• Shipbuilding – Transportation
  • Construction or conversion of a vessel
  • Taxi firms
  • Modernization of the taxi fleet

Tax credit for the construction or conversion of a vessel

The rate of the tax credit varies from 37.5% to 26.25% of the qualified construction or conversion expenditures incurred in the year, depending on the order in which the eligible vessel is constructed or converted.

Depending on the type of vessel and the order of its construction or conversion, certain limits apply to the tax credit. The limits vary from 18.75% to 13.125% of the construction or conversion costs incurred by the end of the year. The portion of the credit that is not granted because of these limits may, under certain conditions, be carried forward to a subsequent year.

The credit applies to the construction or conversion of an eligible vessel. The vessel must be a prototype vessel or one of the first three vessels that are part of a production run based on the prototype vessel.

Corporations that may apply for the credit

In order to claim the credit for the construction of a vessel, the corporation must carry on a shipbuilding business in Québec during the year.

Expenses giving entitlement to the credit

Provided they are incurred for activities carried on in Québec, the following are considered qualified construction expenditures:

• all or part of the cost of the plans and specifications relating to the construction of the vessel
• the salaries and wages incurred for the preparation of these plans and specifications and for the construction of the vessel
• a portion of the subcontracting costs relating to the construction of the vessel

Provided they are incurred for activities carried on in Québec, the following are considered qualified conversion expenditures:

• all or part of the cost of the plans and specifications relating to the conversion of the vessel
• the salaries and wages incurred for the preparation of these plans and specifications
• a portion of the subcontracting costs relating to the conversion of the vessel

The vessel must have a gross tonnage of more than 50 tons and must be constructed or converted at a shipyard located in Québec. The construction project must have obtained a certificate from the Ministère du Développement économique, de l'Innovation et de l'Exportation attesting that the vessel will be a prototype vessel or the first, second or third vessel based on a prototype vessel.

If the work is contracted out, a certificate attesting that the contract is an eligible contract must be obtained from the Ministère du Développement économique, de l'Innovation et de l'Exportation.

The rules for eligible contracts vary according to whether there is an arm's-length or non-arm's-length relationship between the corporation and the person or partnership that carries out the work.

How to apply for the credit

To apply for the credit, the corporation must complete form CO-1029.8.36.55, Demande de crédit d'impôt pour la construction de navires, or form CO-1029.8.36.56, Demande de crédit d'impôt pour la transformation de navires, and enclose the form, along with the relevant certificate(s), with its income tax return or file the form no later than 12 months after the filing deadline for the return.