Canada: Federal Government Concludes Consultation on Patent Box Regime

On April 15, 2024, the Government of Canada concluded a consultation on introducing a “patent box” regime to promote the creation and retention of intellectual property (IP) resulting from research and development activities within Canada. Additionally, the government announced a related consultation on potential revisions to the Scientific Research and Experimental Development (SR&ED) tax incentive program.

The consultation paper highlights Canada’s comparative disadvantage in attracting and retaining IP for commercialization compared to other G7 nations, a gap that has widened over the past twenty years.  Consequently, the federal government is considering various measures to enhance Canada’s IP performance.

One of these measures is a patent box regime.  This regime involves offering preferential tax treatment for income derived from specific types of IP and discouraging the transfer of IP to lower-tax jurisdictions for further commercialization. Currently, patent box regimes have been implemented in the U.K. and 13 EU member states, including France, Spain, and the Benelux countries.

Although Canada has not yet adopted a federal-level patent box regime, certain provinces have recently introduced their own, such as the Saskatchewan Commercial Innovation Incentive in 2017 and Quebec’s Incentive Deduction for the Commercialization of Innovations in 2020.

TMT Law regularly works with companies, both in Canada and abroad, to help them develop strategies to maximize the benefits of government incentives to support their research and development efforts.   Please do not hesitate to contact us if you require assistance in developing the best possible strategy to meet your company’s objectives.