On April 7th, the Canadian federal government has published its Budget 2022, which outlines commitments to Canada’s technology and innovation industries as well as the future of the SR&ED program.
A patent box—also referred to as intellectual property (IP) regime—taxes business income earned from IP at a rate below the statutory corporate income tax rate, aiming to encourage local research and development. Many patent boxes around the world have undergone substantial reforms due to profit shifting concerns.
R&D tax credits are another form of tax break to incentivize R&D. The main difference is that R&D credits effectively reduce the cost of R&D, while patent boxes reduce the taxes on profits resulting from R&D.
Another development in the 2022 Federal Budget in regard to research and development in Canada is the announced creation of a Canadian Innovation and Investment Agency.
Here is the excerpt from the Budget 2022:
The following example of how this agency will function is also provided: