Budget 2026 SR&ED Changes: What Adding Certification Testing and IP Costs Would Mean

Budget 2026 proposes to widen what SR&ED pays for. The Budget 2026 SR&ED changes would bring certain commercialisation costs into the program. Two things would be added: tests, technological validations and studies needed to obtain the initial regulatory approval or certification for a product or process, and the cost of registering and maintaining IP protection for IP that comes out of an eligible SR&ED project.

It is a proposal, not law. As tabled on November 5, 2026, it would apply to taxation years that begin on or after Budget Day. This guide sets out what the budget text says, what it leaves open (including which credit rate would apply), and the records worth keeping now. For how the program works today, see our SR&ED program page.

What Budget 2026 proposes

Budget 2026, tabled on November 5, 2026, proposes to expand the activities and expenditures eligible under the SR&ED program. Start with the most important point: this is a proposal. It is not law until legislation is introduced, passed by Parliament and receives Royal Assent, and the details can change along the way. No one should be filing claims on it yet.

Under the current program, qualifying SR&ED expenditures are fully deductible in the year they are incurred and are eligible for an investment tax credit (ITC): an enhanced 35% rate for certain small and medium-sized corporations, and a 15% general rate otherwise. Work beyond the experimental development stage is generally excluded. That last rule is the one this budget targets. Once a product works, the testing needed to get it approved for sale has often sat outside the program.

The budget describes the change as bringing "certain commercialisation expenses" into SR&ED: the costs of bringing a new product or process to market, including regulatory approvals or certifications, and securing and maintaining IP protection. The government estimates the measure at $930 million over five years ($25 million in 2026-27, $200 million in 2027-28, $245 million in 2028-29, $225 million in 2029-30 and $235 million in 2030-31), and $235 million per year ongoing.

This follows changes announced last year, when the government expanded access to the enhanced credit, restored support for capital expenditures and raised the annual expenditure limit for the enhanced credit to $6 million.

Regulatory and certification testing: what would count

The proposal adds "tests, technological validations, and studies conducted to meet regulatory requirements" where they are carried out for "obtaining the initial approval or certification necessary to commercialize a product or process."

The direct-relation test

The testing must "directly relate to a project that is eligible under the SR&ED program's existing rules." That is the gate. The underlying project still has to meet CRA's 2021 Guidelines on the eligibility of work for SR&ED tax incentives: the "Why" (work undertaken to achieve a scientific or technological advancement) and the "How" (a systematic investigation or search). Regulatory testing does not create an eligible project on its own. As proposed, it attaches to a project that already qualifies.

Initial approval only

The wording is initial approval or certification. Renewals, recertifications and ongoing compliance testing are not mentioned. We would not assume they are covered unless the legislation or CRA guidance says so.

What you could claim

The claimable expenditure types are the same as existing SR&ED: wages and salaries, materials, contracting costs, overhead costs, and machinery and equipment.

Who this could matter to

Any company whose product cannot be sold until a regulator or certification body signs off. Sectors where that is common include:

• Medical devices
• Food, natural health and other health products
• Aerospace and automotive components
• Electrical equipment that needs safety certification

Illustrative example (hypothetical, not a client): a company develops a new sensor housing as part of an eligible SR&ED project, and the product needs a safety certification before it can be sold. Under the proposal, the certification testing could be a candidate if it directly relates to that project and is for the initial certification. The budget does not say which credit rate would apply.

What likely stays out

• Testing not tied to an eligible SR&ED project, for example certifying a product built entirely with established methods
• Quality control and routine testing, which the existing SR&ED definition already excludes; nothing in the budget says that changes
• Renewals and recertifications: the budget is silent, so do not assume they are in
• Testing done after approval to keep a product on the market

IP registration and maintenance: what would count

The second addition covers the costs of registering and maintaining IP protection for IP developed in the course of an eligible SR&ED project. The same logic applies: the IP has to come out of a project that qualifies under the existing rules.

Eligible types of IP

• Patents
• Certificates of supplementary protection
• Plant breeders' rights
• Copyrighted software

Protection can be under Canadian legislation or equivalent legislation in another jurisdiction. Trademarks and industrial designs are not on the list in the budget.

Which costs

Costs reasonably incurred to obtain and maintain protection, including preparing and filing an application and periodic maintenance costs.

Foreign office fees versus Canadian work

Administrative fees payable to a foreign IP office are eligible. Supporting activities, such as preparing an application, are eligible only if conducted in Canada. As we read the proposal, if a foreign firm drafts your foreign application, the foreign office fee could qualify but the drafting work would not. Where the work is done matters.

