Tax credit for R&D labour costs
QC, Canada
Tax credit for R&D in Quebec
grant_single_labels|summary
grant_single|eligibleFinancing
- grant_single|maxCount
- grant_single|projectCostPercent
grant_single|deadlines
- grant_single|openingDateNovember 14, 2019
- grant_single|grantStatusClosed
grant_single|financingType
Tax Credits
grant_single|eligibleIndustries
- Professional, scientific and technical services
grant_single|grantors
- Revenu Québec
- Gouvernement du Québec
grant_single|status
grant_card_status|open
grant_single_labels|preview
Get a tax credit between 14 and 30% of labour costs for your scientific research and experimental development expenditures.
grant_single_labels|projects
This grant is available for companies conducting R&D activities in the province of Quebec, Canada. Eligibility is based on location to enhance regional R&D contributions.
- Companies operating in the province of Quebec, Canada.
grant_single|admissibleProjectsExample
$180,000
Developing advanced cybersecurity measures for financial institutions
$200,000
R&D in renewable energy technology enhancement
$150,000
Development of AI algorithms for medical diagnosis improvements
$140,000
Improvement of agricultural biotech processes for crop yield
$160,000
Innovative software solutions for smart home systems
$120,000
Creation of eco-friendly materials via chemical research
grant_single_labels|admissibility
Eligibility for the CRÉDIT D'IMPÔT RELATIF AUX SALAIRES – R-D is determined by specific criteria relating to the company and its activities.
- The company must operate a business in Canada.
- The company must conduct or have conducted scientific research and experimental development (R-D) work on its behalf in Quebec.
- The company must not be tax-exempt.
- The company must not be a Crown corporation or a wholly-controlled subsidiary of such a corporation.
- The company must not be controlled, directly or indirectly, by a prescribed research entity, nor should it have been within the 24 months preceding the conclusion of an R-D related contract, nor should it be related to such a controlled company.
- If the company is a member of a partnership, it can claim the credit for its share of the salaries paid by the partnership.
grant_eligibility_criteria|who_can_apply
This grant is available to companies operating a business in Canada that conduct or have R&D work conducted on their behalf in Quebec. These companies must meet specific conditions, including financial thresholds and control requirements.
- Corporations that operate a business in Canada.
- Entities conducting or commissioning R&D work in Quebec.
- Corporations not controlled by non-residents of Canada to qualify for the higher credit rate.
- Companies with total assets under 75 million CAD for the preceding tax year to qualify for the higher credit rate.
- Excludes corporations exempt from tax, Crown corporations, or subsidiaries fully controlled by such corporations.
- Excludes corporations controlled by a prescribed research entity in the last 24 months.
grant_eligibility_criteria|who_cannot_apply
Certain companies are not eligible for the CRÉDIT D'IMPÔT RELATIF AUX SALAIRES – R-D due to their tax status and control structure. These restrictions focus on ensuring eligible entities contribute actively to R&D activities in Quebec.
- Tax-exempt corporations.
- Crown corporations or subsidiaries wholly controlled by a Crown corporation.
- Companies controlled, directly or indirectly, by a prescribed research entity or those that were in the 24 months preceding an R&D contract.
grant_eligibility_criteria|eligible_expenses
This grant supports research and development (R&D) activities across various fields, as long as the work is conducted in Quebec. Eligible projects must involve scientific research and experimental development initiatives, as well as related subcontracted work.
- Scientific research and experimental development (SR&ED) conducted directly by the company within Quebec.
- Contracted SR&ED work carried out by dependent subcontractors within Quebec, focusing on salaries of employees in Quebec-based establishments.
- Subcontracted work by independent subcontractors within Quebec, partially funded by the company under R&D contracts.
grant_eligibility_criteria|zone
The eligible expenses for this grant include specific salaries and payments to subcontractors related to R&D work conducted in Quebec.
- Salaries paid to employees working in a Quebec establishment for R&D activities conducted during the year.
- Portion of the consideration paid under an R&D contract to a dependent subcontractor for R&D work performed on behalf of the company during the year, corresponding to salaries paid to the subcontractor's Quebec-based employees.
- Portion of the consideration, paid under an R&D contract to a dependent subcontractor and subsequently paid to another dependent subcontractor, attributed to salaries of the latter's Quebec-based employees.
- Half of the consideration paid under an R&D contract to an independent subcontractor for R&D work conducted on behalf of the company by the subcontractor's Quebec-based employees.
- Half of the consideration paid under an R&D contract to a dependent subcontractor, and subsequently paid to an independent subcontractor, for R&D work conducted on behalf of the company by the latter's Quebec-based employees.
grant_single_labels|register
Here are the steps to apply for the CRÉDIT D'IMPÔT RELATIF AUX SALAIRES – R-D:
- Step 1: Gather Necessary Documents
- Fill out the form RD-1029.7 for the Credit on Salaries – R&D.
