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Quebec Enhances E-Business Tax Credit 

Canadian Tax Adviser

 

July 12, 2013

 

Hugues Lachance
Montreal, Canadian Corporate Tax

 

Anouk Leclair
Montreal, National Tax Centre

 

Quebec's Minister of Finance and Economy, Nicolas Marceau, announced on July 11, 2013 that the refundable tax credit for the development of e-business (TCEB) would be extended and indexed. The Taxation Act will be amended to extend the end of the eligibility period of the TCEB to December 31, 2025 (from December 31, 2015). Furthermore, the Taxation Act will be amended to increase the maximum amount of the TCEB an eligible corporation may claim for a taxation year, in relation to the eligible salary it incurs as of that date regarding an eligible employee to $22,500 (from $20,000) as of January 1, 2016, calculated on an annual basis. This threshold will be indexed on an annual basis starting on January 1, 2016.

For a taxation year of a corporation that includes January 1, 2016, the $22,500 amount will be calculated on a prorated basis, according to the usual rules, based on the number of days of such taxation year that follow December 31, 2015. The tax credit will be extended for a period of ten years from January 1, 2016 until December 31, 2025.

Background
The TCEB, which was introduced in the 2008 Quebec budget, is a refundable tax credit of 30% that is granted to an eligible corporation that pays wages to eligible employees carrying out an eligible activity. Previously, the amount of the tax credit could not exceed $20,000 per employee, per year. The eligibility period was to end December 31, 2015.

To receive the TCEB for a taxation year, a corporation must obtain an eligibility certificate from Investissement Quebec. It must also obtain an annual eligibility certificate for each of its employees regarding whom it wishes to receive the TCEB.

Among other things, to be eligible, the corporation must have an establishment in Québec where it carries on a business relating to information technology. Exempt corporations and Crown corporations are not eligible for the credit. Eligible activities include, among other things, IT consulting services, the development and integration of information systems and their maintenance and evolution in certain circumstances, the design and development of e-commerce solutions, and the development of security and identification services.

More details
The bulletin also clarifies certain aspects of the fiscal policy underlying the TCEB to confirm Investissement Quebec's position on eligible activities of a corporation for the purposes of this tax credit, including that:

 

  • An eligible consulting service has to relate either to the development, integration, maintenance or evolution of information systems or technology infrastructures, or to the design or development of e-commerce solutions or the development of security and identification services
  • Design or development of e-commerce solutions carried out by a corporation may qualify as an eligible activity only if such activity consists of an e-commerce solution allowing a monetary transaction between the person on behalf of whom such design or development was carried out and the customers of such person
  • Activity relating to an information system concerning marketing designed to increase the visibility of a business and promote its goods and services with existing or potential customers does not qualify as an eligible activity. This exclusion does not apply to an activity relating to an information system including a component that partly concerns marketing.

 

These amendments are intended to clarify that an activity's eligibility for the TCEB bears on the nature of an activity that relates to e-business, regardless of how that activity is described.

 

Quebec also announced in the same Information Bulletin, among many other measures:

 

  • Various Quebec harmonization measures to the 2013 Federal budget
  • Confirmation that the QST system will be changed to incorporate almost all the GST/HST measures announced in the federal budget of March 21, 2013
  • A new refund of the fuel tax applicable to gasoline used in commercial vessels
  • A new temporary refundable tax credit for qualifying damage insurance firms
  • Some financial institutions will no longer to subject to the compensation tax.

 

For more information, contact your KPMG adviser.

 

 

 

 

 

Information is current to July 12, 2013. The information contained in this publication is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's National Tax Centre at 416.777.8500

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