Posts Tagged ‘Quebec tax credit’

Quebec Budget 2018 Highlights

The 2018 Quebec Budget, tabled on March 27, 2018, reports accelerated gross domestic product (GDP) growth from 1.4% in 2016 to 3% in 2017 and proposes several measures and investments that will impact businesses in Quebec including:

Innovation

  • Increasing the additional capital cost allowance rate from 35% to 60% for investments in computer equipment and manufacturing and processing equipment made after March 27, 2018.
  • Expanding tax holiday eligibility for large investment projects to include the development of digital platforms (“a computing environment that enables content management or use of a service that serves as an intermediary in accessing information, services, or property supplied or edited by the corporation or partnership, or by a third party, and which is not a tax-exempt platform”).
  • Broadening the tax credit for film and television production to include digital platforms.
  • Providing $348.7M for the implementation of a new biofood policy, including:
    • $180M to spur investment in biofood production and processing;
    • $62.8M to stimulate the development of the biofood industry; and
    • $29.7M to enhance efforts in innovation and training.
  • Committing $171.5M over 4 years to increase the appropriation and marketing of innovations including:
    • $120M to promote mobilizing projects in Québec;
    • $22.5M Support the restructuring the business model of the Centre de recherche industrielle du Québec (CRIQ);
    • $3.5M increase in financial support for niches of excellence in the regions;
    • $5M to support creation of the World Artificial Intelligence Organization in Montréal; and
    • $20.5M Support the Université de Sherbrooke’s project of an integrated innovation chain for digital prosperity.

Business Growth 

  • Reducing payroll taxes through:
    • A $1.2B reduction in the Health Services Fund (HSF) contribution for all small to medium-sized businesses (SMBs); and
    • A gradual reduction of the tax rate of SMBs in the service and construction sectors from 8% to 4%. The tax rate of SMBs in the manufacturing sector was reduced from 8% to 4% effective April 1, 2015, and was likewise reduced for SMBs in the primary sector effective January 1, 2017.
  • Stimulating growth of SMBs via:
    • $10M over 5 years for the creation of Réseau200, which will bring together entrepreneurs and their peers from the business world;
    • $35.4M for initiatives to support accelerators and incubators for Québec businesses;
    • An additional $2.4M over 3 years to support the creation of centres of excellence in the information and communication technologies (ICT) and digital technologies sectors; and
    • $3.4M to support SMBs in their growth projects.
  • Providing additional sums for specialized investment funds in collaboration with other investors, namely:
    • $61.5M for Teralys Capital, a private fund manager investing in innovative businesses;
    • $2M for the Accélérateur de création d’entreprises technologiques (ACET) Capital II fund to help technological entrepreneurs find adequate financing for starting their business; and
    • Support for development of social economy enterprises including continued support for the Chantier de l’économie sociale Trust and support for activities of tax-advantaged funds.
  • Enhancing electricity discounts for major projects, including:
    • An adjustment in the maximum duration of the discount for large projects, which is extended from four to six years; and
    • A 4 year deferral of the discount application period end date, which is moved back to December 31, 2028.

Workforce Development

  • Contributing $810M for a National Workforce Strategy to meet the challenges of the labour market, including:
    • Commitments to improve the flexibility of vocational and technical studies programs; and
    • Implementation of a new process for receiving and processing immigration applications under the Regular Skilled Worker Program which, once implemented, will also provide business and employment integration support (more details will be released in April 2018).
  • Creating a new refundable tax credit for training workers, via enrollment in a training program that leads to a diploma, employed in SMBs to support 30% of eligible training expenditures incurred between March 27, 2018 and January 1, 2023, with up to $5,460 provided per year for each eligible employee (30% rate is linearly reduced where total payroll exceeds $5M, reaching 0% at a total payroll of $7M).
  • Improving refundable tax credits for on-the-job training periods (internships) through:
    • Increasing maximum hourly rates and weekly caps;
    • Increasing base and increased tax credit rates for businesses that operate in remote resource regions, to encourage training young people; and
    • Increasing base and increased tax credit rates for Aboriginal people, to encourage Québec businesses to facilitate their employment integration.

