Archive for the ‘tax incentives’ Category

Is a Canadian Patent Box System on the Horizon?

With the process of implementing a ‘patent box’ system ongoing in Quebec, much attention has been given recently to such a system across Canada to address our innovation gap—despite possessing one of the highest rates for R&D tax credits, Canada is lagging behind other leading developed countries when it comes to introducing innovation.

A patent box system is intended to foster the commercialization of intellectual property by reducing the percentage of tax applied to profits resulting from patented innovations. In contrast to SR&ED tax credits, which target the front end of the innovation lifecycle, a patent box regime targets commercialization, the last stage of the lifecycle. Therefore a patent box has the potential to mesh well with the SR&ED program to promote the entire R&D process.

The federal implementation of a patent box, however, would be neither straightforward nor cheap. The development of a robust framework would be required to determine the validity of claims and criteria for eligibility.

Many patent box systems have been introduced in developed countries within the last decade, especially in Europe. The UK program, for example, began in 2013 and reduces corporate tax on profit broadly related to the invention, from 22% to 10%. The Netherlands has had an innovation box system since 2007, which now encompasses a similarly broad range of IP, with a tax rate reduced from 25% to 5%.

Beginning in 2017, Quebec’s “innovative companies deduction” will allow revenue from innovation developed in the province to be taxed at 4% rather than 11.8%. The limitations to eligibility are an effort to keep the benefits of the tax reductions to companies based in Quebec. Other provinces, such as Saskatchewan, could be following suit soon.

While it is currently unknown when, or if, a Canada-wide patent box system is forthcoming, one thing that remains certain is that the debate on the need, benefit, and cost of the program will continue.  NorthBridge Consultants is dedicated to bringing you the most recent news and updates on various federal and provincial programs and will continue to provide updates on the topic of patent boxes as they become available.

CRA Begins Launching SR&ED Pre-Claim Review Pilot

In August 2016, the Canada Revenue Agency (CRA) began to launch the Pre-Claim Review pilot program in order to review and determine whether R&D projects that are in progress qualify for the Scientific Research and Experimental Development (SR&ED) tax credit program.

This follows the cancellation of the similar Pre-Claim Project Review service at the end of June 2016, which had provided preliminary verbal opinions regarding the SR&ED eligibility of the proposed or initiated projects.

The new free review program aims to provide certainty that eligible R&D projects will be accepted as filed while they are still in progress, when it is easier to defend the projects and before the formal claim is prepared at the end of the fiscal year. After acceptance into the pilot program, the CRA would conduct a review to evaluate the SR&ED eligibility of the scientific or technological knowledge base as well as the work being performed.

A limited number of participants will be selected as the pilot program is implemented in August, October, or November, depending on the province or territory—see the table below for more details. There are a few criteria to be met, such as having previously filed for SR&ED while meeting the basic requirements for claiming SR&ED tax incentives.

The launch of the new review service also follows the recent launch of the Pre-Claim Consultation service, which assists potential claimants in determining whether their work is eligible for SR&ED tax credits and what supporting documents they should keep before they submit a claim. These two programs are intended to increase the predictability and consistency of the SR&ED program by the CRA.

Companies that are interested in using these services can submit a completed Pre-Claim Consultation Request Form or Pre-Claim Review Request Form, or get in touch with their local SR&ED contact for more information.

Pre Claim Review Pilot Program Implementation Schedule

British Columbia August 2016
Alberta August 2016
Saskatchewan August 2016
Manitoba August 2016
Yukon August 2016
Northwest Territories August 2016
Ontario October 2016
Nunavut October 2016
Quebec November 2016
New Brunswick November 2016
Nova Scotia November 2016
Prince Edward Island November 2016
Newfoundland and Labrador November 2016

Tags: , ,

Revisions to Quebec SR&ED Tax Credit Program

During his December 2nd economic update, Quebec Finance Minister Carlos Leitao announced two major revisions to the Quebec SR&ED tax credit program: (1) Introduction of a minimum eligibility threshold, and (2) Standardization of enhanced tax credit rates.

Introduction of Minimum Eligibility Threshold

Leitao introduced amendments to the legislation to exclude, from tax assistance in the form of R&D tax credits, the first dollars spent annually by a taxpayer below an exclusion threshold.  Minimum expenditure thresholds of $50,000 (for companies with less than $50 million in assets) and $225,000 (for companies with assets totalling over $75 million) will be introduced.  The threshold will increase linearly from $50,000 to $225,000 for companies with assets between $50 million and $75 million.

Standardization of Enhanced Tax Credit Rates

Quebec’s enhanced SR&ED tax credit rates for research contracts, private partnership research, and fees paid to a research consortium will be standardized (to be set at same rate as R&D wages).  The rate of the refundable tax credit for R&D wages is 14%, but it can vary from 14% to 30% in the case of a Canadian-controlled corporation.

Tags:

New SR&ED Videos

Canada Revenue Agency (CRA) has released a series of new educational videos about the SR&ED program.  The videos cover topics including: who can claim SR&ED tax incentives, what work qualifies for SR&ED, how to calculate SR&ED expenditures and investment tax credits, and the SR&ED application process.

The Canadian Scientific Research and Experimental Development (SR&ED)  tax incentive program provides both refundable and non-refudnable tax credits to corporations, partnerships or individuals who conduct scientific research or experimental development in Canada.  Please view NorthBridge’s supplementary video to find out more about the SR&ED program.

Tags: ,

Northbridge in the Media

Check out our special report on changes to the SR&ED program in 2014 (published in Canadian Manufacturing) here.

Tags: , , , ,