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Published | Category : Income tax - businesses

Enhancement of the Tax Credit Relating to Information Technologies in Small and Medium-Sized Manufacturing Businesses

The tax credit relating to information technologies in small and medium-sized businesses has been enhanced in two ways. First, the eligibility criteria for the tax credit have been broadened to include corporations doing business in the wholesale and retail sectors. Second, the threshold amount of paid-up capital of a qualified corporation at which the tax credit rate falls to zero has been increased to $50 million.

Eligibility of corporations doing business in the wholesale and retail sectors

Fiscal legislation has been amended so that a corporation can claim the tax credit relating to information technologies for a taxation year in which the proportion of its eligible activities (manufacturing and processing activities, primary sector activities, and activities in the wholesale and retail sectors) for purposes of the tax credit is greater than 50%.

The proportion of eligible activities of a qualified corporation for a taxation year for purposes of the tax credit is calculated as follows: the salaries or wages incurred by the corporation in respect of its employees whose duties consist of manufacturing or processing activities, primary sector activities, or activities in the wholesale or retail sectors, divided by the salaries or wages incurred by the corporation in respect of all its employees.

This change applies in respect of a taxation year of a corporation ending after March 17, 2016, but only to expenditures related to the supply of a qualified management software package incurred after March 17, 2016, and before January 1, 2020, under an information technology integration contract the negotiation of which began after March 17, 2016, and before January 1, 2020, and in respect of which Investissement Québec has issued a certificate.

For more information, see pages A.57 and A.58 of the document entitled Additional Information 2016-2017 (PDF – 2.88 MB), published by the Ministère des Finances.

Increase in the threshold amount of paid-up capital

Fiscal legislation has been amended so that the 20% rate of the tax credit relating to information technologies that a qualified corporation can claim for a taxation year will not be reduced if the corporation's paid-up capital for that year is $35 million or less.

That rate is reduced linearly for a taxation year if the paid-up capital of a qualified corporation is more than $35 million; it falls to zero if the qualified corporation's paid-up capital totals $50 million or more. Thus, a qualified corporation that has $50 million or more in paid-up capital for a taxation year cannot benefit from the tax credit.

This change applies in respect of a taxation year of a corporation ending after March 17, 2016.

For more information, see page A.58 of the document entitled Additional Information 2016-2017 (PDF – 2.88 MB), published by the Ministère des Finances.

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