Principal Changes for 2016

Designated member of a partnership for the application of the small business deduction

A Canadian-controlled private corporation may, under certain conditions, benefit from a tax rate reduction, referred to as the “small business deduction” (SBD). For a taxation year ending after March 22, 2016, a corporation may be considered a designated member of a partnership and be subject to certain rules limiting its eligibility for the SBD, where the corporation is not a member of the partnership, but supplies goods and services to it.

Food donations

A taxpayer who is a member of a partnership that is a recognized agricultural producer and that made food donations may, under certain conditions, increase by 50% its share of the eligible amount for donations used to calculate its deduction for donations and gifts or its tax credit for donations and gifts, as applicable. The donation must have been made to a registered charity that is either Food Banks of Québec or a Moisson member.

Food donations made after March 17, 2016, to a registered charity that is an associate member can also give entitlement to the 50% increase. Certain food donations made after March 17, 2016, by a partnership carrying on a food processing business also give entitlement to this increase.

You must provide information about the partnership's donation on lines 73 and 74 of the information return.

Deduction for income-averaging for forest producers

A taxpayer that is a member of a partnership may, in calculating its taxable income, deduct a portion of the partnership's income derived from non-retail sales of timber from a private forest if, among other things:

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

Taxpayers use this deduction to average the income derived from the sale of timber from a private forest over a period not exceeding seven years.

A taxpayer claiming this deduction for a taxation year must include all or a portion of the amount deducted in the calculation of its taxable income for one or more of the seven years following that taxation year. The total amount deducted must have been included in the calculation of the taxpayer's taxable income by the end of the seventh year. The income-averaging period may be shortened if the private forest is disposed of by the partnership or if the taxpayer ceases to be a member of the partnership.

For more information, see 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.

Tax credit for investment

A corporation can claim a tax credit for investment for its share of the eligible expenses incurred by a partnership of which it is a member.

On January 1, 2017, the increased rates for the tax credit for investment applicable in respect of qualified property acquired for use mainly in certain zones or regions, were reduced as follows:

  • 24% instead of 32% in the case of qualified property acquired for use mainly in a remote zone;
  • 16% instead of 24% in the case of qualified property acquired for use mainly in the eastern part of the Bas-Saint-Laurent region;
  • 8% instead of 16% in the case of qualified property acquired for use mainly in an intermediate zone.

The basic rate for qualified property is still 4%. However, any property acquired after December 31, 2016, that is not covered in the points above is not considered qualified property for the purposes of the tax credit for investment.

For more information, see section 4.5.2 of the Guide to Filing the Partnership Information Return (TP-600.G-V).

Tax credit relating to resources

A corporation can claim a tax credit relating to resources for its share in the eligible expenses incurred by a partnership of which it is a member.

Effective March 18, 2016, the tax credit rate applicable to eligible expenses relating to mineral resources in the Near North and Far North of Québec is:

  • 38.75% instead of 31% if the corporation does not operate a mineral resource or an oil or gas well;
  • 18.75% instead of 15% for all other corporations.

These new rates apply to eligible expenses incurred after March 17, 2016.

For more information, see section 4.5.2 of the Guide to Filing the Partnership Information Return (TP-600.G-V).

Other tax credits

Tax credit relating to information technologies

For a taxation year ending after March 17, 2016, a corporation that is a member of a partnership in the wholesale or retail sector and that holds a qualification certificate issued by Investissement Québec can, under certain conditions, claim the tax credit relating to information technologies for eligible expenses incurred by the partnership for the supply of a management software package. To be eligible, these expenses must have been incurred by the partnership after March 17, 2016, under an information technology integration contract for which negotiations began after that date.

In the past, only corporations that were members of a partnership in the manufacturing or primary sector could benefit from this tax credit.

The tax credit rate is 20% for a corporation that claims the tax credit for a contract for which the partnership submitted an application for a certificate to Investissement Québec after March 26, 2015, but before January 1, 2020. The rate is linearly reduced if the corporation's paid-up capital for the preceding taxation year, including the paid-up capital of its associated corporations, is more than $15 million but less than $20 million. The applicable rate is 0% if the paid-up capital for the preceding taxation year is $20 million or more.

For a taxation year ending after March 17, 2016, the tax credit rate is reduced in the same manner if the paid-up capital for the preceding taxation year is more than $35 million but less than $50 million.

For more information, see form CO-1029.8.36.TI, Crédit d'impôt relatif à l'intégration des technologies de l'information (see courtesy translation CO-1029.8.36.TI-T).

Tax credit for technological adaptation services

A corporation that is a member of a partnership can claim the tax credit for technological adaptation services for its share of the qualified expenditures incurred by the partnership under a contract reached between the partnership and an eligible college centre for transfer of technology (CCTT) or an eligible liaison and transfer centre (LTC).

As of March 17, 2016, an expenditure qualifies for the tax credit for technological adaptation services only if it concerns an eligible liaison and transfer service rendered in Québec or participation in training and information activities dispensed in Québec in connection with an eligible liaison and transfer service.

This new rule applies to qualified expenditures incurred by a qualified partnership after March 17, 2016, for activities or services offered by an eligible CCTT or an eligible LTC after that date, under a contract entered into after that date.

For more information, see form CO-1029.8.21.22, Crédit d'impôt pour services d'adaptation technologique (see courtesy translation CO-1029.8.21.22-T).

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