Following on from our last article in a four-part series on innovative manufacturing companies, we continue to address this topic by elaborating on some of the existing tax measures available to this industry.
Refundable tax credit for information technology (IT) integration
Thinking of purchasing or leasing CRM, ERP or SCM software for your company? A refundable tax credit is available from the provincial government. This refundable tax credit is equal to 20% of eligible expenses related to an eligible IT integration contract designed to stimulate the integration of IT into the business processes of Quebec SMEs. A company is eligible for this tax credit if it meets the following conditions:
- Operates a business through an establishment in Quebec;
- More than 50% of activities are carried out in an eligible sector:
- Primary sector;
- Manufacturing sector;
- Wholesale;
- Retail trade.
In addition, the company must obtain an eligibility certificate from Investissement Québec for an IT integration contract. However, this eligibility certificate issued by Investissement Québec must be received prior to incurring any expenses in connection with an eligible contract.
The 20% rate mentioned above is reduced on a straight-line basis when the paid-up capital of the corporation and its associated companies exceeds $35 million, but is less than $50 million. The company cannot benefit from this credit if paid-up capital is $50 million or more.
Tax credit for the design of industrially manufactured products (industrial design component)
This 24% tax credit granted by Revenu Québec is designed to help Quebec companies use industrial design to improve the competitiveness of their industrially manufactured products and generate maximum economic spin-offs in Quebec, taking into account international competitive constraints[1]. This credit is granted to a corporation or partnership that has received prior certification from the Ministère de l’Économie, Science et Innovation du Québec for the following expenses:
- Salaries incurred internally for one or more industrial designers employed by the company;
- Fees for external designer (consultant).
The corporation claiming this tax credit must have a permanent establishment in Quebec and gross income of at least $150,000 for the taxation year.
The 24% rate mentioned above is reduced on a straight-line basis when the paid-up capital of the corporation and its associated companies exceeds $50 million, but is less than $75 million. The company cannot benefit from this credit if paid-up capital is $75 million or more.
Refundable tax credit for on-the-job training – Work-Learning Program
Although this tax credit is not exclusively for manufacturing companies, it is refundable at a rate of 24% of eligible salaries, and is granted by Revenu Québec. The purpose of this credit is to increase the productivity of Quebec companies through the transmission of knowledge based on the “compagnonnage” formula. Companionship is a method of training, by the most experienced member of your staff, on an individual and structured basis.
To qualify for this credit, your company must :
- Operate a business and have a permanent establishment in Quebec;
- Register with your local Emploi-Québec office and obtain annually required attestations;
- Guarantee the quality of training, particularly with regard to the equipment used, the work techniques employed and working conditions.
Eligible expenses include the employee’s salary and the portion of the journeyperson’s salary that relates to this training. However, total eligible expenses are limited to $600 per week[2].
Tax credit for creating apprentice jobs
The federal Apprenticeship Job Creation Tax Credit is a non-refundable tax credit equal to 10% of the eligible wages payable to eligible apprentices. The maximum credit is $2,000 per year for each eligible apprentice. However, only apprentices working in a “Red Seal[3] ” trade in Quebec are eligible, and this credit applies only to the first 24 months of the apprentice’s apprenticeship.
Do you think one of these credits could apply to your company? Please do not hesitate to contact us so that we can help you.
[1] https://www.economie.gouv.qc.ca/objectifs/informer/par-secteur-dactivite/design-industriel/page/programmes-9706/?tx_igaffichagepages_pi1%5Bmode%5D=single&tx_igaffichagepages_pi1%5BbackPid%5D=12542&tx_igaffichagepages_pi1%5BcurrentCat%5D=
[2] Subject to section 1029.8.33.6 of the Taxation Act.
[3] To consult the list of Red Seal trades: http: //www.red-seal.ca/trades/tr.1d.2s_l.3st-fra.html
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