Your business could benefit from tax measures, such as SR&ED tax credits, for its innovation projects. Do you know all of these measures?
Any organisation, whatever its industry, that is involved in manufacturing and processing or that has technological innovation projects may qualify for specific tax incentives.
These credits are not exclusively for plants, factories or manufactures. For example, under the Scientific Research and Experimental Development Tax Incentive Program, the government encourages organisations of all sizes and in all sectors to put innovative research and development ideas into application.
Tax measures: keep an eye on deadlines
Your activities or projects may be eligible for some of these measures. However, there are deadlines to respect in order to claim these tax incentives or modify previous years’ tax returns if the measures have not all been claimed.
Here are the key points that every organisation should know in order to maximize its tax position in terms of its manufacturing and processing activities or innovation investments, regardless of the industry.
Additional deduction for a manufacturing SME’s transportation costs
A business only needs to carry out a certain proportion of manufacturing and processing activities to benefit from this additional deduction. Furthermore, it does not have to incur transportation or delivery expenses to take advantage of it.
Tax rate reduction
A business that carries out a proportion of its manufacturing and processing activities is entitled to a tax rate reduction in Quebec.
Investment and innovation tax credit
Certain assets acquired for use in manufacturing and processing activities are eligible for a provincial investment tax credit, a tax subsidy that reduces the acquisition cost of these assets.
At the provincial level, the rate of this tax credit may vary depending on the RCM where the asset is used. The 2021-2022 Quebec budget has just enhanced this credit by doubling the rates for investments made until December 31, 2022.
At the federal level, there is a similar investment tax credit and the only eligible regions in Quebec are the Bas-Saint-Laurent, Gaspésie and Îles-de-la-Madeleine.
Accelerated and additional capital cost allowance
Certain assets acquired for use in manufacturing and processing activities qualify for a total capital cost allowance. For Quebec purposes, these assets also qualify for an additional 30% capital cost allowance in the following year.
Tax credit to support employment in Quebec’s maritime regions
An enterprise that has certain manufacturing and processing activities in the Bas-Saint-Laurent, Côte-Nord, Gaspésie and Îles-de-la-Madeleine regions may benefit from a tax credit on the salary paid to certain employees, that is, a subsidy that reduces the payroll cost.
Reduced employer contribution
Enterprises in the manufacturing sector may be entitled to a reduced Health Services Fund (HSF) contribution rate.
Scientific research and experimental development (SR&ED)
A business that carries out manufacturing and processing activities is included in the main industries that are likely to be able to use these tax incentives.
Businesses that are searching for knowledge or know-how to create new materials, devices, products or processes or improve existing ones or are looking for new scientific or technological knowledge may be entitled to SR&ED tax incentives.
The two main benefits of SR&ED tax incentives are:
- Possibility of deducting your SR&ED expenses over several years;
- Obtaining the investment tax credit (ITC) for SR&ED and using it to reduce your income tax payable (in some cases, the Canada Revenue Agency (CRA) may refund remaining ITCs).
Are you taking full advantage of the special tax features of your manufacturing and processing activities and innovation projects? Our team of tax experts can help you make the most of them. Don’t hesitate to call on them; they have mastered the complex tax provisions in this field. Their strategic location also means they are aware of regional characteristics.
Your success is important to us. We make our knowledge and expertise available for your business.