Principal Changes for 2020 in the Partnership Information Return

Coronavirus (COVID-19)

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New tax credit for investment and innovation

If a qualified partnership incurred specified expenses, during a fiscal period and after March 10, 2020, to acquire specified property, any qualified corporation that is a member of the partnership can claim the new tax credit for investment and innovation for these expenses for its taxation year in which the partnership's fiscal period ends. Each corporation can claim the tax credit based on its percentage interest in the partnership.

A partnership is a qualified partnership for a given fiscal period if it meets the following requirements:

  • It has an establishment in Québec and carries on business there.
  • It is not carrying on an aluminum producing business.
  • It is not carrying on an oil refining business.

The tax credit for investment and innovation can be claimed for specified expenses incurred for specified property, which includes:

  • manufacturing or processing equipment;
  • computer equipment;
  • certain management software packages.

This property is also subject to certain conditions.

Specified expenses are the expenses that are included in the capital cost of the specified property and are incurred by a partnership during a fiscal period and after March 10, 2020. The expenses cannot exceed a cumulative limit of $100 million for the purposes of calculating the tax credit.

The tax credit rate applicable to a qualified corporation that is a member of a qualified partnership is established based on the region where the property is acquired to be primarily used. The rate is:

  • 20% if the property is acquired to be used primarily in the low economic vitality zone;
  • 15% if the property is acquired to be used primarily in the intermediate zone
  • 10% if the property is acquired to be used primarily in the high economic vitality zone.

The tax credit is calculated on the portion of the specified expenses incurred to acquire the specified property in excess of $5,000 or $12,500, depending on the property.

The tax credit for investment and innovation replaces the tax credit for investment. However, a corporation may, under certain conditions, elect to receive the tax credit for investment according to its current terms and conditions.

Furthermore, this new tax credit is temporary. Specified expenses incurred after December 31, 2024, for the acquisition of specified property will not be eligible.

For more information, see section 4.4.5 of the Guide to Filing the Partnership Information Return (TP-600.G-V).

Relaxed rules for the tax credit for investment

If a qualified partnership incurred eligible expenses for the acquisition of qualified property during a fiscal period, any qualified corporation that is a member of the partnership can claim a tax credit for investment for its taxation year in which the partnership's fiscal period ends.

On August 15, 2018, temporary enhancements of the tax credit for investment were announced. For qualified property acquired after August 15, 2018, and before January 1, 2020, the basic rate was increased to 5%, and the rates of increase for the tax credit were enhanced so that the rate of the tax credit would be 40%, depending on where the property was acquired to be primarily used.

However, the relatively short period during which the enhancements to the tax credit for investment applied to qualified property acquired after August 15, 2018, and before January 1, 2020, could make it difficult to apply these enhancements to some types of property, particularly property that had been ordered. For this reason, the period during which the acquisition of qualified property gives entitlement to the tax credit for investment has been extended by one year.

The instructions related to these changes could not be updated in the 2019‑10 version of the Guide to Filing the Partnership Information Return (TP-600.G-V), which was the version pertaining to fiscal periods that ended in 2019. The instructions have been updated in this version of the guide.

For more information, see section 4.4.2 of the Guide to Filing the Partnership Information Return (TP-600.G-V).

Elimination of the tax credit relating to information technology integration

If a partnership incurred eligible expenditures related to a qualified information technology integration contract in a fiscal period, any qualified corporation that is a member of the partnership can, under certain conditions, claim the tax credit relating to information technology integration for its taxation year in which the partnership's fiscal period ends. Each corporation can claim the credit based on its percentage interest in the partnership.

To receive the tax credit, the corporation must have filed an application for a certificate in respect of the contract with Investissement Québec. Furthermore, in view of the introduction of the tax credit for investment and innovation, the tax credit relating to information technology integration was eliminated, but it may be granted to corporations that filed an application for a certificate before March 11, 2020. Therefore, except in unusual circumstances, applications filed after March 10, 2020, for a certificate in respect of a qualified information technology integration contract will not be accepted by Investissement Québec.

New tax credit for SMBs that employ persons with a severely limited capacity for employment

A qualified corporation can claim the new tax credit for small and medium-sized businesses that employ persons with a severely limited capacity for employment if:

  • it is a member of a qualified partnership;
  • the qualified partnership paid employer contributions for eligible employees for a calendar year after 2019 that ended in the fiscal period;
  • the partnership's fiscal period ended in the corporation's taxation year in which the contributions were paid.

