To encourage small businesses to integrate information technology into their business practices, the Canada Revenue Agency offers tax benefits to companies in Quebec. This refundable tax credit is based on the amount of money spent on qualified IT integration contracts.
Eligibility Requirements – Clients
To receive the tax credit, your clients must be a corporation or partnership established in Quebec. In addition, more than half of your clients’ activities must be in an eligible sector. For this tax benefit, eligible sectors are limited to primary (agriculture, forestry, fishing, mining), manufacturing, wholesale trade, and retail trade sectors.
Qualified Integration Contract
The federal government has outlined a number of requirements that must be met to receive the credit. The IT integration contract must be carried out for the purpose of setting out a plan to gain access to a computer system infrastructure to optimize business processes such as implementing cloud computing. The contract must be with a person at arm’s length who provides a qualified management software package.
The qualified management software package has to fulfill at least one requirement. The software must enable management to either gain access to all operational processes of the business, have the ability to interact with its customers, or cover all movements of information across the supply chain. Alternatively, the software could develop these software packages, reconfigure existing packages, or provide support and training to personnel to resolve technical issues.
Tax Credit Calculation
The tax credit correlates to 80 percent of costs related to a qualified informational technology integration contract. Total associated costs are capped at $312,500. The maximum credit amount is $250,000, or $312,500 x 80 percent. The expenses must be related to contracts that were negotiated after March 26, 2015, for corporations in the primary and manufacturing sectors. Alternatively, the expenses must be related to contracts negotiated after March 17, 2016, for clients in the wholesale and retail trade sectors.
How to Receive the Credit
The first step to receiving the IT integration credit is to send a completed Application for a Contract Certificate to Investissement Quebec. This application should be sent as soon as your client has a written agreement for the delivery of a management software package. The application is broken into five sections. First, your client must provide general information about its corporation including the company name, address, and representative’s information. Second, your client must state the activities of its business. This includes stating the place of business, number of employees, and the sector(s) in which it operates.
The third section of the application is a preliminary analysis. This pertains to a written document that outlines the problems affecting your client’s IT and the analysis performed to fix these issues. The fourth section outlines mandatory documents to be included with the application. This includes analysis documents, financial statements, and corporate organizational charts. The last section requires your client to declare the application is correct by signing the form.
Once the application is complete, Investissement Quebec reviews the information. If your client is found to be eligible for the credit, it will receive an eligibility certificate to be included with its federal income tax return. Start by informing your clients of this tax credit, and for those in Quebec looking to integrate information technology into their operations, discuss the requirements of receiving this tax benefit.