On November 5, 2026, the Government of Canada released its second federal budget, Budget 2026: Masters of our destiny.
The Budget introduces a number of measures aimed at encouraging Canadian businesses to develop, commercialize and scale in Canada. For technology companies, founders and investors, these measures span different stages of the company lifecycle, from early-stage investment and product development to growth, expansion, exit and reinvestment.
Below, we highlight some of the key measures and where they may come into play.
1. Starting and investing
The Canada Growth Incentive is a two-part measure aimed at encouraging investment in small- and medium-sized Canadian businesses. Together, the measures use tax incentives to make investing in Canadian businesses more attractive.
First, the budget proposes a new capital gains exemption of up to $15 million per individual, per qualifying business on gains from qualifying investments. The exemption would apply to shares issued by certain Canadian-controlled private corporations not exceeding $100 million in assets at the time of issuance, provided the other eligibility requirements are met. Qualifying shares would need to be held for at least 36 months to benefit from the capital gain exemption.
The proposed exemption is intended to reward founders and investors for taking on the risk of building and investing in Canadian businesses by allowing them to retain more of the gains where those businesses succeed. Put simply, following the growth and eventual sale of a qualifying business, founders and investors may benefit from the exemption of up to $15 million in capital gains, subject to the applicable eligibility requirements.
Second, the budget proposes to enhance the existing small business rollover by giving investors more time to reinvest proceeds from the sale of eligible small business shares while deferring the related capital gain. The rollover accommodates the use of Simple Agreements for Future Equity (SAFEs) in early-stage investing by providing up to five years for replacement shares to be issued where an investor enters into an eligible agreement for future equity during the applicable reinvestment period.
2. Developing and commercializing
When it comes to developing and commercializing new products and processes, the budget introduces and strengthens several programs aimed at supporting businesses in this phase. While early-investments are key, the budget highlights the importance of working through the hurdles that may arise.
The budget proposes a $930 million expansion over five years of the Scientific Research and Experimental Development (SR&ED) tax incentive program, which currently applies to reducing the cost of research and development in new products or processes.
The expansion would extend the program to certain commercialization expenses, particularly costs associated with obtaining regulatory approvals and certifications and securing and maintaining intellectual property protection. The Canada Revenue Agency is set to release sector-specific guidance on eligible commercialization expenses.
Building on commercialization support, the budget suggests measures aimed at strengthening Canada’s intellectual property ecosystem. Most notably, a proposed change to the Patent Act would require changes in patent ownership to be registered with the Canadian Intellectual Property Office. The government expects increased transparency around patent ownership to reduce due diligence costs and investment risk.
Lastly, the budget provides $298 million over three years to renew the National Research Council of Canada’s Industrial Research Assistance Program (NRC IRAP) fund, which supports Canadian clean technology small- and medium-sized enterprises in undertaking and bringing new technologies and innovative projects.
3. Growing and scaling
The Budget expressly seeks to address financing gaps faced by Canadian companies as they grow. Delivered by the Business Development Bank of Canada (BDC), the Early and Growth Stage Investment Strategy consists of two streams:
- $75 million Pre-seed and Seed Investment Stream; and
- $675 million Later and Growth Stage Investment Stream.
The second stream of this strategy focuses on ensuring that once established, companies have access to larger pools of capital to scale while remaining anchored in Canada. Under the proposed framework, the funding would be deployed indirectly through investment funds focused primarily on Series B and later-stage companies.
The budget also confirms the Productivity Mega Deduction, which provides businesses with an immediate deduction for certain qualifying capital investments. The deduction is intended to encourage companies to invest in their growth. Rather than deducting the cost of a qualifying investment over several years, businesses may deduct the full cost in the year the investment is made, subject to the applicable eligibility requirements.
Looking forward
In the coming year, the Canadian government will release additional guidance and make the legislative changes necessary to implement these measures. As it stands, the Budget proposes measures aimed at supporting the growth of Canada’s technology and innovation industries. It brings with it incentives for founders to pursue their ideas and for investors to support them, while also expanding the Government of Canada’s role in supporting the ecosystem.
