SR&ED vs. OIDMTC: Which R&D Credit Is Right for Your Tech Company?

By Bader A. Chowdry, CPA, CA, LPA | Insight Accounting CPA

Choosing between Canada’s SR&ED program and Ontario’s OIDMTC can mean the difference between recovering tens of thousands of dollars-or leaving money on the table. For technology companies in Mississauga, Toronto, and across the GTA, understanding how these R&D tax credits interact is essential to maximizing your innovation investment returns.

At Insight Accounting CPA Professional Corporation, we help Ontario tech companies navigate both federal and provincial R&D incentives. With our Accounting Intelligence approach and proprietary AI governance framework (patent pending), we ensure you claim every dollar you’re entitled to while maintaining full CRA and provincial compliance.

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Understanding SR&ED: Canada’s Federal R&D Tax Credit

The Scientific Research and Experimental Development (SR&ED) program is the largest federal tax incentive for R&D in Canada, distributing over $3 billion annually to businesses of all sizes.

How SR&ED Works for Ontario Tech Companies

For CCPCs (Canadian-Controlled Private Corporations):

Refundable tax credit: 35% on the first $3 million of qualifying expenditures

Non-refundable credit: 15% on expenditures above the $3M threshold

Cash refunds even if your company isn’t profitable

For other corporations:

15% non-refundable tax credit on all qualifying R&D expenditures

Can reduce federal tax payable or be carried forward 20 years

What Qualifies for SR&ED in Tech?

Technology companies in Mississauga and across Ontario commonly claim SR&ED for:

Software development: Custom algorithms, proprietary frameworks, API innovations

Hardware integration: IoT devices, embedded systems, robotics

AI/ML research: Machine learning model development, natural language processing

Platform architecture: Scalable infrastructure, security protocols

Testing and experimentation: Prototype validation, performance optimization

Qualifying criteria: Advancement of scientific knowledge or technology, overcoming technological uncertainties, and systematic investigation.

Learn more in our complete SR&ED guide for Ontario businesses.

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Understanding OIDMTC: Ontario’s Interactive Digital Media Tax Credit

The Ontario Interactive Digital Media Tax Credit (OIDMTC) is a provincial incentive specifically designed for companies creating interactive digital media products in Ontario.

How OIDMTC Works

40% refundable tax credit on eligible Ontario labour and expenditures

Up to 35% on qualifying marketing and distribution expenses

No cap on eligible expenditures (unlike SR&ED’s $3M limit for enhanced rates)

Must meet specific product and employment criteria

What Qualifies for OIDMTC?

The OIDMTC applies to interactive digital media products including:

Video games: console, PC, mobile, VR/AR gaming experiences

Educational software: interactive learning platforms, training simulations

Entertainment software: interactive storytelling, virtual experiences

Business applications: interactive dashboards, data visualization tools

Edutainment products: hybrid education-entertainment platforms

Key OIDMTC Requirements

To qualify, your Ontario tech company must:

Have a permanent establishment in Ontario

Pay at least 50% of development salaries to Ontario-based employees

Create a product with end-user interactivity (not passive consumption)

File the required Ontario tax forms with supporting documentation

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SR&ED vs. OIDMTC: Head-to-Head Comparison

| Factor | SR&ED | OIDMTC |

|——–|——-|——–|

| Rate | 35% (CCPC, first $3M) + 15% | 40% + up to 35% marketing |

| Jurisdiction | Federal | Provincial (Ontario only) |

| Product Focus | Broad R&D across all industries | Interactive digital media only |

| Refundable | Yes (for CCPCs) | Yes |

| Labour Requirement | Flexible | 50%+ Ontario-based salaries |

| Interactivity | Not required | Mandatory |

| Marketing Costs | Not eligible | Up to 35% rate |

| Carryforward | 20 years | Not applicable (fully refundable) |

When SR&ED Is Better

Choose SR&ED when:

Your tech company develops backend infrastructure or non-interactive technology

You’re building SaaS platforms for business use (not entertainment/education)

Your headcount is distributed across multiple provinces or countries

You’re conducting pure R&D without an end-user interface

You want flexibility in how labour is allocated geographically

When OIDMTC Is Better

Choose OIDMTC when:

You’re building video games, educational software, or entertainment products

You have primarily Ontario-based developers (meeting the 50% threshold)

Your product has significant marketing/distribution costs (extra 35% available)

You’re a startup gaming company with no taxable income yet

Your product clearly fits the “interactive digital media” definition

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The Strategic Approach: Claiming Both Credits

Here’s where it gets interesting-many Ontario tech companies can claim both SR&ED and OIDMTC for the same project, maximizing their total R&D refund.

Stacking Strategy Example

Consider a Mississauga-based gaming startup developing a mobile game:

|————-|————-|————–|——————-|

| Ontario developer salaries ($200K) | $70,000 | $80,000 | $150,000 |

| Marketing costs ($50K) | $0 | $17,500 | $17,500 |

| Testing equipment ($30K) | $10,500 | $0 | $10,500 |

| Total for $280K spend | $80,500 | $97,500 | $178,000 |

Effective refund rate: 63.6% of total R&D spending recovered through tax credits.

Important Rules for Stacking

No double-dipping on same costs: You cannot claim the exact same expenditure twice. However, you can strategically allocate different cost pools to different programs.

