Posts Tagged ‘Intellectual Property (IP)’

Budget 2019: Highlights for Businesses

Federal Finance Minister Bill Morneau’s election year budget, tabled on March 19th, 2019, forecasted a deficit of $19.8B for fiscal 2019, with deficits projected to decline gradually to $9.8B by 2023.

No additional measures were proposed to provide business tax reductions, or to address the 2018 Fall Economic Statement announcements regarding an Accelerated Investment Incentive or the immediate write-off of manufacturing/processing and clean energy machinery and equipment in response to the recent U.S. tax reform.  

The initiatives proposed in Budget 2019 are heavily focused on investments in skills and training and offer some limited benefits to Small- and Medium-Sized Enterprises (SMEs).

SR&ED Enhanced Tax Credit Rate Eligibility Amended

The Scientific Research and Experimental Development (SR&ED) Tax Incentive Program provides a  basic 15% , non-refundable credit to all businesses performing SR&ED in Canada. Eligible small and medium-sized companies can qualify for enhanced 35% refundable tax credit rate of qualifying SR&ED expenditures up to $3M per fiscal year.

Eligibility for the 35% rate is determined by a business’ level of taxable capital and income from the prior fiscal year. 

  • The taxable capital threshold is between $10M and $50M.
  • The taxable income threshold begins at $500,000 taxable income in the prior year and reduces current fiscal year eligibility for the enhanced credit on a sliding scale until $800,000 taxable income in the prior year.

Budget 2019 proposed to eliminate the income threshold to qualify for federal enhanced (refundable) SR&ED investment tax credits for taxation years beginning on or after March 19, 2019, for SMEs, in order to increase support for SMEs that are scaling up their R&D efforts or have variable income from year to year. The capital threshold will continue to apply.

The proposed changes will allow SMEs to continue to receive refundable tax credits on up to $3M in expenditures, regardless of their profitability. 

Corporate Rates and Employee Stock Option Deductions (Compared to U.S. Tax Measures)

Despite tax-payer anticipation for Canadian corporate tax rate reductions in accordance with recent U.S. tax reform, there were no proposed changes in Budget 2019 to the corporate income tax rates or to the $500,000 Small-Business Deduction Limit for Canadian-controlled private corporations (CCPCs).

Budget 2019 proposed to impose a $200,000 annual cap on employee stock option grants for employees of large, long-established, mature firms in alignment with the U.S. tax treatment. Employee stock option benefits of startups and rapidly growing Canadian businesses will remain uncapped.

Further details of this measure will be released before the summer of 2019.

Canada’s Innovation and Skills Plan is Ongoing

Canada’s Innovation and Skills Plan was launched in 2017 to help Canadian businesses start up, scale up, and become globally competitive.

  • In February 2018 the Government announced a $950M investment in five regional industry-led innovation superclusters including digital technologies, food production, advanced manufacturing, artificial intelligence in supply chain management, and ocean industries. These superclusters have assumed operation and are expected to create 50,000 jobs and add $50B to the economy over the next 10 years. 
  • The $1.2B Strategic Innovation Fund was launched in July 2017, to spur Canadian innovation by supporting the costs of direct labour, subcontractors, and consultants, as well as overhead, direct materials and equipment, land and building, and other direct costs. As of January 2019, the Fund had secured 31 investment agreements from leading researchers and manufacturers, worth a total of $8.1B, including a federal investment of $795M. Budget 2019 proposes to provide a further $100M over four years, starting in 2019–20, to the Strategic Innovation Fund (SIF).  The SIF will leverage private sector co-investments in order to support the activities of the Clean Resource Innovation Network.
  • Innovative Solutions Canada was launched in December 2017, replacing the Build in Canada Innovation Program (BCIP), to help companies bridge the technology gap between the R&D stage of projects and the pre-commercialization phase through government acquisitions. The program will dedicate over $100M annually by the end of March 2020 to support challenges issued by twenty participating federal departments and agencies to address federal government needs.
  • The first Canadian National Intellectual Property Strategy was proposed in Budget 2018. Budget 2019 announced intent to move forward with a pilot Patent Collective, to help Canadian start-ups and small and medium-sized enterprises pool together vital intellectual property assets.

Workforce Development Investments

Budget 2019 proposed investments in talent acquisition and skills training that impact businesses including: 

  • $35.2M over five years, starting in 2019, with $7.4M per year ongoing to make the Global Talent Stream a permanent program to give Canadian businesses enhanced access to top global talent. The Global Stream Talent pilot project was a part of the Global Skills Strategy that was announced in the 2016 Fall Economic Statement.
  • More than $1.7B over five years, and $586.5M per year ongoing to: (1) implement a Canada Training Benefit which will include a new, refundable Canada Training Credit (CTC) to help cover up to half of eligible tuition and fees associated with training, and (2) to implement a new Employment Insurance Training Support Benefit to provide income support when an individual requires time off work As of 2019, eligible individuals will be able to accumulate $250 annually (up to a maximum of $5,000 over a lifetime) that can be applied towards eligible expenses beginning in 2020.
  • An additional $150.0M over four years, starting in 2020, to Employment and Social Development Canada to create up to 20,000 additional work-integrated learning opportunities annually in partnership with innovative businesses.

