This site uses cookies to provide you with a more responsive and personalised service. By using this site you agree to our use of cookies. Please read our cookie notice for more information on the cookies we use and how to delete or block them.

Bookmark Email Print this page

2008-2009 Quebec budget highlights

R&D Tax Update, March 2008 (08-2)

The 2008-2009 budget, presented on March 13, 2008, by Minister of Finance Monique Jérôme-Forget, contains interesting tax measures to improve assistance for scientific research and experimental development (SR&ED) and other important tax developments specifically for the manufacturing sector.

Tax assistance for SR&ED – New improvements are proposed to Quebec’s system of tax assistance for SR&ED.

  • The tax assistance granted to small- and medium-sized enterprises (SMEs) that carry out SR&ED will increase. The tax legislation will be amended to raise the spending limit that applies to the increased rate of 37.5% to $3 million. This change will apply for fiscal periods ending after March 13, 2008, and will be prorated for fiscal periods that include this day.
  • Partnerships with public partners will now be eligible for the refundable tax credit for pre-competitive research previously limited to private partnerships.  Eligibility criteria for the credit will be modified and other technical amendments made. Changes will generally apply regarding eligible SR&ED expenditures incurred after March 13, 2008.
  • The tax assistance currently in place to encourage business-university synergy will be improved by technical amendments to make the tax credit more accessible.

Development of information technology – To consolidate the development of companies in the information technology sector, a temporary refundable tax credit for the development of information technology will be introduced. This tax credit, which an eligible corporation may claim until December 31, 2015, is equal to 30% of eligible salaries incurred as of March 14, 2008. The maximum amount of the tax credit that an eligible corporation may claim regarding an eligible employee, for a taxation year, will be limited to $20,000.

Manufacturing sector – An investment tax credit is introduced for eligible investments incurred from March 14, 2008, to January 1, 2016, with regard to new manufacturing and processing equipment (class 43) by a corporation that carries on a business in Quebec and has an establishment there.

  • The tax credit rate will be 5%, but may rise to 20% if the eligible investment is made in an intermediate zone (Saguenay-Lac-Saint-Jean, Mauricie, and the La Vallée-de-la Gatineau, Pontiac, and Antoine-Labelle RCMs), to 30% if the investment is made in the Bas-Saint-Laurent regions, and up to 40% if this investment is made in a remote zone (the Abitibi-Témiscamingue, Côte-Nord, Nord-du-Québec and Gaspésie-Îles-de-la-Madeleine regions).
  • The tax credit will be fully refundable for corporations whose paid-up capital, calculated on a consolidated basis, does not exceed $250 million. Refundability will decline linearly for paid-up capital between $250 million and $500 million. Any non-refundable portion of the tax credit may be carried forward 20 years, and back three years.
  • Aluminum producing corporations and oil refining corporations will be excluded.

Elimination of the tax on capital for manufacturing corporations – A deduction will be allowed to manufacturing corporations, in calculating their paid-up capital, to enable them to completely eliminate their tax on capital. This deduction will apply for taxation years ending after March 13, 2008.

  • The expression "manufacturing corporation” will designate a corporation at least 20% of whose activities consist of manufacturing and processing.
  • The elimination of the capital tax will be complete for a manufacturing corporation whose proportion of activities attributable to manufacturing and processing, for a given taxation year, is 50% or more; if the proportion is between 50% and 20%, the deduction a manufacturing corporation may claim in calculating its paid-up capital is reduced linearly.

About R&D Tax
Opportunities, issues and developments affecting the federal and provincial scientific research and experimental development tax incentive programs.

View archives