Executive summary
Nov 11, 2025
5 min to read
2025 Federal Budget: New Measures to Drive Innovation-Led Growth in Canada
Key points to remember
- R&D and Innovation Incentives Are Expanding : The enhanced SR&ED tax credit, a strengthened Strategic Innovation Fund, and improved commercialization and exports programs together, equip Canadian companies with tools to accelerate research, development, and global competitiveness.
- AI Is a Strategic Priority : Significant investments in sovereign AI infrastructure, public–private collaboration, and data-driven measurement (TechStat) aim to position Canada as a global leader in responsible AI innovation.
- Intellectual Property Protection and Commercialization Are Supported : New and expanded initiatives including, ElevateIP, NRC IP Assist, and the National IP Performance Review, are designed to help businesses protect, monetize, leverage and scale their IP assets while improving access to financing opportunities that support growth.
- Federal Procurement Becomes a Growth Lever : The new Buy Canadian policy and related programs provide SMEs with improved access to federal contracts, creating sustained domestic demand, encouraging local production, and strengthening supply chains.
- Early Engagement Is Key : Companies should proactively engage with legal and advisory teams to structure investments, protect and commercialize IP, leverage funding and procurement opportunities, and anticipate emerging regulatory frameworks in AI, digital governance, and data privacy.
Innovation drives performance. It’s a fact.
Companies that invest in R&D see tangible returns versus those that do not. Innovation is a proven lever for productivity, growth, and long-term competitiveness, and the federal government has clearly taken notice.
Framed as “Canada Strong,” the 2025 Federal Budget represents a pivotal policy shift toward innovation-led growth. In an era defined by fast-changing global trade dynamics and rapid digital transformation, Canada is prioritizing artificial intelligence, innovation, and intellectual property as strategic levers for long-term economic value.
The measures introduced in Budget 2025 aim to bolster Canada’s digital infrastructure and drive the commercialization of homegrown technologies. The following highlights some of the key technology and innovation measures featured in this year’s budget and what they could mean for your business.
Targeted Measures to Accelerate R&D and Increase Global Competitiveness
Acknowledging the vital role of innovation in driving productivity, Budget 2025 introduces a series of measures to strengthen the synergy between research, commercialization, and export growth at a time when private investment is lagging and global competition continues to grow.
Key measures include:
1. Enhanced SR&ED Tax Incentive
The Scientific Research and Experimental Development (SR&ED) program, Canada’s flagship R&D incentive (currently providing $4.2 billion annually), is being expanded and modernized.
What it means:
- Higher taxable capital thresholds
- Restored eligibility for capital expenditures
- Expanded annual expenditure limit for the enhanced 35% tax credit rising to $6 million for taxation years beginning on or after December 16, 2024.
These measures represent an additional $440 million in ongoing government investment, expected to catalyze private-sector R&D activity, generating roughly $1.2 billion in annual economic output; a three-to-one return for the Canadian economy.
Additionally, in response to long-standing industry feedback, the government will streamline the SR&ED application process to reduce administrative burden and improve predictability for businesses.
- The CRA will introduce an optional pre-claim approval process to provide businesses with upfront confirmation of eligible projects cutting processing times to 90 days from the current 180.
- It will also leverage AI tools to identify low-risk claims and reduce unnecessary audits.
- Reviews will be streamlined by eliminating redundant steps and information requests.
2. Strengthened Strategic Innovation Fund (SIF)
Continued investment in high-growth sectors, such as AI, quantum computing, clean technologies, and advanced manufacturing, to accelerate commercialization and scaling of Canadian innovations.
3. Improved Innovation-to-Export Pipeline
Expanded programs to help small and medium-sized enterprises (SMEs) commercialize their technologies and reach international markets.
4. Modernized Innovation Sandboxes
Amendments to the Red Tape Reduction Act to facilitate regulatory experimentation for emerging sectors, helping businesses test and deploy new technologies faster.
Collectively, these initiatives seek to strengthen Canada’s innovation ecosystem by boosting productivity, simplifying processes, and supporting the global growth of R&D-driven Canadian companies.
Investment in Artificial Intelligence
Artificial intelligence is at the core of the federal government’s industrial strategy. Through the 2025 Federal Budget, Canada is committing substantial resources to develop sovereign AI infrastructure, and advance leadership in responsible AI innovation.
