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SR&ED for Video Game Development


​The video game development industry has come a long way since Super Mario Bros. on the first 8-bit Nintendo console. As with the music industry, where artists can record, produce, master and release their works to the public independently - thanks to the advent of Digital Audio Workstations (DAW) – computer programmers can now design, develop, and port their own games directly to the main stream via PC, Microsoft XBOX, Sony Playstation, Nintendo Wii, or Apple iPhone. Technology is making us more independent. This allows people to spend more time exploring ideas that, just a decade ago, could only have been pursued by large corporations.

Behind this acceleration in technology is the open source phenomenon.

“Open source is an approach to the design, development, and distribution of software, offering practical accessibility to a software product’s source code.” - Wikipedia

One of these open source applications, OG​RE (Object-Oriented Graphics Rendering Engine), is a scene-oriented 3D rendering engine written in C++ ( a programming language). It was designed to make it intuitive for developers to produce applications utilizing hardware-accelerated 3D graphics. 

Unity 3D is another integrated authoring tool for creating 3D video games and other interactive content such as architectural visualizations or real-time 3D animations. Unity is similar to other modern game development suites in the sense that an integrated graphical environment is the primary way of authoring the game (think drag and drop). The cost of an indie license is a bargain at $200 USD whereas a pro license rings in at $1500 USD. The price is right for independent developers or startup game studios looking to purchase a tool that allows them to create products where the sky truly is the limit. The editor runs on Windows and Mac OS X and can produce games for Windows, Mac, Wii, or iPhone platforms. It can also produce browser games that use the Unity web player plug-in, supported on Mac and Windows.

These tools are being utilized today to develop innovations that can be rewarded by government programs.

Scientific Research and Experimental Development, SR&ED or “shred”, is a federal tax incentive program administered by the Canada Revenue Agency (CRA) that encourages Canadian businesses of all sizes, and in all sectors, to conduct research and development (R&D) in Canada. The SR&ED program gives claimants cash refunds and/or tax credits for their expenditures on eligible work done in Canada.

Recently, there has been a wave of startup video game development companies taking advantage of open source or low cost tools to rapidly develop innovative technologies and high-quality products for commercialization purposes. This is a low-risk / high reward approach to business. These companies are often sprung from technology parks or incubators and rely on funding from government or private investors. Incubators provide support to companies wishing to commercialize their technologies, in the areas of strategic planning, business and marketing plan development, financing advice, and product development. One such incubator in Winnipeg, Fortune Ca​t Game Studios, touts that it is:

“…the first video game business incubator in North America. Our studio houses talented young project teams as they develop video game prototypes that will be marketed, produced and ultimately, made commercially available.”

Another, the Eureka Project is:

“…a high-tech business incubator, located at Smartpark at The University of Manitoba, helps launch technology-based businesses. New ventures seeking the help of incubators are three times more likely to succeed than new companies that do not seek help of an incubator. The Eureka P​roject provides support to companies wishing to commercialize their technologies, in the areas of strategic planning, business and marketing plan development, financing advice, and product development. Clients also benefit from reduced rental rates, turnkey offices, equipment usage, and IT support.”

Moreover, these companies are at the leading edge of technology and innovation. They often take existing open source or 3rd party tools and greatly improve their capabilities through inventions of new algorithms, methods and processes.

The SR&ED technical experts at Meyers Norris Penny (MNP) have helped video game development companies like the ones taking advantage of the benefits of open source tools to realize cash refunds and tax credits for their innovations through the SR&ED program. The expenditures that qualify are related to eligible projects where a technological advancement has been made, for example “a prototype infrastructure for a massive multiplayer online game” or “a real-time sorting algorithm for accurate representation of textures”. The expenditures could consist of, but are not limited to, employee wages, contract payments, and capital costs such as computer hardware and software licenses.

For more information or to contact an MNP SR&ED technical expert, visit the MNP SR&ED service information page.

For more information on CRA’s SR&ED program, visit the information page.