Each corporation can claim the credit based on its percentage interest in the partnership.

A partnership is an eligible partnership for a given fiscal period, if it meets the following requirements:

  • It has an establishment in Québec and carries on business there.
  • Its paid-up capital for the previous fiscal period is less than $15 million (if the partnership is a member of an associated group, its paid-up capital includes the paid-up capital of each member of the group).
  • The number of remunerated hours of the partnership's employees exceeds 5,000 for the fiscal period, except in the case of a partnership that would have been a primary and manufacturing sectors corporation for the fiscal period had it been a corporation.
Note
Due to the COVID‑19 pandemic, the calculation of the number of employee remunerated hours has been adjusted. For more information, see below under “Adjustment to the calculation of employee remunerated hours – Small business deduction and other tax measures.”

An employee is an eligible employee if he or she has a severe and prolonged impairment in mental or physical functions, or if the Minister of Labour, Employment and Social Solidarity has issued a certificate showing that the person received a social solidarity allowance.

For more information, see section 4.4.5 of the Guide to Filing the Partnership Information Return (TP-600.G-V).

Tax credits for scientific research and experimental development – Elimination of certain expenditure exclusion thresholds

If a partnership carries on a business in Canada and undertakes scientific research and experimental development (R&D) work in Québec or has such work undertaken in Québec on its behalf, the partnership's members can claim one of the following tax credits, as applicable, for their taxation year in which the partnership's fiscal period ends:

  • the tax credit for salaries and wages (R&D);
  • the tax credit for university research or research carried out by a public research centre or a research consortium;
  • the tax credit for fees and dues paid to a research consortium;
  • the tax credit for private partnership pre-competitive research.

However, no tax assistance is granted for otherwise qualified R&D expenditures that are below a certain threshold. Furthermore, if a partnership incurs expenses that give entitlement to more than one R&D tax credit, the portion of the exclusion threshold that is attributable to a member of the partnership is allocated proportionately among each of the tax credits.

In the interest of increasing the productivity and competitiveness of Québec businesses, the exclusion threshold for qualified expenditures has been eliminated, except for the tax credit for salaries and wages (R&D). However, for the purposes of calculating the tax credit, the exclusion threshold will continue to be allocated proportionately among the various tax credits as if the exclusion thresholds for the other tax credits had not been eliminated.

This measure applies to a partnership's fiscal periods that begin after March 10, 2020, for R&D work carried out after that date.

Tax credit for taxi owners

If a partnership that is resident in Québec on December 31 of a taxation year and that, at any time during its fiscal period, is the holder of one or more valid taxi owner's permits and has assumed, during the fiscal period, 90% or more of the feul cost of bringing into service any taxi attached such a permit, its members can claim the tax credit for taxi owners for their taxation year in which the partnership's fiscal period ends based on their percentage interest in the partnership. For the purposes of this tax credit, a “taxi owner's permit” means such a permit referred to in the Act respecting transportation services by taxi.

The tax credit for taxi owners is subject to a limit that corresponds, for a given fiscal period, to 2% of the partnership's total gross income from both its business of providing transportation by taxi and the leasing of any motor vehicle attached to a taxi owner's permit the partnership holds (hereinafter “eligible income”).

On October 10, 2020, the Act respecting transportation services by taxi was repealed and the requirements for claiming the credit were amended as was the way it is calculated. Thus, the members of a partnership whose fiscal period begins after December 31, 2019, and includes October 9, 2020, can claim the tax credit for taxi owners for their taxation year in which the fiscal period ends, provided that the taxi owner's permit held by the partnership was valid on October 9, 2020. Moreover, the limit applicable to the tax credit is adjusted to take into account only the partnership's eligible income that is attributable to the portion of the fiscal period after December 31, 2019, and before October 10, 2020.

Lastly, the members of a partnership that is the holder of a taxi owner's permit and whose fiscal period begins after October 9, 2020, can no longer claim the tax credit for taxi owners, since the credit is eliminated after that date.

New class 56 – Zero-emission vehicles and automotive equipment

Zero-emission automotive equipment and vehicles that meet certain requirements and that are acquired and available for use after March 1, 2020, but before 2028, are in new class 56, a class of property eligible for a CCA rate of 30%.

As is the case for class 54 and 55 vehicles, a class 56 vehicle allows the partnership that acquired it to claim an enhanced CCA for the fiscal period in which it becomes available for use for the first time.

