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Published | Category : Income tax - businesses

Tax Credit for Salaries and Wages (IFC) and a New Non-Refundable Tax Credit

Major changes are to be made to the tax credit for salaries and wages (IFC) (hereinafter the "refundable tax credit") (referred to in the Budget Speech as the refundable tax credit for international financial centres). It will be replaced almost entirely by a non-refundable tax credit, except with respect to back-office activities. The refundable tax credit may still be claimed in respect of such activities, which, subject to certain conditions, may be considered qualified international financial transactions (QIFTs).

Continuation of the refundable tax credit with respect to back-office activities

The Act respecting sectoral parameters of certain fiscal measures will be amended so that an eligible corporation that operates a business, all of whose activities are back-office activities that qualify as QIFTs, may obtain a qualification certificate that recognizes the business as an international financial centre (IFC) and the annual certificate that is required for purposes of the refundable tax credit.

These amendments relating to corporations will apply to taxation years that begin after March 26, 2015.

Replacement of the refundable tax credit with a non-refundable tax credit in respect of activities other than back-office activities

Tax legislation will be amended so that an eligible corporation that operates a business recognized as an IFC by the Minister of Finance may deduct from its income tax otherwise payable for a taxation year an amount representing 24% of the qualified salaries and wages it incurred for the year in respect of its eligible employees. This new non-refundable tax credit cannot be greater than $16,000 per employee, calculated on an annual basis.

All the conditions in tax legislation that apply to the refundable tax credit will apply to the new non-refundable tax credit, with the necessary modifications.

Furthermore, an eligible corporation will be able to carry back over the three preceding taxation years or carry forward over the following 20 taxation years the portion of the tax credit that did not reduce its income tax payable for the taxation year to which the tax credit relates. However, no carry-over is possible in respect of either a taxation year for which the corporation does not have a valid qualification certificate for purposes of the non-refundable tax credit or a taxation year ending before March 27, 2015.

These amendments relating to eligible corporations will apply to taxation years that begin after March 26, 2015.

For more information, see pages A.95 to A.100 of the document entitled Additional Information 2015-2016 (PDF – 1.96 MB), published by the Ministère des Finances.

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