All Quebec based businesses are eligible for a new tax credit announced in the 2020 provincial budget earlier this week. The investment and innovation tax credit, to be known as C3i, will be available for purchases of computer hardware, management software or manufacturing and processing equipment made before January 1, 2025.
“Business competitiveness increasingly relies on an advanced level of digitization. However, studies show that approximately 75 per cent of Québec businesses have low technological readiness,” the budget document observes. “This tax measure will provide support of close to $526 million over five years to improve business competitiveness.”
Small and medium sized businesses (SMBs) can receive a refundable credit on the portion of costs greater than $5,000 when they purchase computer hardware and/or management software, or the portion of costs in excess of $12,500 for the purchase of manufacturing and processing equipment. Tax credits will be non-refundable for large corporations with assets and gross income of at least $100 million.
The C3i credit is prorated to the economic vibrancy of Quebec regions with a rate of 10, 15 or 20 per cent depending on where a business is located. Businesses in the Montreal and Quebec City regions are capped at 10 per cent, while most other urban areas of the province are in the 15 per cent zone.
The budget also introduces a tax credit for businesses investing in share capital of Quebec SMBs active in green technologies, information technology, life sciences, innovative manufacturing or artificial intelligence. Qualifying investors can receive a 30 per cent tax credit, to a maximum of $225,000 annually, for eligible investments.
Investors must be Quebec-based corporations, and have an arm’s length relationship with the SMB and core business activities unrelated to finance and investment. In addition to meeting criteria for innovative production/services, SMBs must have paid-up capital of less than $15 million and gross income of less than $10 million to qualify. Tax credits will be allocated for a maximum of $1 million of annual investment in each eligible SMB.
“Over the next five years, investments eligible for this measure will total more than $120 million,” the budget document states. “The new tax credit will represent $30 million in support for the development of innovative SMBs by 2024-2025.”