Key measures include:
1. Sovereign AI Infrastructure
A proposed investment of $925.6 million over five years (starting in 2025-26) to develop a large-scale sovereign public AI infrastructure. This initiative aims to expand Canada’s AI compute and cloud capacity, giving public and private sector R&D greater access to secure, sovereign compute resources — a critical foundation for homegrown innovation.
2. Strengthened Public–Private Collaboration
The Minister of Artificial Intelligence and Digital Innovation will work with industry to identify new AI infrastructure projects. The Canada Infrastructure Bank will also be empowered to invest in AI infrastructure initiatives, reinforcing collaboration between government and industry.
3. New TechStat Program
A proposed investment of $25 million over six years for Statistics Canada to implement the Artificial Intelligence and Technology Measurement Program (TechStat). This program will analyze the use of AI and how it affects productivity, labour markets, and the broader economy, providing data-driven insights into Canada’s digital transformation.
4. Renewed National AI Strategy (2025)
An updated national plan, to be released by the end of 2025, will focus on commercialization, ethical deployment, and attracting global AI talent.
5. Complementary Quantum and Photonics Investments
A proposed investment of $334.3 million over five years will support quantum technology development through the Defence Industrial Strategy, along with funding for the NRC’s Photonics Fabrication Centre to scale operations and attract private capital.
Overall, these measures signal a step toward a large-scale AI deployment in Canada, anchored in sovereign infrastructure, innovation support, and responsible governance.
Turning Intellectual Property Into a Growth Engine
Budget 2025 reinforces the central role of intellectual property (“IP”) in advancing Canada’s innovation and productivity agenda. Recognizing that IP output, ownership and commercialization are key to global competitiveness, the budget introduces targeted measures to help Canadian SMEs protect, manage and monetize their intangible assets
Key measures include:
1. Expanded ElevateIP and Patent Collective Programs
A proposed investment of $84.4 million over four years (starting in 2026–27) for Innovation, Science and Economic Development Canada to extend ElevateIP, along with $22.5 million over three years to renew the Innovation Asset Collective’s Patent Collective. These initiatives will further provide SMEs with funding and expertise to protect and commercialize their innovations.
2. Extended NRC IP Assist Program
A proposed investment of $75 million over three years (starting in 2026–27) to extend the National Research Council’s IP Assist Program, providing tailored guidance to small and medium-sized businesses on patenting, licensing, and IP management.
3. Comprehensive National IP Performance Review
A comprehensive review to identify new opportunities to partner with IP-intensive companies, attract domestic investment, strengthen IP retention and commercialization in Canada, and support international IP protection for export-oriented businesses.
4. Improved Legal Certainty and IP-Backed Financing
With Budget 2025 the government commits to improving transparency and predictability in the IP system to facilitate IP-backed lending and deter abusive practices, helping businesses use their intangible assets to secure financing and scale.
5. New Venture and Growth Capital Catalyst Initiative
A proposed overall investment of $1 billion over three years (starting in 2026–27) on a cash basis for the Business Development Bank of Canada to launch the new Venture and Growth Capital Catalyst Initiative, a fund-of-funds that will mobilize more private venture capital by incentivising pension funds and other institutional investor participation, particularly in innovation-driven sectors such as life sciences.
6. Upcoming Early-Stage Growth Strategy
A forthcoming $750 million strategy (details in 2026) to address early growth-stage funding gaps for scaling Canadian businesses, ensuring that homegrown IP and innovations are commercialized from within Canada.
Collectively, these measures are designed to strengthen Canada’s IP ecosystem by improving protection, commercialization, and access to financing for innovative, growth-oriented companies.
Strategic Procurement to Strengthen Canadian Businesses
Budget 2025 reinforces the government’s commitment to supporting homegrown businesses through a new “Buy Canadian” Policy. This initiative shifts federal procurement from a “best efforts” approach to a mandatory requirement to prioritize Canadian suppliers and inputs, ensuring that public spending directly benefits Canadian workers and businesses. To make this new policy a reality, Budget 2025 allocates over $185 million across several key programs.
