Income Tax Regulations — 2900
2900 (1) [Repealed, SOR/2000-296, s. 1] (2) For the purposes of clause 37(8)(a)(i)(B) and subclause 37(8)(a)(ii)(A)(II) of the Act, the following expenditures are directly attributable to the prosecution of scientific research and experimental development: (a) the cost of materials consumed or transformed in such prosecution; (b) where an employee directly undertakes, supervises or supports such prosecution, the portion of the amount incurred for salary or wages of the employee that can reasonably be considered to be in respect of such prosecution; and (c) other expenditures, or those portions of other expenditures, that are directly related to such prosecution and that would not have been incurred if such prosecution had not occurred. (3) For the purposes of subclause 37(8)(a)(ii)(A)(II) of the Act, the following expenditures are directly attributable to the provision of premises, facilities or equipment for the prosecution of scientific research and experimental development: (a) the cost of the maintenance and upkeep of such premises, facilities or equipment; and (b) other expenditures, or those portions of other expenditures, that are directly related to that provision and that would not have been incurred if those premises or facilities or that equipment had not existed. (4) For the purposes of the definition qualified expenditure in subsection 127(9) of the Act, the prescribed proxy amount of a taxpayer for a taxation year, in respect of a business, in respect of which the taxpayer elects under clause 37(8)(a)(ii)(B) of the Act is 55% of the total of all amounts each of which is that portion of the amount incurred in the year by the taxpayer in respect of salary or wages of an employee of the taxpayer who is directly engaged in scientific research and experimental development carried on in Canada that can reasonably be considered to relate to the scientific research and experimental development having regard to the time spent by the employee on the scientific research and experimental development. (5) Subject to subsections (6) to (8), where in subsection (4) the portion of an expenditure is all or substantially all of the expenditure, that portion shall be replaced by the amount of the expenditure. (6) The amount determined under subsection (4) as the prescribed proxy amount of a taxpayer for a taxation year in respect of a business shall not exceed the amount, if any, by which (a) the total of all amounts deducted in computing the taxpayer’s income for the year from the business, exceeds the total of all amounts each of which is (b) an amount deducted in computing the income of the taxpayer for the year from the business under any of sections 20, 24, 26, 30, 32, 37, 66 to 66.8 and 104 of the Act, or (c) an amount incurred by the taxpayer in the year in respect of any outlay or expense made or incurred for the use of, or the right to use, a building other than a special-purpose building. (7) In determining the prescribed proxy amount of a taxpayer for a taxation year, the portion of the amount incurred in the year by the taxpayer in respect of salary or wages of a specified employee of the taxpayer that is included in computing the total described in subsection (4) shall not exceed the lesser of (a) 75% of the amount incurred by the taxpayer in the year in respect of salary or wages of the employee, and (b) the amount determined by the formula 2.5 × A × B / 365 where A is the Year’s Maximum Pensionable Earnings (as determined under section 18 of the Canada Pension Plan) for the calendar year in which the taxation year ends, and B is the number of days in the taxation year in which the employee is an employee of the taxpayer. (8) Where (a) a taxpayer is a corporation, (b) the taxpayer employs in a taxation year ending in a calendar year an individual who is a specified employee of the taxpayer, (c) the taxpayer is associated with another corporation (referred to as the “associated corporation”) in a taxation year of the a