Principal Changes for 2021 in the Partnership Information Return

Note
Coronavirus (COVID-19)

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End of note

The principal changes to the Partnership Information Return (form TP-600-V) for 2021 are listed below.

Property in classes 43.1 and 43.2

Clean energy generation equipment and energy conservation equipment is included in class 43.1 or, under certain conditions, in class 43.2. These classes benefit from tax incentives with respect to the capital cost allowance.

Changes have been made to the types of property that can be included in classes 43.1 and 43.2 in order to encourage investment in clean technology.

In addition, as the tax incentives associated with these classes must enable the government to achieve its current environmental goals, the eligibility criteria for certain types of property in these classes have been modified.

Addition of property types

The following types of property can be included in classes 43.1 and 43.2 if certain conditions are met:

  • pumped hydroelectric storage equipment;
  • electricity generation equipment that uses physical barriers or dam-like structures to harness the kinetic energy of flowing water or wave or tidal energy;
  • active solar heating systems, ground source heat pump systems, and geothermal energy systems that are used to heat water for a swimming pool;
  • equipment used to produce solid and liquid fuels (e.g. wood pellets and renewable diesel) from specified waste material or carbon dioxide;
  • a broader range of equipment used for the production of hydrogen by electrolysis of water; and
  • equipment used to dispense hydrogen for use in hydrogen-powered automotive equipment and vehicles.

These changes apply to new property acquired and available for use after April 18, 2021.

Removal of property types and modifications to eligibility criteria

The following property types have been removed from classes 43.1 and 43.2:

  • fossil-fuelled cogeneration systems;
  • fossil-fuelled enhanced combined cycle systems;
  • specified waste-fuelled electrical generation systems for which more than one quarter of the total fuel energy input is from fossil fuels;
  • specified waste-fuelled heat production equipment for which more than one quarter of the total fuel energy input is from fossil fuels;
  • gas generating equipment for which more than one quarter of the total fuel energy input is from fossil fuels.
Important
A change was made to the eligibility criteria for classes 43.1 and 43.2 such that specified waste-fuelled electrical generation systems (for which one quarter or less of the total fuel energy input is from fossil fuels) are subject to a maximum heat rate threshold. Systems with an electrical output capacity of three megawatts or less will be exempt from this requirement.
End of note

The removal of certain types of property from classes 43.1 and 43.2, as well as the application of the new heat rate threshold for specified waste-fuelled electrical generation systems, will apply to property that becomes available for use after 2024.

Tax credit for university research or research carried out by a public research centre or a research consortium – Elimination of the requirement to obtain an advance ruling

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 the tax credit for university research or research carried out by a public research centre or a research consortium for their taxation year in which the partnership's fiscal period ends, provided that the application is accompanied by a favourable advance ruling.

However, this rule has been amended to lighten the administrative burden associated with R&D tax credits. Thus, the requirement to obtain a favourable advance ruling has been eliminated, and changes have been made concerning the information collected to verify the eligibility requirements for this tax credit.

This measure applies as of March 26, 2021.

For more information, see Tax Credit for University Research or Research Carried out by a Public Research Centre or a Research Consortium (Code 03) (in French only).

Temporary enhancement of the tax credit for an on-the-job training period

If, in a fiscal period, a qualified partnership incurred qualified expenditures with respect to an individual serving a qualified training period in a business the partnership carried on in Québec, the partnership's members can, under certain conditions, claim the tax credit for an on-the-job training period for their taxation year in which the partnership's fiscal period ends.

Certain rates of the tax credit for an on-the-job training period have been enhanced for qualified expenditures incurred after March 25, 2021, but before May 1, 2022, in connection with an on-the-job training period beginning after March 25, 2021.

For this period, the base rates of the tax credit for an on-the-job training period are:

  • 20% in lieu of 16% for a member who is an individual, if the trainee is a disabled person, an immigrant or an Aboriginal person, or serves the training period in a qualified region;
  • 40% in lieu of 32% for a member that is a corporation, if the trainee is a disabled person, an immigrant or an Aboriginal person, or serves the training period in a qualified region;
  • 15% in lieu of 12% for a member who is an individual or 30% in lieu of 24% for a member that is a corporation, for all other trainees.

Note that the increased rates of the tax credit remain the same for a trainee enrolled as a full-time student in a recognized educational institution.

