As an incentive to embark on innovative projects, your clients in Prince Edward Island may receive a refundable labour rebate for salaries and wages paid for certain projects. Projects for the Innovation and Development Labour Rebate are typically short term, as only one year of labour expenses is eligible for the credit. If a project extends over multiple years, Innovation Prince Edward Island may prorate the rebate over several years, not to exceed a decade.
Tax Credit Computation
The Innovation and Development Labour Rebate provides a tax incentive equal to 25 percent of eligible salaries and wages. The salaries and wages must be paid to Prince Edward Island residents. Plus, these employees must be full-time workers earning at least $30,000 per annum of gross wages. Anybody who has an ownership stake in the company is not eligible to be included in the salary and wage costs.
To receive the Innovation and Development Labour Rebate, your client must have a permanent establishment in Prince Edward Island. In addition, your client must develop new or innovative products, processes, or services in specific industrial sectors. The only approved sectors are aerospace, biosciences, export-focused manufacturing and processing, financial services, information technology, and renewable energy. The project your client is undertaking must also provide economic benefits to Prince Edward Island.
Before your client starts working on its innovative project, it must apply for the Innovative and Development Labour Rebate. Once a project is approved, claims are accepted each quarter.
The application is broken into six sections. The first section collects general information from your client including the company’s name, address, and contact person details. It also requires your client to provide annual sales, annual exports, business sector information, and legal entity information. The second section calls for geographical location information of your client’s business as well as employment information. The third and fourth sections call for additional documentation, while the fifth section relates to the type of assistance for the application. Lastly, your client must consent and declare the information provided is correct.
The third and fourth sections of the application call for external documents. In section three, requirement paperwork includes a history of your client’s business, description of the business, and financial statements for the last two years. It also requires shareholder information, project proposal information, estimated costs of the project, facility information, and current market position. The fourth section outlines optional documentation including business plans, marketing plans, feasibility studies, competitive analysis, a professional resume, and any relevant consultant studies. Although these items aren’t required, they could help strengthen your client’s application.
Once a project is accepted for financial assistance, your client receives a letter or offer stating terms and conditions. This contract between the government and your client stipulates what must occur for your client to receive funding. If your client does not uphold the terms and conditions of the agreement for its innovative projects, the government can declare your client to be in nonperformance of the contract. Your client may be required to repay any money it has received from the government as well as be held accountable for paying interest on incentive amounts collected.
Work with your clients in Prince Edward Island to see if they are eligible for the Innovation and Development Labour Rebate. If they are, help them prepare an application to send to Innovation PEI to recoup some labour expenses related to their innovative projects.