The Québec Government recently announced changes to the
refundable tax credit for the development of e-business. The tax
credit, which has a rate of 30 per cent, is granted to an eligible
corporation regarding the salaries paid to eligible employees for
carrying out eligible activities. Introduced last year, the tax
credit itself does not change. Rather, the government has broadened
one eligibility criterion to allow certain corporations operating
in the information technology sector to qualify for the credit.
To qualify as an eligible corporation, at least 75 per cent of
the corporation's activities for the taxation year must be in
the information technology sector. The corporation's gross
income is the criterion taken into consideration to make such a
determination. In addition, at least 75 per cent of the
corporation's activities carried out in the information
technology sector must consist either of: services ultimately
supplied to a person with whom it is at arm's length or
services relating to applications developed by the corporation that
will be used exclusively outside Québec — or a
combination of both.
The change introduced relates to the notion of "information
technology sector." In the previous regime, this was limited
to activities included under code 541510 of the North American
Industry Classification System (NAICS), "Computer Systems
Design and Related Services." This notion is now broadened,
but exclusively for the purposes of the criterion relating to the
proportion of activities in the information technology sector (and
not the one relating to the proportion of services supplied).
Under the new regime, "information technology sector"
includes the activities encompassed by an additional six NAICS
codes: 334110 (Computer and Peripheral Equipment Manufacturing),
334220 (Radio and Television Broadcasting and Wireless
Communications Equipment Manufacturing), 417310 (Computer, Computer
Peripheral and Pre-Packaged Software Wholesaler-Distributors),
443120 (Computer and Software Stores), 511210 (Software Publishers)
and 51821 (Data Processing, Hosting and Related Services).
However, at least 50 per cent of the corporation's gross
income will have to be earned from activities included under NAICS
code 511210 (Software Publishers), activities included under NAICS
code 541510 (Computer Systems Design and Related Services) or a
combination of these activities within the same taxation year.
These changes will apply to salaries incurred by an eligible
corporation and paid to eligible employees after March 13, 2008,
and before January 1, 2016.
McCarthy Tétrault Notes:
If your corporation operates mainly in computer systems design
and related services but was under the threshold in the past
because it carried on other activities, you may want to see whether
those other activities now fall within the acceptable categories so
that your corporation can qualify for the credit.
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.
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