Government launches consultations to increase Canadian research and development and intellectual property retention

February 1, 2024

Sector:

Federal SR&ED Tax Incentive Program Consultations: Modernizing R&D and IP Support in Canada

Today, the Canadian federal government has launched consultations on its Scientific Research and Experimental Development (SR&ED) tax incentive program, aiming to ensure the program continues to drive innovation and strengthens Canada’s position as a global research and development (R&D) leader. This initiative is crucial for supporting Canadian businesses and fostering the retention of intellectual property (IP) within Canada.

What Is the SR&ED Tax Incentive Program?

The SR&ED program is Canada’s largest federal initiative for business-related R&D and has been a cornerstone of Canadian innovation policy since its inception in 1948. Each year, the program provides over $3.9 billion (2021) in tax incentives to more than 22,000 businesses, encouraging both Canadian technology companies and foreign-owned firms to invest in R&D activities within the country.

SR&ED tax credits offer significant financial incentives to Canadian businesses, enabling them to reduce their tax liabilities and reinvest in developing cutting-edge technologies. If you are considering applying for SR&ED or want to maximize your claim, learn more about our SR&ED and Incentives services at Kreston GTA.

Why Are Consultations Happening Now?

The Department of Finance is now seeking feedback from Canadians and stakeholders on how to modernize and improve the SR&ED program, including the possibility of introducing a patent box regime. Patent boxes are tax regimes that allow corporate profits derived from domestic IP commercialization to be taxed at a lower rate, incentivizing companies to both develop and retain IP within Canada.

The government is exploring whether further incentives—such as reduced corporate tax rates on global income derived from Canadian-generated IP—could enhance the program’s effectiveness. These changes aim to make Canada more competitive in retaining valuable intangible assets and in supporting R&D-intensive businesses.

Key Objectives of the Consultation

The federal government’s consultation is focused on:

• Enhancing support for R&D-focused Canadian firms
• Improving SR&ED eligibility criteria and program structure
• Aligning the SR&ED program with other R&D support initiatives
• Exploring more effective methods for delivering assistance via SR&ED

The consultation also considers how the SR&ED program can better complement direct funding programs and other innovation incentives.

The Importance of Evolving SR&ED Support

As a Chartered Accountant with a robust background in finance and technology consulting, I strongly applaud this consultative effort by the Canadian government. Evolving from a rigid, rules-based framework to a more targeted, outcome-driven approach is essential for fostering world-class IP development and protection in Canada. This evolution will help Canadian businesses remain globally competitive and ensure the economic benefits of innovation are realized domestically.

Why Does Intellectual Property Retention Matter?

Retaining intellectual property in Canada ensures that the economic and social benefits of innovation—including job creation, economic growth, and technological advancement—stay within our borders. A modernized SR&ED program, complemented by a competitive patent box regime, will make Canada a more attractive destination for innovators and entrepreneurs worldwide.

How Kreston GTA Can Help

At Kreston GTA LLP, we offer market-leading technical and financial expertise through our integrated team of senior industrial engineering specialists and specialized tax accountants. Our SR&ED and incentives team provides a holistic approach to maximizing investment tax credits and identifying all available funding opportunities for your business.

Whether your organization operates in IT, artificial intelligence, life sciences, robotics, or manufacturing, Kreston GTA delivers tailored support to help you thrive in the fast-evolving Canadian innovation landscape. Through our international network, Kreston Global, we empower clients to succeed wherever they operate.

For comprehensive guidance on maximizing your SR&ED tax credits and integrating them with other government incentive programs, consult our SR&ED and Incentives practice.

About the Author

Dale is a Partner in the SR&ED and Government Incentives practice at Kreston GTA LLP. With an MBA and over 15 years of engineering technology leadership experience in IT, telecom, space, and manufacturing—followed by senior roles at EY, Deloitte, Grant Thornton LLP, Baker Tilly Canada, and RSM Canada LLP—Dale specializes in optimizing government incentives across Canada’s major markets. He now leads practice growth in strategic sectors including AI, life sciences, financial services, robotics, and semiconductors.

Frequently Asked Questions

1. What is the SR&ED tax incentive program?
The SR&ED program is a federal tax incentive initiative that supports Canadian businesses investing in research and development, offering significant tax credits to offset R&D costs.

2. Who can benefit from SR&ED tax credits?
Any Canadian business, including foreign-owned firms conducting eligible R&D activities in Canada, can benefit from SR&ED tax credits.

3. What changes are being considered in the current consultation?
The government is considering modernizing the SR&ED program, possibly introducing a patent box regime to provide further tax incentives for retaining IP in Canada.

4. Why is intellectual property retention important for Canadian R&D?
Retaining IP ensures economic benefits, such as job creation and innovation, remain within Canada, strengthening our global competitiveness.

5. How can Kreston GTA help with SR&ED and other Canadian innovation incentives?
Kreston GTA offers expert guidance on maximizing SR&ED tax credits and leveraging all available government incentives to support innovation and business growth.