Fashion Design Tax Credit

This document was prepared with the information on the ministère du Développement économique, de l'Innovation et de l'Exportation's Web site.

Revenu Quebec (RQ) can grant a company or partnership that holds a Certificate of Eligibility for a fashion design activity (in-house or external) issued by the ministère du Développement économique, de l'Innovation et de l'Exportation (MDEIE), a fashion design tax credit for payroll expenses incurred for one or more fashion designers or pattern maker for fees and/or royalties under a contract with a fashion designer or pattern maker (consultant).

Eligibility Criteria

This tax measure is aimed at:

• Any fashion or textile manufacturer whose gross revenue for the taxation year was at least $150,000 and whose fashion design activities were carried out in-house by a salaried designer who holds a Recognition of Qualification from the (MDEIE).
• Any fashion or textile company or partnership that has a contract with a fashion designer consultant who holds a Recognition of Qualification.

This measure is aimed at Quebec-based companies that take innovation risks.

Eligible Activities

In-house or external fashion design.

Summary

The tax credit can be used by a company that holds a Certificate of Eligibility to reduce its income tax. When the tax credit exceeds the tax payable, the company will, under certain conditions, receive a refund from the RQ. The credit amount is calculated at the end of the taxation year and the tax credit is claimed using the form prescribed by the RQ when the company files its tax return. In some cases, the company can use the tax credit to reduce its tax instalments or capital tax collected under the Taxation Act.

Determination of the tax credit

The tax credit is determined according to the type of Certificate of Eligibility held by the company, i.e., based on whether its fashion design activities are carried out in-house of externally.

• For a company with a Certificate of Eligibility for In-house Fashion Design Work, the payroll expenses for a qualified designer (up to $60,000) attributable to the design period qualify for the tax credit.
• For a company or partnership that holds a Fashion Design Certificate for Outside Work, to 65% of fees and/or royalties incurred under a contract qualify for the tax credit.

Tax credit rate

Pursuant to sections 1029.8.36.10 to 1029.8.36.12 of the Income Tax Act, a company or partnership with assets:

• equal to or less than $50 million, including, for tax purposes, companies associated with the company during the taxation year, the refundable tax credit is 30%;
• equal to or more than $75 million, including, for tax purposes, companies associated with the company during the taxation year, the refundable tax is 15%;
• in excess of $50 million and less than $75 million, the refundable tax credit that previously ranged  is between 15% and 30% (see calculation on RQ form).

For more information, consult the Web site  http://www.mdeie.gouv.qc.ca/page/web/portail/en/ministere/nav/programs.html?&page;=details.jsp&iddoc;=73122

Quebec Contact(s):
Direction des biens de consommation
Ministère du Développement économique, de l'Innovation et de l'Exportation
710 Place d'Youville
Québec, Quebec  G1R 4Y4
Telephone: 418 691-5960
Fax: 418 643-4545
Toll-free (information): 1-866-680-1884