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Quebec Introduces New Temporary Tax Credits and Enhances Others 

Canadian Tax Adviser

 

October 29, 2013

 

Lucie Trudel
Montreal, Enterprise Tax

 

In a recent Information Bulletin, Quebec announces three new temporary refundable tax credits. Quebec's 35-page Information Bulletin, dated October 7, 2013, announces a credit for individuals investing in Eco-friendly renovation work, a credit for certain corporations that acquire, or add to, buildings used in the course of manufacturing or processing (M&P) activities, and a credit for manufacturing small and medium enterprises (SMEs) that incur expenses relating to an information technology integration contract. The bulletin also announces the enhancement of the tax holiday for large investment projects as well as the improvement of the tax credit for M&P equipment acquired by SMEs.

New Green renovation tax credit
EcoRenov, Quebec's new temporary refundable tax credit for green renovation, will be generally available to individuals who have incurred green renovation expenditures on their residence after October 7, 2013 and before November 1, 2014. The refundable tax credit is 20% of eligible expenditures in excess of $2,500 for recognized work to a maximum credit of $10,000. The maximum credit can be claimed in 2013 and/or 2014.

 

Enhanced tax credit for M&P equipment acquired by SMEs
Quebec's bulletin announces it will raise the tax credit for investments made by manufacturing SMEs by 10%. The basic rules of the investment tax credit will remain unchanged. Amongst other rules, the equipment still has to be:

 

  • In class 29, 43 or 52
  • New
  • Used solely in Quebec mainly in a business for at least 730 days.

 

In very general terms, the enhanced credit is available to an eligible taxpayer where:

 

  • The paid-up capital (PUC) of the SME is under $15 million (the credit rate is reduced linearly between $15 million and $20 million and will reach zero where the PUC of the qualified corporation, for the taxation year, is $20 million or more)
  • The SME is a "qualified manufacturing corporation" (or qualified partnership) for a taxation year (i.e., the proportion of M&P activity for the taxation year exceeds 50%)
  • The SME is under the cumulative cap of $75 million
  • The qualified property is acquired after October 7, 2013 and before January 1, 2018

 

Where these conditions are met, the credit rate will range from 20% to 50%, depending on the region where the qualified property that is acquired is to be used.

 

Quebec's bulletin also announces that it will broaden the definition of "qualified property" to include property included in Class 50 of Schedule B of the Regulation in Quebec's Taxation Act acquired by a qualified corporation or by a qualified partnership after January 31, 2011 and before January 1, 2018 (rather than acquired after January 31, 2011 and before January 28, 2009), where such property is used mainly for the manufacturing or processing of goods intended for sale or lease.

 

The tax credit will be available even if the application for the tax credit is filed more than 12 months after the stated filing deadline, as long as the application is filed by the later of either April 7, 2014 or the last day of the 12-month period following the filing deadline for the taxation year for which the credit is claimed.

 

New temporary tax credit for information technology integration
Quebec's bulletin introduces a new temporary refundable tax credit of up to 25% on expenses (limited to $62,500) relating to an information technology integration contract for manufacturing SMEs. This credit is intended to support businesses seeking to modernize their business processes by integrating high value added software packages. The rate of the tax credit of a qualified corporation, for a taxation year, will be 25% where the PUC of the corporation does not exceed $15 million for that year. This rate will be reduced linearly and will reach zero where the paid-up capital of the qualified corporation, for such year, is $20 million or more.

 

This tax credit will apply to expenses related to a qualified IT integration contract for which Investissement Québec has issued a certificate. To receive this tax credit, a qualified corporation (or qualified partnership) must have paid the expenses relating to a qualified IT integration contract at the time it submits the claim to Revenu Quebec.

 

New temporary tax credit relating to buildings used in the course of M&P
Quebec's bulletin announces a new temporary refundable tax credit for buildings used in the course of M&P activities by a Quebec manufacturing SME. The credit will range from 20% to 50% of qualified expenses, although this rate differs depending on the region where the building is located, the PUC of the SME and whether the SME benefits from a job creation credit.

 

To be eligible for the credit, a qualified corporation or qualified partnership whose activities are mainly M&P activities must incur expenditures related to the building or a building addition after October 7, 2013 and before January 1, 2018. These expenditures will be subject to a cumulative cap of $150,000.

 

In addition, the expenditures may only be eligible for tax credit if the corporation or partnership acquired qualified property, for the purposes of the tax credit for investments relating to M&P equipment ("tax credit for investments"), for a minimum of $25,000.

 

The eligible expenditures related to a qualified building must have been paid at the time the
refundable tax credit is claimed. However, a special tax exists to recapture the tax credit claimed in cases where the building is sold or not used before a 48-month period that begins on the last day of the taxation year or the fiscal period for which the qualified corporation or the qualified partnership first incurred an expenditure related to the building. This special tax will equal the total of the tax credit the qualified corporation received for its eligible expenditures or its share of the eligible expenditures attributed to it by a partnership.

 

Enhanced tax holiday for large investment projects
Quebec's bulletin announces that it will reduce the investment threshold required to be entitled to the tax holiday for large investment projects to $200 million (from $300 million) to support large modernization projects

 

For more information, contact your KPMG adviser.

 

 

 

 

 

 

Information is current to October 29, 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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