The governing Saskatchewan Party has recently proposed a post-election tax incentive (Saskatchewan Commercial Innovation Incentive, or SCII) for Saskatchewan companies that commercialize patented technologies in the province. This proposal is contingent on the re-election of the Saskatchewan Party and is proposed to begin in 2017 (see: http://www.saskparty.com/tax_incentive_innovation).
The Saskatchewan Party has provided a background document that briefly explains the proposal and the background of such incentives, which have been referred to as a “patent box” or “incentive box”. As explained via the background document, by Finn Poschmann, President and CEO of Atlantic Provinces Economic Council:
A “patent box” or “innovation box” draws a line around business income earned from developing and applying pure and applied research and other forms of intellectual property (IP), and taxes that income at a lower rate than the general corporate tax rate. It would reward firms for developing, owning and exploiting IP in their domestic activities. That means it rewards people who put their bright ideas to work”
Saskatchewan may be the first jurisdiction in Canada, and possibly in North America, to provide such a tax incentive. The SCII essentially provides a 6% corporate tax reduction on income earned on new products resulting from qualifying intellectual property commercialized in the province, for a period of 10 or possibly 15 years.
To qualify for the SCII, a company would need to submit a plan that:
- Presents evidence that the product being commercialized is new or substantially transformed;
- Demonstrates a significant economic and fiscal return will accrue to Saskatchewan from the commercialization of the eligible IP; and
- Requires regular reporting with the provincial government confirming the “new growth” economic and fiscal benefits to Saskatchewan.
Further clarification will be required before implementation of the tax incentive, including the types of qualifying IP and the inclusion of patented processes, and the Saskatchewan Party indicates that consultations will take place before introducing the incentive.
The SCII has the potential to strongly benefit existing Saskatchewan companies contemplating the commercialization of patented products in the province. If implemented, the SCII may also serve to attract a wide range of technology development/commercialization companies to set up shop in Saskatchewan.