Every tax credit counts, and if your clients are running a business in the IT field in Québec, they might be eligible to take advantage of a specialized tax credit applicable to eligible corporations. As of 2017, the development of an E-business tax credit allows corporations to claim a credit for each person they employ. The credit is significant and can be worth up to $25,000 for each eligible employee.
Are Your Clients Eligible?
This credit is generally only available to companies that employ a minimum of six employees, although there are some exceptions for start-ups. Also, this credit only applies to employees with full-time jobs, who devote at least 75 percent of their time to eligible activities. This can include carrying out the development activities themselves, providing support, or supervising others who carry out these activities.
Finally, your client’s corporation must meet certain criteria. Eligible corporations must operate an IT business in Québec. At least 75 percent of the business’s activities must focus on IT, and 50 percent of those activities must be related to specific industries including the following:
- Computer systems design and related services
- Video game development
- Software publishing
- Video game publishing
In some cases, these industries can also qualify under the 50 percent eligibility requirement if they provide qualifying IT services:
- Professional Employer Organizations
- Temporary Help Services
Even if an e-business does operate in one of the qualifying fields, not all activities in these industries are eligible for the credit. If your client provides IT consulting services that support system design and development or if your client manages e-business processes, it’s probably eligible. Likewise if it’s directly involved in designing, integrating, and maintaining information systems and technology infrastructure, it may also be able to claim the credit. This can include e-commerce technology for handling monetary transactions with customers, and security and identification services that support the secure operation of these systems.
Eligible activities must be geared towards developing and maintaining systems and infrastructure which means that some functions, even if they are seemingly directly related to IT development, do no qualify. These ineligible functions include hardware installation, training and administration, and any activity in support of a brand marketing information system. Daily operational activities, such as electronic transaction processing or e-commerce platform support, are also ineligible.
Qualifying for and Calculating the Tax Credit
Make sure you remind your clients to apply annually, as they must obtain a certificate every year from Investissement Québec for both the company and each employee every year. There is a fee to apply.
To calculate the credit for each eligible employee, multiply their salary (maximum of $83,333) by 24 percent to arrive at the refundable portion of the tax credit.. This is the amount your clients can get back regardless of whether or not they have a net tax liability. In other words, even if they don’t owe taxes, they can still pocket that amount. Then, multiply the salary by 6 percent to get the non-refundable amount. This is the amount they don’t get to keep if their tax liability drops to zero or below, so help them plan accordingly.
As long as you make sure your clients stay up-to-date on their applications, they can take advantage of this credit year after year. This credit and similar programs can help your clients to get a real advantage in growing an e-commerce business in Québec.