Additional Funding Proposed in Budget 2019

  • $100M over three years (on a cash basis), starting in 2019, to Western Economic Diversification Canada to increase its programming in western Canada.
  • New Strategic Science Fund starting in 2022, which will operate under a principles-based framework for allocating federal funding for third-party science and research organizations. The Minister of Science will provide more detail on the Fund over the coming months.
  • Implementation of new Regulatory Roadmaps for reviewing and modernizing regulatory requirements and practices that impede innovation and growth in the following high-growth sectors:
    • Agri-food and aquaculture
    • Health and bio-sciences
    • Transportation/infrastructure

This includes the establishment of a regulatory sandbox for new and innovative medical products such as tissues developed through 3D printing, artificial intelligence, and gene therapies targeted to specific individuals. Further details will be released in the coming weeks.

Historic Reform of Funding Programs: Budget 2018 Highlights

Federal Finance Minister Bill Morneau’s third budget, tabled on February 27th, 2018, forecasted a deficit of $18.1B for fiscal 2018, with deficits projected to decline gradually to $12.3B by 2022.

Budget 2018 confirmed the announcements made in the 2017 Fall Economic Statement to reduce the small business tax rate to 9% by January 2019. There were no proposed changes to the corporate income tax rates or to the $500,000 Small-Business Deduction Limit for Canadian-controlled private corporations (CCPCs); however, Budget 2018 introduced a $50,000 threshold on passive income held in corporations. The small business deduction limit will be reduced by $5 for every $1 of investment income above the $50,000 threshold and will be reduced to zero at $150,000 of investment income, at which point the business owner will lose the Small Business tax rate and will be taxed at the general corporate rate.

Following a review of all innovation programs across 20 federal departments and agencies, Budget 2018 proposed a “historic reform of business innovation programs.” Overall funding will increase but the total number of business innovation programs will be streamlined by up to two thirds. The initiatives proposed in Budget 2018 include:

Research & Innovation

  • $700M over 5 years, starting in 2018, to enable the Industrial Research Assistance Program (IRAP) to support projects up to a new threshold of $100M.
  • The Strategic Innovation Fund (SIF) will move away from supporting smaller projects to allow for more focused support for projects over $10M.
  • The Build in Canada Innovation Program (BCIP) will be consolidated within Innovative Solutions Canada.
  • $85.3M over 5 years, starting in 2018, to support a new Intellectual Property (IP) Strategy aimed at helping entrepreneurs understand and protect their IP and get access to shared IP. Further details will be revealed in the coming months.
  • Five regional high-tech innovation superclusters were announced in February 2018 to receive $950M over 5 years in non-repayable funding.

Business Growth

Small business & Startups

  • $4.6M over 5 years, beginning in 2018, for Canada’s Start-up Visa Program, which provides permanent resident immigration status to innovative global entrepreneurs with business growth potential in Canada. As announced in July 2017, this program will be made permanent in March 31, 2018.
  • $115M over 5 years for the Women Entrepreneurship Strategy through regional development agencies.
  • $1.65B over 3 years for women entrepreneurs through the Business Development Bank of Canada (BDC) and Export Development Canada (EDC).
  • Regional development agencies may take on more responsibilities for accelerator and incubator support such as the Canadian Accelerator and Incubator Program.
  • The Venture Capital Catalyst Initiative was launched this past year to increase the availability of late-stage venture capital to support the growth of innovative Canadian firms.

Export

  • The Canadian Trade Commissioner Service will amalgamate programs administered by Global Affairs Canada including CanExport, Going Global Innovation, Canadian Technology Accelerators, and Canadian International Innovation program.
  • $10M over 5 years, starting in 2018, to renew the Canadian Technology Accelerators Program for helping high growth tech companies grow in key U.S. markets.
  • $10M over 5 years, starting in 2018, to connect women with expanded export services and opportunities through the Business Women in International Trade Program.

Skills Development

  • Additional $448.5M over 5 years, starting in 2018, for the Youth Employment Strategy’s Canada Summer Jobs program to double the number of work placements and modernize the strategy in the following years.
  • $19.9M over 5 years, starting in 2018, to pilot an Apprenticeship Incentive Grant for Women, to provide a $3,000 grant for each of the first two years of training in Red Seal trades.
  • $46M over 5 years, starting in 2018, for a new Pre-apprenticeship program for underrepresented groups.
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