The Cross-Border Biotech Blog

Biotechnology, Health and Business in Canada, the United States and Worldwide

Tag Archives: Section 116

More Highlights in Canada’s 2010 Federal Budget For Biotech, Venture Capital and Innovation Groups

My first take on the most important bits for Canadian biotech companies and investors:

1) Looks like Section 116 will stay dead this time!

2) Better for research funding, with Genome Canada, NSERC, CIHR, SSHRC coming out much better than last year.  Grease?  Meet squeaky wheel.

3) Is this the end of the SIFT/SR&ED dealsLooks that way: Yes. Right now!

“Ensure that income trust conversions into corporations are subject to the same loss utilization rules that currently apply to similar transactions involving only corporations.”

Right now = today…

“[T]hese amendments apply to transactions undertaken after 4:00 p.m. Eastern Standard Time on March 4, 2010, other than transactions that the parties are obligated to complete pursuant to the terms of an agreement in writing between the parties entered into before that time.”

4) The new SMB Innovation Commercialization Program — looks like a made-here-bought-here initiative:

“a two-year pilot initiative through which federal departments and agencies will adopt and demonstrate the use of innovative prototype products and technologies developed by small and medium-sized businesses. Budget 2010 provides $40 million over two years to support up to 20 demonstration projects. To help small and medium-sized businesses take advantage of this initiative, the Government will organize regional trade shows so that companies can showcase their innovative concepts to federal departments. Further details regarding this initiative will be announced later in the spring of 2010.”

5) Some administrative improvements to SR&ED credits:

“In addition, as announced in January 2010, the CRA will begin to report quarterly, through its website, on the time it takes to review an SR&ED claim from start to finish. A new manual for CRA reviewers will become effective on April 1, 2010. This manual will emphasize how the CRA will work closely with claimants so that they may better understand the SR&ED program requirements and process.”

Canada Federal Budget 2010: Goodbye Section 116

As predicted by Mark McQueen among others:

Section 116: Eliminating tax reporting under section 116 of the Income Tax Act for investments such as those by non-resident venture capital funds in a typical Canadian high-technology firm.


“narrowing the definition of taxable Canadian property, thereby eliminating the need for tax reporting under section 116 of the ITA for many investments.”

With a shout-out to the CVCA (kudos)!

“The Canadian Venture Capital Association has indicated, in making representations for changes of this nature, that “…a broader exemption…would make Canada a more attractive destination for equity investments by non-residents and, in particular, venture capital and private equity funds.”

Here’s the stake:

“[T]he definition of taxable Canadian property in the Income Tax Act [will] be amended to exclude shares of corporations, and certain other interests, that do not derive their value principally from real or immovable property situated in Canada… This measure will eliminate section 116 compliance obligations for these types of properties.”

Deloitte has a bulletin out that notes the changes and puts it in the context of what we will now call the “bad old days.”

Highlights of Canada’s 2010 Federal Budget For Biotech, Venture Capital and Innovation

 Here’s the highlight reel.  More details and analysis here.

  1. $45 million over five years to establish a post-doctoral fellowship program.
  2. $222 million in funding over five years for TRIUMF, Canada’s premier national laboratory for nuclear and particle physics research.
  3. Additional $32 million per year for Canada’s research granting councils, plus an additional $8 million per year to the Indirect Costs of Research Program.
  4. Providing Genome Canada with an additional $75 million for genomics research.
  5. Doubling the budget of the College and Community Innovation Program with an additional $15 million per year.
  6. $135 million over two years to the National Research Council Canada’s regional innovation clusters program.
  7. $48 million over two years for research, development and application of medical isotopes.
  8. $497 million over five years to develop the RADARSAT Constellation Mission.
  9. Launching a new Small and Medium-sized Enterprise Innovation Commercialization Program with $40 million over two years.
  10. Renewing and making ongoing $49 million in annual funding for the regional development agencies to support innovation across Canada.
  11. Improving Canada’s system of international taxation to facilitate investment, cut red tape, and streamline the compliance process associated with the taxation of cross-border activity.

Closer look at #9 coming up…  Is #11 the end of 116?  Checking…

The full budget homepage is here:


Get every new post delivered to your Inbox.

Join 128 other followers