Canada

Updates to Quebec tax credits & incentives to offset US tariff impact

TAX ALERT  | 

Recent initiatives and changes by the government of Quebec include enhancements to the investment tax credits (ITCs) for manufacturing and processing equipment with new measures and increases for eligible companies. These changes have been put in place as a means to support the impact on Quebec businesses in the manufacturing sector following the U.S. government's imposition of tariffs and are in addition to the increases in capital cost allowances detailed in the previous two Canadian budgets.

The following article outlines specific areas where impacted manufacturing companies can leverage these new updates to benefit their growth and sustainment.

Property eligibility for Quebec-based companies

Established in 2008, the purpose of the ITC is to boost productivity. The credit is equal to a percentage of the purchase cost of equipment; the percentage amount varies depending upon where the company is located as well as its size.

For companies with global consolidated paid-up capital (PUC) of less than $250 million, the ITC is refundable. It is considered partly refundable for those companies with a PUC of less than $500 million and more than $250 million. For companies with a PUC of over 500 million, the credit is non-refundable. Please refer to the detailed chart below for regions and rates.

New measures and increases

The new increases have been broken down into three areas and will apply to expenses accrued on property inclusively between August 16, 2018 and December 31, 2019.

Increase one: Outside resource regions
Since December 31, 2016, property purchased outside resource regions has not been eligible for the ITC. This has now changed and that property now qualifies.

Increase two:  Return to previous level
The credit rate has been raised to the level it was before June 4, 2014.

Increase three: Rate for PUC of greater than $500 million
For companies with a PUC of $500 million or more, the ITC rate will be 5 per cent instead of 4 per cent.

Other measures

Eligible companies operating in the metal processing sector with a PUC of $250 million or less will realize an increase in the ITC rate by 5 to 10 per cent. The chart below details the regions where the property is used and corresponding rates applicable from August 16, 2018 to December 31, 2019. The regions encompass the:

  • Remote resource regions of Abitibi-Témiscamingue, Côte-Nord, Nord-du-Québec, Gaspésie-Iles-de-la Madeleine,
  • Intermediate regions of Saguenay Lac-St-Jean, Mauricie, MRC Antoine Labelle, Kamouraska, La Vallée-de-la Gatineau, Les Basques, Pontiac, Rimouski-Neigette, Rivière-du-Loup and Témiscouata, and
  • The Eastern Bas-St Laurent including MRC de la Matapédia, Mitis and La Matanie.

Rates applicable from Aug. 16, 2018 to Dec. 31, 2019

Remote resource regions

 

Intermediate resource region

Eastern Bas-St Laurent

Other Quebec regions

PUC≤$250M

40%

20%

30%

10%

PUC≤$250M (Metal Processing)

45%

25%

35%

20%

PUC>$250M

5%

5%

5%

5%

 

Relevant information to keep in mind

The ITC program is scheduled to be phased out on December 31, 2022. The rates are anticipated to return to their previous levels, (i.e., those in place before August 16, 2018) beginning on January 1, 2020. Additionally, the credit will no longer apply for property used in regions of Quebec, other than the resource regions, as of 2020:

Rates applicable from Jan. 1, 2020 to Dec. 31, 2022

Remote resource regions

 

Intermediate resource region

Eastern Bas-St Laurent

Other Quebec regions

PUC≤$250M

24%

8%

16%

Ineligible

PUC≤$250M (Metal Processing)

N/A

N/A

N/A

N/A

PUC>$250M

4%

4%

4%

Ineligible

 

Speak with an advisor to learn more about these and other government incentives and how they can assist the growth and sustainment of your business.

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National Tax Leader


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