Canada, directly undertaken by or on behalf of the taxpayer, and related to the business (except to the extent that subsection (1.4) deems the expenditures to have been made in Canada); or (b) by payments to an approved association, university, college, research institute or other similar institution to be used for scientific research and experimental development carried on outside Canada related to the business provided that the taxpayer is entitled to exploit the results of that scientific research and experimental development. Minister may obtain advice (3) The Minister may obtain the advice of the Department of Industry, the National Research Council of Canada, the Defence Research Board or any other agency or department of the Government of Canada carrying on activities in the field of scientific research as to whether any particular activity constitutes scientific research and experimental development. Where no deduction allowed under section (4) No deduction may be made under this section in respect of an expenditure made to acquire rights in, or arising out of, scientific research and experimental development. Where no deduction allowed under ss. 110.1 and 118.1 (5) Where, in respect of an expenditure on scientific research and experimental development made by a taxpayer in a taxation year, an amount is otherwise deductible under this section and under section 110.1 or 118.1, no deduction may be made in respect of the expenditure under section 110.1 or 118.1 in computing the taxable income of, or the tax payable by, the taxpayer for any taxation year. Expenditures of a capital nature (6) For the purpose of section 13, an amount claimed under subsection (1) that may reasonably be considered to be in respect of a property described in paragraph (1)(b) is deemed to be an amount allowed to the taxpayer in respect of the property under regulations made under paragraph 20(1)(a), and for that purpose the property is deemed to be of a separate prescribed class. Loss restriction event (6.1) If a taxpayer was, at any time (in this subsection referred to as “that time”) before the