Canada helped invent modern AI. Now, as the federal government opens a critical 30-day consultation to shape the next chapter of the country’s AI leadership, innovative businesses developing AI solutions face an unprecedented convergence of opportunity and urgency.
The stakes couldn’t be higher: Canada’s position as an AI superpower depends on companies like yours staying competitive, scaling rapidly, and continuing to push the boundaries of what’s possible. The government knows this, which is why they’re not just asking for input on AI strategy; they’re backing it up with the most generous R&D funding enhancements we’ve seen in years.
A National Sprint to Define AI Leadership
From October 1-31, 2025, the federal government is inviting founders, researchers, and innovators to help shape Canada’s renewed AI strategy. This isn’t window dressing; it’s a genuine national sprint to address critical questions about how Canada will accelerate safe AI adoption, scale Canadian AI champions, strengthen sovereign infrastructure, and build public trust.
The consultation builds on Canada’s Pan-Canadian AI Strategy (launched in 2017) and the 2024 Canadian Sovereign AI Compute Strategy. But this time, there’s a renewed sense of urgency. Canada faces stiff global competition for AI talent, investment, and leadership. The government’s vision is clear: Canada will be the world’s leader in responsible and secure AI, harnessing our unique advantages to drive economic growth and opportunity for all.
For AI innovators, this is a signal that government support for the sector is intensifying at exactly the right time.
The Perfect Storm: Enhanced Funding Meets AI Innovation
While the consultation shapes long-term strategy, the financial support for AI companies is already transforming. Three major policy shifts are creating unprecedented opportunities for AI innovators to access non-dilutive funding:
Federal SR&ED Enhancements: Your R&D Just Got More Valuable
The December 2024 SR&ED reforms represent the most significant program upgrades in years. For AI companies, the implications are game-changing:
Higher Credit Limits: The enhanced 35% refundable tax credit limit jumped from $3 million to $4.5 million in eligible expenditures. For qualifying Canadian-controlled private corporations, this means up to $1.575 million annually in refundable credits—a potential $525,000 boost to annual cash flow.
Public Company Eligibility: Canadian public corporations will be able to access the same enhanced 35% refundable credits on up to $4.5 million worth of qualifying expenditures. Previously restricted to non-refundable credits, public AI companies can now receive actual cash back from their R&D investments.
Capital Expenditures Return: Perhaps most significant for AI developers: capital expenditures are back. AI development often requires substantial investments in compute infrastructure, specialized hardware, and data processing equipment. These capital investments now qualify for both SR&ED deductions and investment tax credits.
For companies building large language models, computer vision systems, or other compute-intensive AI solutions, the restoration of capital expenditure eligibility could dramatically increase claim values.
Quebec’s CDAEIA: Provincial Support Specifically for AI
Quebec isn’t waiting for federal strategy to mature; they’ve already pivoted their flagship innovation program toward AI. Starting in 2026, the Tax Credit for the Development of E-Business (CDAE) transforms into the CDAEIA, with AI integration as a core qualifying criterion.
The CDAEIA represents a strategic repositioning that goes beyond a simple name change. Activities must be closely related to information system design or software publishing and significantly integrate AI functionalities, such as machine learning, neural networks, automated business processes, and data-driven customer experiences.
For Quebec-based AI companies, this creates a powerful funding combination: Federal SR&ED credits for experimental development plus provincial CDAEIA credits for AI integration and implementation. Smart companies are already developing strategies to maximize both programs simultaneously.
The AI-R&D Multiplier Effect
Recent McKinsey research reveals why government investment in AI innovation is accelerating: AI itself is supercharging R&D productivity across industries. In pharmaceuticals, AI could enhance R&D throughput by more than 100%. In computer gaming, AI could boost output by 150%. Even in conservative sectors like commercial aerospace, AI could increase R&D pace by 25%.
This creates a virtuous cycle: AI innovation makes R&D more productive, which generates more qualifying R&D activities, which unlocks more funding to accelerate AI development further. Companies that understand this dynamic and position themselves strategically will compound their advantages.
What AI Innovators Should Do Right Now
The convergence of government consultation, enhanced funding programs, and accelerating AI capabilities creates three immediate imperatives:
Participate in the National Consultation
The October 31 deadline is approaching fast. If you’re developing AI solutions, the government wants to hear from you. Key areas where founder input matters most:
- Commercialization pathways: What barriers prevent AI research from becoming commercial products?
- Infrastructure needs: What compute, data, and cloud capabilities do you need to compete globally?
- Talent retention: What would keep your AI researchers and developers in Canada?
- Regulatory balance: How can Canada ensure AI safety without stifling innovation?
Submit your input at ised-isde@ised-isde.gc.ca or through the official consultation portal. Your perspective as someone building AI solutions day-to-day carries weight.