For more information, see Tax Credit for an on-the-Job Training Period – Individuals, if the partner is an individual, or Tax Credit for an on-the-Job Training Period – Workplace Apprenticeship Progam (WAP) (in French only), if the partner is a corporation.

Tax credit for investment and innovation

If a qualified partnership incurs specified expenses during a fiscal period 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, provided that such expenses are incurred after March 10, 2020, but before January 1, 2025.

Temporary enhancement

In order to encourage Québec businesses to carry out their investment projects and to accelerate Québec's economic recovery, the tax credit for investment and innovation has been enhanced, and its rates temporarily increased from:

  • 20% to 40%, if the property is acquired to be used primarily in a low economic vitality zone;
  • 15% to 30%, if the property is acquired to be used primarily in an intermediate zone;
  • 10% to 20%, if the property is acquired to be used primarily in a high economic vitality zone.

This temporary enhancement applies to specified expenses incurred after March 25, 2021, but before January 1, 2023, to acquire specified property during this period or to acquire specified property after March 25, 2021, but before April 1, 2023, if one of the two following conditions is met:

  • The property is acquired in accordance with a written obligation entered into after March 25, 2021, but before January 1, 2023.
  • The construction of this property, by the partnership or on the partnership's behalf, began after March 25, 2021, but before January 1, 2023.

Amendment of the definition of “low economic vitality” zone

Québec tax legislation has been amended to add the regional county municipalities (RCMs) of Maskinongé, Le Domaine-du-Roy and Papineau to the list of low economic vitality zones for the application of the tax credit for investment and innovation. This change applies to specified expenses incurred after June 30, 2021, to acquire specified property after that date, except for property:

  • acquired in accordance with a written obligation entered into before July 1, 2021;
  • whose construction, by the partnership or on the partnership's behalf, was already in progress on June 30, 2021.

The RCMs of Les Appalaches and La Côte-de-Gaspé, as well as the Communauté maritime des Îles-de-la-Madeleine have been removed from the list of low economic vitality zones for the application of the tax credit for investment and innovation. This change applies to specified expenses incurred after March 31, 2023, to acquire specified property after that date.

For more information, see courtesy translation CO-1029.8.36.11-T, Tax Credit for Investment and Innovation, and the page Tax Credit for Investment and Innovation (in French only).

Tax credit to support print media companies

A qualified corporation that is a member of a qualified partnership that incurred qualified salaries or wages in respect of employees whose duties relate to the production of original written information content or to information technology activities related to the production or dissemination of such content can, under certain conditions, claim the tax credit to support print media companies. The corporation must claim the credit for its taxation year in which the partnership's fiscal period ends, based on its percentage interest in the partnership.

The definition of the term “qualified partnership” has been modified. A partnership that carries on a broadcasting undertaking within the meaning of the Broadcasting Act is now qualified for the purposes of the application of the tax credit to support print media companies. However, the term “qualified partnership” now excludes, among others, partnerships that hold a licence within the meaning of the Act. This change applies to all taxation years for which a qualified corporation that is a member of a qualified partnership can claim this tax credit.

For more information, refer to the instructions for code 108 of lines 440p through 440y in the Guide to the Corporation Income Tax Return (CO-17.G), which is available in French only.

Election of the period used for the calculation of employee remunerated hours – Small business deduction

A Canadian-controlled private corporation (CCPC) that is a member of a partnership can, under certain conditions, benefit from the small business deduction (SBD) with respect to its share of income derived from an eligible business in this partnership for a fiscal period ending in the CCPC's 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 a partnership that would not have been a primary or manufacturing sectors corporation (at least 25% of the activities of such corporations are in the primary or manufacturing sectors) for the fiscal period had it been a corporation.

Specifically, according to the eligibility requirement, 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 share of income derived from an eligible business in the partnership.

In addition, a corporation's applicable SBD rate for a taxation year decreases linearly if the total remunerated hours is between 5,500 and 5,000. The SBD rate is equal to zero if this total does not exceed 5,000 hours.

To limit the potential impact of the temporary suspension of activities due to the COVID-19 pandemic, taxpayers can choose the period used to calculate employee remunerated hours.

Thus, for a fiscal period of a partnership that ends after June 30, 2020, and before July 1, 2021, any CCPC that is a member of a partnership in a taxation year in which the fiscal period ends can elect, with respect to its share of income derived from an eligible business of the partnership, to have its SBD eligibility determined in reference to the partnership's employee remunerated hours for the partnership's fiscal period that ended immediately before the given fiscal period.

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