Prescribed proxy amount (PPA) is a notional amount on which SR&ED ITC can be earned with respect to SR&ED overheads (and other expenditures). It is calculated as a percentage of a salary base. The PPA is only applicable when the claimant elects to use the proxy method.
The PPA is used in lieu of actual SR&ED overhead expenditures when calculating qualified SR&ED expenditures to earn SR&ED ITC. The PPA is not included in the pool of deductible SR&ED expenditures.
With the proxy method, actual SR&ED overhead expenditures can be deducted from business income as ordinary business expenses.
PPA = 65% of the salary base (prior 2013).
PPA = 50% of the salary base (starting from 2013)