The Quebec tax system offers a range of tax holidays to attract qualified foreign workers to Quebec: the deduction for foreign researchers, deduction for foreign experts, deduction for foreign specialists, deduction for foreign professors, etc. Although these tax incentives may appear tempting, the fact remains that one must make sure to meet the numerous established criteria in order to be able to benefit from them.

As regards the tax holiday for a foreign researcher, it covers a researcher who takes up a position as an employee of an employer who undertakes, or causes to be undertaken on his behalf, in Quebec, scientific research and experimental development. The foreign researcher must work exclusively or almost exclusively (that is to say close to 90% of the paid working time) for that employer and he must perform duties that consist exclusively or almost exclusively in carrying on scientific research and experimental development. In addition, the foreign researcher must not reside in Canada prior to the entering into of the employment contract or prior to taking up his position as an employee. The employer of a foreign researcher must also obtain a certificate from the Minister of Economic Development, Innovation and Export Trade attesting that such researcher specializes in the field of pure or applied science or in a related field and that he has, in that respect, a Master's degree recognized by a Quebec university or equivalent knowledge.

As regards the tax holiday for a foreign professor, it is available for a foreign professor hired as an employee by a Quebec university, for whom he must work exclusively or almost exclusively. Just like in the case of a foreign researcher, the foreign professor must not reside in Canada immediately prior to the entering into of the employment contract or immediately prior to taking up his position as an employee. The Quebec university must obtain, before the specified deadline, for the tax year concerned, a certificate delivered by the Minister of Education, Recreation and Sports, certifying that such professor specializes in one of the fields of science and engineering, finance, health or new information and communications technologies and that he has, in that respect, a doctoral degree. Moreover, such certificate must attest that the foreign professor's duties with his employer consist exclusively or almost exclusively in acting as a professor in one of the foregoing fields.

In both cases, as regards employment contracts entered into by a foreign researcher or foreign professor after March 30, 2004, the tax holiday, which generally corresponds to a percentage of the paid remuneration, is offered over a continuous period of five years at the most and the rate of the tax holiday varies according to the year within such period as follows:

  • 100% for the first two years;
  • 75% for the third year;
  • 50% for the fourth year; and
  • 25% for the fifth year.

In addition, it is the employer who must make a written request with respect to the employee for the required attestation or certificate within the time periods provided for by law, that is to say before March 1 of the year following the taxation year. Since these tax holidays affect the amounts of the deductions at source that the employer is required to withhold from his employee's salary, it is in the employer's interest to make sure that the conditions for benefitting from these tax holidays are respected and to follow up on the applicable rates for these holidays.

For example, if a foreign researcher who was hired in 2002, while the tax holiday rate for a foreign researcher was a fixed rate of 100% for a period of five years, is subsequently hired as a foreign professor after March 30, 2004, in accordance with the applicable new rules and subject to all of the conditions being met, and he wishes to henceforth have the benefit of the tax holiday for foreign professors within the limits provided for by law, then he must use the diminishing rates that vary according to the years.

In more complex situations, it is recommended that you obtain assistance from your tax advisor in order to comply with all the legal requirements relating to these various Quebec tax holidays, which, incidentally, are not available with respect to federal taxes.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.