On Tuesday, March 10, 2020, the Government of Quebec delivered its 2020-2021 Budget. While major investments were announced in several sectors, notably with respect to promoting public transit and electric vehicles, no changes were made to personal and corporate tax rates. In addition to major announcements in the areas of health, education, culture and regional economic development, the Budget introduces several measures to stimulate Quebec business development. Moreover, the government is maintaining its efforts to ensure tax fairness and the integrity of the tax system.
Below are a few of the proposed tax measures for businesses:
New tax credit for investments and innovation – This tax credit replaces the tax credit for investments relating to manufacturing and processing equipment and is refundable in some cases. It applies in respect of expenses incurred after the day of the Budget speech (but before January 1, 2025) for the acquisition of manufacturing and processing equipment, computer equipment and management software. The tax credit rate will vary by region (10%, 15% or 20%).
Deadline extension for submitting an application for the initial qualification certificate for the tax holiday for large investments projects – The deadline for submitting an application for the initial qualification certificate for the tax holiday for large investment projects has been extended by four years, from December 31, 2020, to December 31, 2024. This tax holiday, which lasts a maximum of 15 years, was originally announced in the 2013-2014 Budget.
New incentive deduction for the commercialization of innovations in Quebec – This new deduction is available for taxation years starting after December 31, 2020. It will allow qualified innovative corporations to reduce their effective tax rate from 11.5% to 2% on the qualified portion of their taxable income attributable to the commercialization of a qualified intellectual property asset. This includes software protected by copyright or an invention protected by a patent, a certificate of supplementary protection or a plant-breeder’s rights.
Elimination of the expenditure exclusion threshold for certain income tax credits for scientific research and experimental development (R&D) – With respect to R&D expenditures incurred by a taxpayer for a taxation year starting after March 10, 2020, the Budget proposes eliminating the exclusion threshold for qualified expenditures relating to university research contracts, eligible research contracts entered into with eligible public research centres, precompetitive research projects carried out in private partnerships and fees or dues paid to eligible research consortia.
Strengthening corporate transparency – In its continuing efforts to improve corporate transparency, the government will require businesses to disclose certain personal information (i.e., name, date of birth, address) regarding their beneficial owners to the Registraire des entreprises du Québec. These include natural persons who hold, directly or indirectly, at least 25% of the concerned legal-person’s voting shares or that person’s shares measured by fair market value, as well as natural persons who exercise direct or indirect influence that would, in effect, result in control of the legal person. These measures will be included in a bill to be introduced in the coming months.
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