Audit Your R&D Activities Through an AI Lens
Many AI companies underestimate the scope of their qualifying R&D activities. With enhanced SR&ED limits and restored capital expenditure eligibility, now is the time for a comprehensive audit:
- Algorithm development: Experimental work to improve model performance, reduce bias, or overcome technical limitations
- Data pipeline innovation: Novel approaches to data collection, cleaning, labeling, or processing
- Infrastructure optimization: Systematic investigation into compute efficiency, distributed training, or resource allocation
- Integration challenges: Technical uncertainty around deploying AI models in production environments
- Capital investments: Hardware, GPUs, specialized equipment for AI development and training
The key is proper documentation. AI development often involves rapid iteration and experimentation, which is precisely the type of systematic investigation that qualifies for SR&ED. But you need contemporary records that capture the technological uncertainty, hypotheses tested, and systematic approaches used.
Develop an Integrated Multi-Program Strategy
The most successful AI companies aren’t choosing between SR&ED and provincial programs, but optimizing across both. Consider:
For Early-Stage AI Startups: Focus on SR&ED for experimental development while your work involves fundamental research and proof-of-concept. The enhanced $4.5 million limit provides substantial support during capital-intensive research phases.
For Growth-Stage AI Companies: Leverage both SR&ED for continued R&D and CDAEIA (if Quebec-based) for AI implementation activities. This combination can provide cash flow for both breakthrough research and productization.
For Scaling AI Enterprises: With restored capital expenditure eligibility, larger companies can now claim credits on significant infrastructure investments while maintaining SR&ED claims for ongoing experimental development.
The strategic question isn’t which program to use. but how to structure your activities to maximize both.
Why AI Companies Need Specialized Expertise
Here’s the uncomfortable truth: The intersection of AI development, evolving tax regulations, and multiple funding programs is exceptionally complex. The companies that succeed are partnering with specialists who understand both the technical nuances of AI qualifying activities and the regulatory landscape.
This is especially critical for AI companies because:
AI Activities Are Often Misunderstood
Government reviewers may not immediately recognize novel AI work as qualifying R&D. Explaining why your approach to transformer architecture optimization involves technological uncertainty requires expertise in both AI development and SR&ED qualification criteria.
Documentation Requirements Are Evolving
As AI development accelerates, documentation practices must keep pace. Contemporary records of experiments, failed approaches, and systematic investigation become crucial during audits, but many AI teams aren’t naturally documenting in ways that satisfy SR&ED requirements.
Multi-Program Optimization Requires Strategic Thinking
Deciding which activities qualify for SR&ED versus CDAEIA, when to claim capital expenditures, and how to structure projects across multiple jurisdictions requires specialized knowledge. Small optimization decisions can mean hundreds of thousands in additional funding.
Audit Defense Needs AI-Specific Expertise
When government reviewers question your claims, you need defenders who can articulate why your AI development involves technological uncertainty, not just routine engineering. This requires deep understanding of both AI development practices and government audit processes.
Boast’s Advantage for AI Innovators
This is where Boast’s unique combination of technology and expertise becomes invaluable. We’re not traditional accountants treating R&D credits as another line item, and we’re not purely automated tools that miss strategic optimization opportunities.
Instead, we’ve built a platform specifically designed for innovative companies pushing technological boundaries, which is exactly what AI development represents:
AI-Ready Documentation: Our platform creates comprehensive audit documentation from day one, tracking the experimental nature of AI development in ways that satisfy government requirements while not disrupting your development workflows.
Multi-Program Optimization: We help you structure activities to maximize both federal SR&ED and provincial programs like CDAEIA, ensuring you capture every dollar of available funding.
Technical Expertise: Our team understands AI development challenges and can articulate technological uncertainty in language that resonates with government reviewers.
Capital Expenditure Strategy: With restored capital eligibility, we help AI companies maximize claims on compute infrastructure, specialized hardware, and equipment investments.
Year-Round Partnership: Unlike project-based consultants who disappear after claim submission, our platform provides continuous value, through policy updates, ongoing optimization, plus audit support whenever needed.
Canada’s AI Future Depends on Companies Like Yours
Every AI company that scales successfully, every breakthrough that happens in Canadian labs, and every AI solution that solves real problems strengthens Canada’s position as an AI superpower.
But that leadership requires companies to have the cash flow to hire top talent, invest in infrastructure, and push through the experimental phases where breakthroughs happen.
The enhanced SR&ED program, provincial AI-focused credits, and broader government support create an environment where Canadian AI companies can compete globally. The question is whether you’re positioned to maximize these opportunities.
Your Next Steps
As the October 31 consultation deadline approaches, three actions matter most:
- Contribute to the national conversation. Share your perspective on what Canada needs to do to support AI innovation. Your voice shapes policy.
- Audit your current R&D funding strategy. With enhanced limits and restored capital eligibility, there’s likely significant value you’re leaving on the table.
- Partner with specialists who understand AI. The complexity of modern AI development combined with evolving funding programs requires expertise in both domains.
Canada helped invent modern AI, but maintaining leadership requires sustained innovation and smart use of available resources. The government is stepping up with enhanced funding and strategic focus. The question is: are you ready to maximize the opportunity?
Ready to explore how enhanced SR&ED credits and AI-focused programs can accelerate your innovation? Let’s ensure you’re positioned to capture every dollar of funding you deserve while contributing to Canada’s AI leadership.
Because the next chapter of Canada’s AI story will be written by companies that moved decisively when the opportunity was clear. Make sure yours is one of them.