Key measures include:
1. New Buy Canadian Policy Implementation
A proposed investment of $98.2 million over five years, plus $9.8 million ongoing, for Public Services and Procurement Canada to operationalize the policy and ensure Canadian suppliers are prioritized in federal procurement.
2. New Small and Medium Business Procurement Program
A proposed investment of $79.9 million over five years through Innovation, Science and Economic Development Canada to help SMEs access federal procurement opportunities and integrate into public supply chains.
3. Modernized Defence Procurement
A proposed investment of $6.6 billion over five years to reinforce Canada’s defence industrial base and increase reliance on Canadian supply chains for military equipment.
Integrated into Canada’s broader innovation strategy, the “Buy Canadian” Policy shows how strategic procurement can ignite innovation and strengthen the industrial ecosystem. By leveraging federal purchasing power, Canada aims to create sustained domestic demand for Canadian technologies, incentivize local production, and reinforce supply chain resilience.
How Your Business Can Act on Budget 2025
As new programs roll out, businesses should quickly engage with legal and advisory teams to:
- Structure R&D and AI investments for maximum tax efficiency;
- Protect and commercialize IP assets through proactive protection and licensing strategies;
- Leverage new funding and procurement opportunities, while carefully navigating compliance requirements under new federal initiatives; and
- Prepare for emerging regulatory frameworks in digital governance, AI accountability, and data privacy.
For tailored guidance on how to take full advantage of these new measures, contact BCF’s Intellectual Property professionals for strategic advice on protecting and optimizing your technology and intellectual property assets.
Frequently Asked Questions (FAQ)
Frequently Asked Questions (FAQ)
The Buy Canadian Policy is a new federal initiative that makes it mandatory for government procurement to prioritize Canadian suppliers and inputs. By shifting from a “best efforts” approach to a strategic requirement, the policy aims to create sustained domestic demand, support local production, and strengthen supply chains. Budget 2025 allocates over $185 million to implement this policy and related programs, giving businesses better access to federal procurement opportunities.
Canada’s Scientific Research and Experimental Development (SR&ED) program is the country’s flagship R&D tax incentive. Budget 2025 expands and modernizes the program by:
- Increasing taxable capital thresholds,
- Restoring eligibility for capital expenditures, and
- Expanding the enhanced 35% tax credit to $6 million per year.
The changes are designed to encourage private-sector R&D investment, streamline the application process, and provide faster confirmation of eligible projects through the CRA’s optional pre-claim approval process.
To qualify, R&D work must be conducted in Canada and meet two key criteria: it must aim to achieve a scientific or technological advancement, and it must be based on a systematic process of experimentation or analysis. These requirements ensure that the program supports genuine innovation rather than routine product improvements.
The Strategic Innovation Fund (SIF), managed by Innovation, Science and Economic Development Canada (ISED), provides transformative investments to support Canadian businesses and organizations in R&D, commercialization, and growth. It aims to accelerate innovation, attract large-scale investments, and foster collaboration between the private sector, research institutions, and non-profits in key technology sectors.
Budget 2025 introduces and extends several IP-focused programs to support Canadian SMEs:
- ElevateIP and Patent Collective Programs provide funding and expertise for IP protection and commercialization,
- NRC IP Assist Program offers guidance on patenting, licensing, and IP management,
- A National IP Performance Review aims to identify new opportunities for investment, retention, and export-oriented commercialization, and
- Initiatives like the Venture and Growth Capital Catalyst and upcoming Early-Stage Growth Strategy help businesses access financing to scale innovations.
Budget focuses on broad, strategic initiatives such as investing in sovereign AI infrastructure, supporting public–private collaboration, funding AI research and measurement programs, and updating the national AI strategy. These steps lay the groundwork for future effective AI adoption.
Budget 2025 provides multiple pathways for businesses to access R&D funding and federal procurement opportunities. Key initiatives include:
- Enhanced SR&ED tax incentives to support private-sector research and development,
- The Strategic Innovation Fund to accelerate growth in high-potential sectors,
- Programs supporting the commercialization of technologies and expansion into export markets, and
- The Buy Canadian Policy, which gives SMEs improved access to federal contracts.
Engaging with professional advisors early can help businesses identify which programs are most relevant, and how to strategically leverage available funding and procurement opportunities to support growth and innovation.
