Consultation on Creating a Patent Box Regime

Current Status: Open

Join In

The federal government is seeking views on the suitability of adopting a patent box regime to encourage the creation and retention of intellectual property (IP) stemming from research and development (R&D) conducted in Canada.

The Department of Finance is releasing a consultation paper to gather input on the potential introduction of a patent box regime in Canada. We also invite you to submit any additional comments or feedback relevant to the scope of this consultation.

Key Questions for Consideration

  1. In contrast to its international peers, Canada has a net balance of payments deficit (receipts minus payments) on charges for the use of IP that has grown over the last two decades. In other words, businesses in Canada outlay more to entities in other countries for the use of IP than they receive from international sources for the same purpose. What sort of dynamics might be underlying this trend? What factors have contributed to Canada's negative balance?
  2. Would implementation of a patent box regime improve Canada's competitiveness as a location for developing, commercializing, and retaining ownership of IP? With respect to competitiveness as a location for developing IP, how would support through a patent box regime compare to support provided through the SR&ED program?
  3. How important are tax considerations in decisions regarding where to commercialize IP and where to locate IP? Which factors besides tax rates impact businesses' decisions around where to locate and commercialize IP derived from R&D conducted in Canada? How should the Department of Finance account for these factors in determining how businesses might alter their behaviour in response to implementation of a patent box regime?
  4. What would be a competitive combined federal-provincial/territorial tax rate under a Canadian patent box regime?
  5. The Action 5 Final Report identifies the IP assets that are in-scope of a nexus compliant approach.  Should all these assets be eligible for a potential patent box regime in Canada? Are there differences in business practices with respect to different types of IP assets that should lead the Department of Finance to expect that commercialization and IP location decisions for each asset would respond differently to a patent box regime?
  6. If Canada were to implement a patent box regime, compliance with the nexus approach would require businesses to report detailed information around expenditures incurred in the development of eligible IP, similar to requirements in place under regimes in other jurisdictions that are compliant with the nexus approach. Drawing on experience with nexus-compliant regimes in other jurisdictions, please share any comments on challenges and best practices in this regard.
  7. Are there design features of a patent box regime that the Department of Finance should consider specifically to limit new fiscal costs to the government?

Contact Us

Submissions for this consultation will be open until April 15, 2024.

Email us your comments and feedback at SRED-PB-RSDE-RPB@fin.gc.ca with "Patent Box" as the subject line.

Comments and feedback may also be sent by mail to:

Director General
Business Income Tax Division
Tax Policy Branch
Department of Finance Canada
90 Elgin Street
Ottawa ON K1A 0G5

Who is the focus of this consultation?

Through this consultation, we want to hear from all Canadians and stakeholders, including innovative Canadian businesses conducting R&D in Canada, advocacy groups, research organizations, academics, and tax practitioners.

Privacy

Information received through this comment process is subject to the Access to Information Act and the Privacy Act. Should you indicate that your comments, or any portions thereof, be considered confidential, the Department of Finance will make all reasonable efforts to protect this information.

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Get in touch

Questions about this consultation can be emailed to SRED-PB-RSDE-RPB@fin.gc.ca

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