Published | Category: Income tax - businesses

Introduction of an Additional Deduction for Transportation Costs of All Small and Medium-Sized Businesses Located in the Special Remote Area

A new deduction for transportation costs has been introduced. The amount of the additional deduction that a qualified corporation can claim for a taxation year depends on the scale of the corporation's activities in the special remote area and on the corporation's size. The amount may reach 10% of the qualified corporation's gross income for the taxation year.

The special remote area consists of the municipality of L'Île-d'Anticosti, the Communauté maritime des Îles-de-la-Madeleine, the Golfe-du-Saint-Laurent RCM (Côte-Nord) and the Kativik Regional Government (Nord-du-Québec).

Qualified corporation

The additional deduction is available to all Canadian-controlled private corporations whose paid-up capital, calculated on a consolidated basis, is less than $15 million. These corporations can claim this deduction in calculating their net income, regardless of their sector of activity.

However, so that corporations benefit fully from this deduction for a taxation year, the paid-up capital, calculated on a consolidated basis, must not exceed $10 million. Qualified corporations can benefit partially from the deduction for a taxation year where their paid-up capital, calculated on a consolidated basis for the year, is between $10 million and $15 million. The additional deduction is linearly reduced in accordance with the parameters in effect for the additional deduction for transportation costs of remote manufacturing small and medium-sized businesses (SMBs).

Determination of the level of activities in the special remote area

A qualified corporation may claim the 10% additional deduction for a taxation year where its labour or capital investments are primarily concentrated in the carrying on of a business located in the special remote area.

To that end, the corporation must show that over 50% of its cost of labour or over 50% of its cost of capital for the taxation year is attributable to the carrying on of the business located in the special remote area.

Moreover, there is no limit on the additional deduction for transportation costs of SMBs located in the special remote area.

Finally, a corporation cannot claim both the additional deduction for transportation costs of SMBs located in the special remote area and the additional deduction for transportation costs of remote manufacturing SMBs for a particular taxation year.

This measure applies to a qualified corporation's taxation year that begins after March 28, 2017.

For more information, see pages A.28 to A.30 of the Additional Information 2017-2018 (PDF – 2.71 MB), published by the Ministère des Finances.

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