The 2022 Federal Budget (the “Budget”) was tabled by Chrystia Freeland, Deputy Prime Minister and Minister of Finance, in Ottawa on April 7. This was the Liberal government’s second budget during the COVID-19 pandemic.
The budget includes billions of dollars in spending with significant focus on many pressing issues for Canadians, including housing, climate, jobs and growth, and affordability. The over 300-page document includes a plethora of other small-spend initiatives, as legislative measures, including a few intellectual property related matters discussed below.
Review of Tax Support to R&D and Intellectual Property
In the Budget, the government indicated that it intends to undertake a review of the Scientific Research and Experimental Development (SR&ED) program. The SR&ED program provides tax incentives to encourage Canadian businesses to conduct research and development. This program has been a keystone to Canada’s innovation strategy. The review is intended to ensure that the SR&ED program is effective in encouraging research and development that benefits Canada, and to explore opportunities to modernize and simplify the program. Further, the government will consider if the tax system could play a role in encouraging the growth and retention of intellectual property that emerges from research and development conducted in Canada. Specifically, the government indicated that it will consider adopting a “patent box” regime to meet these objectives.
A patent box regime, also known as the IP box regime, is a special lower corporate tax regime used in some countries, including the United Kingdom and France, to incentivize research and development by taxing patent revenues differently from other commercial revenues. For example, in the United Kingdom, eligible profits are taxed at a lower tax rate of 10%.
No timeline was given for this review.