Revisions to Quebec SR&ED Tax Credit Program

During his December 2nd economic update, Quebec Finance Minister Carlos Leitao announced two major revisions to the Quebec SR&ED tax credit program: (1) Introduction of a minimum eligibility threshold, and (2) Standardization of enhanced tax credit rates.

Introduction of Minimum Eligibility Threshold

Leitao introduced amendments to the legislation to exclude, from tax assistance in the form of R&D tax credits, the first dollars spent annually by a taxpayer below an exclusion threshold.  Minimum expenditure thresholds of $50,000 (for companies with less than $50 million in assets) and $225,000 (for companies with assets totalling over $75 million) will be introduced.  The threshold will increase linearly from $50,000 to $225,000 for companies with assets between $50 million and $75 million.

Standardization of Enhanced Tax Credit Rates

Quebec’s enhanced SR&ED tax credit rates for research contracts, private partnership research, and fees paid to a research consortium will be standardized (to be set at same rate as R&D wages).  The rate of the refundable tax credit for R&D wages is 14%, but it can vary from 14% to 30% in the case of a Canadian-controlled corporation.

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A Summary of Digital Tax Credits in Canada

Many provinces are jumping on board with new digital media tax incentives!  Claiming for digital tax credits in conjunction with federal SRED will allow you to maximize your tax credits.  As often is the case, the provinces all allow for digital tax credits to be claimed in conjunction with federal SR&ED, as long as the same expenses are not double-claimed.

To follow are the most recent updates (by province) in the digital media sector.

Quebec Tax Credit for Production of Multimedia Titles

Quebec currently has the most generous incentives for digital media.  To follow are the current offerings by the Quebec government:

– 37.5% for titles that are produced without having been ordered, are intended to be commercialized and are available in French.

– 30% for titles that are produced without having been ordered, are intended to be commercialized and are not available in French.

– 26.25% for other titles.

Ontario Interactive Digital Media Tax Credit (OIDMTC)

OIDMTC offers up to a 40% refundable tax credit based on eligible Ontario labour expenditures and eligible marketing and distribution expenses incurred after March 26, 2009 by any Canadian corporation.   Non-specified projects are refundable for 40%, versus 35% for specified products.  Eligible marketing and distribution expenses are capped at $100,000 per eligible product. Eligible labour expenditures are 100% of salaries and wages for employees and 100% (50% before March 27, 2009) of remuneration paid to arm’s length persons who are not employees.

BC Interactive Digital Media Tax Credit (BCIDMTC)

The BC Interactive Digital Media Tax Credit (IDMTC) program provides a refundable 17.5% tax credit on eligible salary and wages incurred by eligible corporations to develop interactive digital media products in British Columbia after August 31, 2010 and before September 1, 2015.

If the new BCIDMTC legislation mirrors the credits in other provinces as expected, a taxpayer will be allowed to claim either the BCIDMTC or the B.C. SR&ED tax credit on the same qualifying expenditure, but not both.

Nova Scotia Digital Media Tax Credit

Since January 1, 2008, the digital media tax credit is 50% of eligible salaries, up to 25% of total production costs. In addition, a corporation is eligible for a bonus for producing its products outside the Halifax Regional Municipality area. The bonus is 10% of eligible salaries, up to 5% of total production costs.

Saskatchewan Film Employment Tax Credit

Saskatchewan, through its film employment tax credit program, offers a refundable tax credit equal to 45% of the labour expenditures associated with the production of eligible films, which include multimedia productions. For the purpose of this tax credit, eligible salaries cannot exceed 50% of the total production cost.

Manitoba Interactive Digital Media Tax Credit

This tax credit provides a refundable corporate income tax credit equal to 40% of Manitoba labour costs on eligible projects up to $500,000.

Prince Edward Island’s Video Game Labour Rebate Program

This program provides a 30% rebate on direct payroll costs, payable on a quarterly basis.

Further Information

To find out more about how your company could benefit from digital tax credits, contact Northbridge Consultants.

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