What happened: Ottawa has proposed some changes to Canada’s Scientific Research and Experimental Development (SR&ED) program, the country’s largest R&D tax credit system. Tax experts and tech firms say the changes could help incentivize companies to invest more in innovation and — crucially — keep their intellectual property in Canada.
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The changes would make R&D cheaper by letting companies write off equipment, giving public firms access to the higher 35% tax credit (currently reserved for private companies), and expanding the total amount that companies can claim.
Why it’s happening: Ottawa wants to make it less risky and expensive for Canadian researchers and companies to stay at home. By cutting capital costs, experts say Canadian firms will have less of a reason to go abroad to commercialize their research.
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As part of the program, the feds are exploring a “patent box” system that offers tax breaks on profits generated by IP developed in Canada.
Why it matters: The changes are being touted as a potential solution to Canada’s productivity woes. One tax expert told BetaKit that the removal of capital expenditures from SR&ED back in 2013 contributed to Canada’s sluggish productivity, which is now among the lowest of any G7 country.—LA