Exclusions

• Enforcement, such as litigation over alleged infringement
• Costs not directly connected to securing and maintaining IP rights

Recapture if you dispose of the IP

If the taxpayer disposes of the IP, recapture rules apply to the related SR&ED deduction and ITC. Anyone planning to sell or transfer patents or software, including as part of selling the business, should factor this in. The budget does not set out the mechanics in detail.

What the budget does not say yet

Several questions that drive the actual value of these changes are open. The budget is silent on them, and we are not going to guess.

• Rate: the budget does not say whether the new costs would earn the 35% enhanced rate or the 15% general rate.
• Expenditure limit: it does not say whether the new costs would count toward the $6 million expenditure limit for the enhanced credit.
• How CRA will apply it: CRA "will work to provide sector-specific guidance to clarify SR&ED eligibility as it pertains to commercialisation expenses." No guidance has been published yet.
• Definitions: there is nothing beyond what is set out above. Terms such as initial approval, technological validations and directly relate are not defined further.
• Legislation: there is no draft legislation yet. The scope, wording and timing could all change before anything is enacted.

Until these answers exist, any estimate of what these costs would be worth in credits is a guess. Be cautious with forecasts that assume a rate or treat the new costs as sitting inside or outside the limit.

What to do now

Good records cost little and are hard to rebuild later. If the measure is enacted as proposed, the companies with clean project-level records will be in the best position to claim.

• Track and tag regulatory testing and IP costs by project, starting now. Separate them from general overhead in your accounting.
• Tie each cost to a specific SR&ED project in your records. A cost you cannot link to an eligible project is unlikely to qualify under the proposal.
• Keep work papers that show the link between the testing or patent and the project's technological uncertainty and systematic investigation. Test plans, lab notes and invention disclosures written at the time carry more weight than a summary written at year end.
• Check your taxation year start date. The measure would apply to taxation years beginning on or after November 5, 2026. Arithmetic from that rule: a corporation with a December 31 year end would first benefit in its taxation year starting January 1, 2027. On the same arithmetic, a corporation whose taxation year began October 1, 2026 would not reach a qualifying year until October 1, 2027 (illustrative dates).
• Talk to your patent agent about where application preparation is done. Under the proposal, preparation work counts only if it is conducted in Canada, while foreign office fees are eligible.
• Do not file on the proposal. Wait until the measure is enacted.
• Review your position when draft legislation and CRA's sector-specific guidance are released, since either could change scope, rate treatment or documentation expectations.

Common mistakes to avoid

• Treating the proposal as law. Claiming these costs before the measure is enacted invites a reassessment.
• Assuming a regulated industry means eligibility. Without an eligible SR&ED project behind it, certification testing does not qualify under the proposal.
• Building forecasts on the 35% rate, or assuming the new costs sit inside or outside the $6 million limit. The budget does not say.
• Including renewals, recertifications or IP enforcement and litigation costs. Enforcement is expressly excluded, and renewals are not mentioned.
• Lumping foreign attorney preparation work in with foreign office fees. As proposed, only the office fees qualify when the preparation is done outside Canada.
• Reconstructing the link to the SR&ED project at year end. Document it as the testing and filings happen.

Frequently asked questions

When would the Budget 2026 SR&ED changes start?

As proposed, they would apply to taxation years that begin on or after Budget Day, November 5, 2026. Arithmetic from that rule: a corporation with a December 31 year end would first benefit in its taxation year starting January 1, 2027. This depends on the measure being enacted as proposed.

Is this law yet?

No. It is a budget proposal. It needs legislation to be introduced, passed and given Royal Assent, and the details may change. Do not file claims based on it until it is enacted.

Would patent costs count?

Under the proposal, costs reasonably incurred to obtain and maintain a patent, including preparing and filing the application and periodic maintenance, would be eligible if the invention was developed in the course of an eligible SR&ED project. Enforcement costs such as infringement litigation are excluded.

Would certification testing count?

Tests, technological validations and studies to meet regulatory requirements would be eligible under the proposal if they are for the initial approval or certification needed to commercialize a product or process, and if they directly relate to a project that is eligible under the existing SR&ED rules. Renewals are not mentioned.

Which credit rate would apply to the new costs?

The budget does not say whether they would earn the 35% enhanced rate or the 15% general rate, or whether they would count toward the $6 million expenditure limit. Draft legislation or CRA guidance may answer this. Until then, it is unknown.

Would foreign patent fees count?

Under the proposal, administrative fees payable to a foreign IP office would be eligible. Supporting work such as preparing the application would be eligible only if it is conducted in Canada.