1. SR&ED Tax Incentives Life Sciences B.C. 28 January 2009

2. SR&ED Tax IncentivesPage 2 Agenda ► Introductions ► Overview of the SR&ED Tax Credit Program ► Technical Criteria ► Financial Criteria ► Investment Tax Credits (ITC’s) ► Recent Developments ► Q&A

3. SR&ED Tax IncentivesPage 3 Overview of the SR&ED Program ► Federal tax incentive program; ► SR&ED must be carried out in Canada by a company carrying on a business in Canada; ► Taxpayers can receive both federal and provincial ITC’s ► SR&ED claim must be filed within 18 months of the year- end in which the expenditures were incurred

4. SR&ED Tax IncentivesPage 4 Technical Criteria There are 3 technical criteria to that need to satisfied in order for activities to be considered eligible SR&ED. ► Uncertainty - Technological or Scientific ► Advancement - Technological or Scientific, and ► Content - Scientific and Technical. SR&ED work was done by qualified personnel and results were recorded and available for review.

5. SR&ED Tax IncentivesPage 5 Financial Criteria ► Eligible expenditures include: ► Labour costs ► Contractor costs ► Materials costs ► Overhead costs ► Lease/rental costs ► Third party payments ► Capital equipment costs

6. SR&ED Tax IncentivesPage 6 Investment Tax Credits ► 20% Federal ITC ► Enhanced 35% refundable credit for CCPCs (with limits); ► Provincial Credits – Additional 10% ITC in British Columbia ► ITC’s can be carried back 3 years or forward 20 years

7. SR&ED Tax IncentivesPage 7 Enhanced ITCs for CCPCs ► Refundable ITC of 35% for amounts up to the expenditure limit; ► A taxpayer’s expenditure limit is impacted by the taxpayer’s taxable income and taxable capital in the prior year; ► Need to consider associated group; ► Cont./

8. SR&ED Tax IncentivesPage 8 Enhanced ITCs for CCPCs Continued The annual limits are: ► Expenditure Limit - $3 million for taxation years ending after February 25, 2008 ► Taxable Income (prior year’s) – Eliminated at $800,000, phased out between $500,000 and $800,000, effective January 1, 2009 (previously $400,000 and $700,000) ► Taxable Capital (prior year’s) – Eliminated at $50m.

9. SR&ED Tax IncentivesPage 9 Recent Developments ► New T661 & guide issued in November 2008; ► No change to eligibility requirements; ► Key Changes: ► Technical questions to be answered within T661 for all projects, word limits apply; ► Technical descriptions required for ALL projects (previously the top 20 only); ► Document checklist for each project; ► Mandatory for taxation years ending after December 31, 2008.

10. SR&ED Tax IncentivesPage 10 Questions?