Ontario labour allocation: SR&ED allows multinational labour; OIDMTC requires 50%+ Ontario-based. Plan your workforce accordingly.

Federal vs. provincial refunds: SR&ED comes from Ottawa; OIDMTC from Toronto. Both are processed separately with different timelines.

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Common Mistakes Ontario Tech Companies Make

Mistake #1: Assuming You Must Choose One

Many tech founders in the GTA believe they can only claim one program. This confusion costs them hundreds of thousands in forgone refunds.

Mistake #2: Misclassifying Product Types

Interactive educational software might qualify for both. Backend API development might only qualify for SR&ED. Misclassification leads to rejected claims.

Mistake #3: Poor Documentation

Both programs require contemporaneous documentation. Tech companies often fail to track:

Time logs by project and activity

Technical challenges encountered

Iterative development cycles

Labour allocation by province

Mistake #4: Missing Eligible Marketing Costs

OIDMTC’s marketing provision is often overlooked. Eligible expenses include:

Digital advertising for game launches

App store optimization costs

Influencer marketing campaigns

Trade show participation expenses

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Industry-Specific Considerations for Ontario Tech

Video Game Developers

Gaming companies in Toronto and Mississauga frequently benefit from both credits. Game development typically involves:

Technical advancement (SR&ED eligible)

Interactive entertainment products (OIDMTC eligible)

Significant marketing budgets (OIDMTC bonus)

SaaS & Enterprise Software

Business-focused software often qualifies primarily for SR&ED, as it may lack the “entertainment/education” component required for OIDMTC. However, some SaaS products with interactive training modules may qualify for both.

AI/ML Research Companies

Pure AI research often falls under SR&ED only, but if you’re developing interactive AI applications (chatbots, virtual assistants, learning platforms), you may access both programs.

Clean Tech & Hardware

Hardware development with embedded software may qualify for SR&ED. If the resulting product has interactive digital components, OIDMTC might also apply.

Learn more about technology industry accounting services tailored to Ontario’s innovation sector.

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Documentation Best Practices for Maximum Claims

For SR&ED:

Maintain technical narratives describing uncertainties and resolutions

Track time by project using project management tools

Preserve version control logs showing iterative development

Document failed experiments as aggressively as successes

For OIDMTC:

Document Ontario employee residence status

Track Canadian vs. foreign labour separately

Maintain product interactivity specifications

Preserve marketing expense receipts with clear campaign attribution

At Insight Accounting CPA, our AI-powered documentation review analyzes your R&D records to identify missing documentation before filing-significantly reducing audit risk.

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Filing Timeline and Process

|———|———-|—————–|—————|

Strategic Timing

File both claims simultaneously to:

Streamline documentation preparation

Ensure consistent labour allocations across programs

Maximize cash flow timing

Minimize CRA and Ontario Ministry audit overlap

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AI Governance and R&D Compliance

As the only GTA accounting firm developing proprietary AI governance frameworks (patent pending), Insight Accounting CPA helps tech companies navigate:

Automated documentation systems for R&D tracking

Blockchain-verified expense records for audit-proof claims

Predictive analytics for claim value optimization

Real-time compliance monitoring throughout the year

Our Accounting Intelligence approach means you spend less time on paperwork and more time building-while recovering maximum R&D value.

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Frequently Asked Questions (FAQ)

Can I claim both SR&ED and OIDMTC for the same project?

Yes, often you can claim both. The key is ensuring different expenditure pools support each claim. For example, Ontario-based developer salaries might support both credits, while foreign labour only supports SR&ED. Marketing costs only qualify for OIDMTC.

What if my company isn’t profitable yet?

Good news: Both SR&ED (for CCPCs) and OIDMTC provide refundable tax credits, meaning you receive cash refunds even if you pay no corporate income tax. This makes both programs ideal for Ontario startups and pre-revenue tech companies.

How do I know if my product qualifies for OIDMTC?

The product must be primarily interactive digital media-software designed for user interaction rather than passive consumption. Video games, educational software, and interactive training platforms typically qualify. Backend infrastructure, APIs, and non-interactive business tools generally do not.

What’s the minimum claim size?

There’s no official minimum, but from a cost-benefit perspective, SR&ED claims under $50,000 may not justify the compliance effort. OIDMTC has no specific threshold. We recommend consulting with a CPA when your annual R&D spend exceeds $25,000.

Can I amend past years’ claims?

SR&ED: Yes, within the 18-month window from your fiscal year-end. OIDMTC: Yes, within standard tax reassessment periods. If you’ve been doing R&D for years without claiming, there may be recoverable funds available.

What happens if my claim is audited?

CRA conducts SR&ED reviews to verify eligibility and documentation completeness. Ontario may also review OIDMTC claims. Working with an experienced CPA dramatically improves your success rate.

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Maximize Your R&D Refund with Insight Accounting CPA

Don’t leave money on the table. Whether you’re a startup in Mississauga, a gaming studio in Toronto, or a SaaS company anywhere in Ontario, our team at Insight Accounting CPA Professional Corporation ensures you access every available R&D dollar.

Call (905) 270-1873 to schedule your complimentary R&D credit consultation or book online. We’ll review your projects, identify eligibility for both SR&ED and OIDMTC, and provide a claim value estimate-no obligation.

Serving technology companies across Mississauga, Toronto, the GTA, and throughout Ontario with Accounting Intelligence and AI-powered compliance solutions.