Refundable tax credit for salaries for scientific research and experimental development

This document was prepared with the information on the ministère de Revenu Québec’s Web site.

A person (trust, individual, or corporation) that carries out scientific research or experimental development in Quebec or has it carried out on their behalf may request a refundable tax credit for salaries paid in Quebec.

When a partnership carries out R&D in Quebec or has it carried out on its behalf, its members may request a refundable tax credit for its share of the salaries paid by the partnership.

Eligibility Criteria

TARGET CLIENTELE

Taxpayers who carry out scientific research or experimental development (R&D) in Quebec or have it carried out on their behalf.

Canadian companies that do not have an establishment in Quebec and that have R&D activities carried out by companies located in Quebec.

ELIGIBLE SALARIES

Salaries paid to employees of an establishment located in Quebec as follows:

• All salaries paid to employees who devote at least 90% of their time to R&D activities or R&D support;
• A proportion of the salaries paid to employees who devote less than 90% of their time to R&D activities, based on the time each one devotes to those activities;
• If the taxpayer has concluded a contract with a related subcontractor, the amount it has paid the subcontractor that may reasonably be attributed to salaries paid to employees of an establishment of that person in Quebec or, if it has no employees, the amount that would have been paid for salaries if it had had any;
• If the taxpayer has concluded a contract with an unrelated subcontractor, half of the amount it has paid the subcontractor that may reasonably be attributed to work done by the employees of an establishment of that person in Quebec or, if it has no employees, the amount that would have been paid for salaries if it had had any.

Eligible Activities

When they support pure or applied research or the development of new processes, materials, products, or devices or the improvement of existing ones, the following activities are eligible:

• operational research;
• mathematical analysis;
• computer programming;
• psychological research;
• technical support;
• design;
• data collection;
• sampling.

Summary

RATE OF TAX CREDIT FOR RESEARCH AND DEVELOPMENT CARRIED OUT AND CONTRACTS CONCLUDED AFTER JUNE 12, 2003

Taxpayers other than a corporation may claim a tax credit of 17.5%.  However the rate varies between 17.5% and 35%* depending on the value of the corporation’s assets and is applied to R&D expenses incurred as follows:

- after June 12, 2003, if the R&D was done by the corporation itself;
- after June 12, 2003 , if a contract was concluded after that date.

*The fully refundable tax credit increases to 35% for the first $2,000,000 in annual R&D salaries for Canadian-controlled SME’s.

For more informations, consult the Web site at http://www.formulaire.gouv.qc.ca/cgi/affiche_doc.cgi?dossier=9057&table=0#14