The enhanced CCA can reach:

  • 100% of the property's capital cost, if it is available for use before 2024;
  • 75% of the property's capital cost, if it is available for use in 2024 or 2025;
  • 55% of the property's capital cost, if it is available for use in 2026 or 2027.

For more information, see section 4.2 of the Guide to Filing the Partnership Information Return (TP-600.G-V).

Income averaging for forest producers

A taxpayer that is a member of a partnership, when calculating its taxable income, can deduct part of its share of the partnership's income generated by the non‑retail sales of timber produced in a private forest if:

  • the partnership is a certified forest producer in respect of the private forest at the end of the partnership's fiscal period that ends in the taxpayer's taxation year;
  • the taxpayer's taxation year ends after March 17, 2016, and before January 1, 2021.

The taxpayer claiming the deduction for a given taxation year must include the amount of this full or partial deduction in the calculation of its taxable income over a period not exceeding seven years after the taxation year in question. This deduction enables the taxpayer to average the income generated by the non‑retail sales of timber produced in a private forest over a maximum of seven years.

In order to encourage the active management of private forests and greater contribution to supplying Québec timber processing plants, the income‑averaging mechanism for certified forest producers in respect of a private forest has been extended for a five-year period. A taxpayer can therefore use the income‑averaging mechanism if its taxation year ends before January 1, 2026.

For sales of timber produced in a private forest concluded after March 9, 2020, and before January 1, 2026, the income‑averaging period has been extended from seven years to ten years.

For more information, refer to form TP-726.30-V, Income Averaging for Forest Producers, or form CO-726.PF, Déduction pour étalement du revenu d'un producteur forestier (see courtesy translation CO-726.PF-T), depending on whether the member is an individual or a corporation.

Adjustment to the calculation of employee remunerated hours – Small business deduction and other tax measures

A Canadian-controlled private corporation (CCPC) can, under certain conditions, benefit from the small business deduction (SBD) for a given taxation year. One of these conditions is that the CCPC must meet the eligibility requirement with respect to the number of remunerated hours of its employees. This condition applies to CCPCs that are not primary or manufacturing sector corporations (at least 25% of the activities of such corporations are in the primary or manufacturing sectors).

If the CCPC must meet the eligibility requirement with respect to the number of remunerated hours of its employees, and that CCPC is a member of a partnership:

  • the number of remunerated hours of the CCPC's employees must exceed 5,000 for the taxation year in order for the CCPC to be entitled to the SBD on its income derived from an eligible business carried on in Canada;
  • the number of remunerated hours of the partnership's employees must exceed 5,000 for the fiscal period ending in the CCPC's taxation year in order for the CCPC to be entitled to the SBD on its specified partnership income.

The number of employee remunerated hours is used not only to apply the eligibility requirement with respect to the number of employee remunerated hours, but also to determine the rate of the SBD.

In addition, the eligibility requirement with respect to the number of employee remunerated hours is one of the conditions that a corporation must meet to claim the tax credit for small and medium-sized businesses to foster the retention of experienced workers and the tax credit for SMBs that employ persons with a severely limited capacity for employment. If the corporation is a member of a partnership:

  • the number of remunerated hours of the qualified corporation's employees must exceed 5,000 for the taxation year for the qualified corporation to be entitled to these tax credits for the employer contributions that it paid;
  • the number of remunerated hours of the partnership's employees must exceed 5,000 for the fiscal period ending in the qualified corporation's taxation year for the qualified corporation to be entitled to these tax credits for the employer contributions that the partnership paid.

To limit the potential impact of the temporary suspension of activities due to the COVID‑19 pandemic, the calculation of the number of employee remunerated hours has been adjusted.

Thus, if a partnership's fiscal period includes all or part of the period that begins on March 15, 2020, and ends on June 29, 2020 (the “closing period”), the number of remunerated hours of the partnership's employees for this fiscal period is equal to the result of the following calculation:

Number of remunerated hours of the partnership's employees for the fiscal period × 365
Number of days in the fiscal period not included in the closing period

New line on the return

A new line has been added to Part 2 of the return: line 22. On this line, the partnership reports whether it received or disposed of virtual currency. For more information, refer to section 3.2 of the Guide to Filing the Partnership Information Return (TP-600.G-V).

Coronavirus disease (COVID-19)

Revenu Québec has introduced relief measures to make life easier for individuals and businesses affected by the exceptional situation caused by COVID-19 in 2020. For more information, see Coronavirus Disease (COVID-19).

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