What is the CRA’s 65% administrative position?
When the qualifying corporation engages a third party service provider with whom it deals at arm’s length (that is, with whom it is not related), the amount of salary or wages paid to the employee may not be available. Under such circumstances, the CRA will accept, as an administrative practice, 65% of the labour portion of an invoice amount as a reasonable estimate of the salary or wages paid to the employees that is directly attributable to the development of the product. The remaining 35% represents overhead and the service provider’s profit.
To read more about the CRA’s 65% administrative position, please see CRA Publication RC4164 (page 15), www.canada.ca/en/revenue-agency/services/forms-publications/publications/rc4164.html.