- Fill out the form RD-222 for the Deduction of SR&ED Expenditures.
- If applicable, fill out the form RD-1029.7.8 for the Agreement on Expense Limit Among Associated Corporations.
- Collect a detailed report of incurred expenses and supporting documents.
- Compile a list of employees involved with their information.
- Prepare a list of subcontractors with necessary financial details.
- Gather invoices and proof of payments to subcontractors.
- Create reconciliations of R&D expenses.
- Develop organizational charts for the company and associated companies.
- Include prior year’s tax notice from the Canada Revenue Agency.
- Collect additional required documents as specified.
- Step 2: Complete Tax Declaration
- Enter the credit name in the appropriate lines (440p to 440y) on the tax declaration.
- Include the credit code (02) and amount in the specified fields.
- Step 3: Submit the Tax Declaration
- Attach all forms and documents to the corporation’s tax return for the year.
- If unable to attach, send the documents within 12 months post the tax return deadline.
- Use authorized software to transmit documents electronically if desired.
- If mailing, clearly label all documents with the company’s name, IDs, and fiscal year-end.
- Aim to submit all documents in one package for faster processing.
grant_single_labels|otherInfo
Here are additional relevant details for this grant application:
- The application must include proof of payment for all claimed salaries and subcontractor expenses at the time of application.
- A reconciliation of R&D expenditures is required to verify the amount submitted for the tax credit.
- Consideration must be given to reducible expenses, which may diminish the total eligible amount claimed under the tax credit.
- If companies are associated, they must agree on how to distribute the $3 million expense limit eligible for the increased tax credit rate and submit a "Schedule of Expense Limit Allocation among Associated Corporations (RD-1029.7.8)."
- If documents cannot be submitted with the tax return, they should be provided within 12 months of the tax return’s filing deadline.
- The process is streamlined if documents are submitted online using authorized software, negating the need for physical document submission.
Apply to this program
Maximize Your Company's R&D Potential with Quebec's Payroll Tax Credit
The Quebec R&D payroll tax credit offers financial benefits to companies engaged in eligible scientific research and experimental development activities within the province. Designed to stimulate innovation, this incentive can significantly offset payroll expenses associated with R&D efforts.
Understanding the Quebec R&D Payroll Tax Credit
Quebec's R&D payroll tax credit is a compelling opportunity for companies that conduct eligible R&D activities within the province. The credit aims to support businesses incorporated in Canada that engage in scientific research and experimental development (SR&ED) projects, thereby incentivizing innovation and technological advancements. Qualifying companies can obtain a credit on salaries paid to employees engaged in SR&ED work specifically done in Quebec. This relief aims to reduce the financial burden of R&D work, facilitating further investment in these crucial activities.
The basic rate of this tax credit is set at 14%. However, it can be increased to 30% if certain conditions are met, such as the company not being controlled by non-residents and having total assets worth $50 million or less in the preceding tax year. Companies involved need to pay attention to how their asset thresholds might affect the rate, particularly if their assets fall between $50-75 million; here, the enhanced rate gradually decreases.
The tax benefit applies to various expenditures related to SR&ED, including direct salaries and payments made to contractors conducting research work. Importantly, expenses can only be claimed if they are actually paid before submitting the tax credit application. A range of supporting documents must be submitted alongside the application to justify the claimed expenses and facilitate the proper calculation of the credit. These documents include, but are not limited to, detailed breakdowns of expenses, records of payments to subcontractors, and lists of involved employees and subcontractors.
For businesses operating within partnerships, the tax credit can be proportionately claimed based on the share of SR&ED-related salaries paid by the partnership. Moreover, associated companies must agree on how to split the $3 million spending limit entitled to the enhanced credit rate, necessitating the completion of a formal agreement.
There are also nuances in expenses eligible for this tax credit. These include salaries for direct SR&ED activities and certain subcontracted expenses. However, only 50% of the paid consideration to unrelated contractors is eligible under this scheme, highlighting the importance of strategic partnership selection and management.
Businesses must navigate various exclusions to ensure eligibility, such as avoiding circumstances where they might be classified as tax-exempt entities or Crown corporations. The program is designed to foster an environment of competitive innovation within Quebec, allowing local firms the financial leverage needed to compete on both national and global scales.
Applying for this tax credit involves navigating a series of required and prescribed documentation that provides a comprehensive picture of the entity's SR&ED activities and financial details. By fulfilling these conditions meticulously, companies can tap into significant financial support aimed at advancing their R&D projects, thereby driving growth and innovation in Quebec's economy.
