Patent Activity

Case Study

Fact Pattern

• A Co is a corporation incorporated in Canada with a fixed place of business in British Columbia.
• A Co has developed a life sciences patent which has an eligible patent classification number assigned in accordance with the International Patent Classification, 8th edition, adopted under the Strasbourg Agreement Concerning the International Patent Classification under Item 5, Section C, Class 07.
• A Co licenses its life sciences patent to its foreign affiliates.
• A Co and its foreign affiliates conduct a transfer pricing study to ensure the non-arm’s length license fees are comparable to arm’s length transactions.

Illustration

Analysis

• A Co is eligible to apply for registration under the International Business Activity Act (IBAA) since it will be carrying on an “international business,” was incorporated in Canada and has a permanent establishment in British Columbia.
• A Co will be required to become a member of the IFC BC Society in order to remain registered.
• A Co is carrying on a qualifying business. If the licensing of the life sciences patent is part of the active business of A Co, then it will be a qualifying business. On the other hand, if the licensing of the life sciences patent is considered to be a separate business whose income is principally income from property, it will also be considered to be a qualifying business.
• A Co’s business activity qualifies as international business by means of licensing to non-resident persons a patent, which has been prescribed under the Regulation.
• A Co will be eligible to claim a refund of 75% of its BC corporate income taxes paid up to a maximum of $8 million for each taxation year.

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