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:

  1. Possibility of deducting your SR&ED expenses over several years;
  2. 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.

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Prepared in the context of a health crisis, the Legault government’s third budget focuses on three priorities: health, education and the economy.

As the Quebec government expected in the fall of 2020, the 2020-2021 deficit remains at $15B. After using the stabilization reserve, the current year’s deficit is $6.2B. For the next two years, the deficits are estimated to be $12.3B (2021-2022) and $8.5B (2022-2023), with the objective of balancing the budget in seven years, at the end of the 2027-2028 fiscal year. Since the deficits will continue for more than five years, the Balance Budget Act must be temporarily updated.

The underlying objective of those budget announcements is to avoid increasing taxes (individuals and corporations) and cutting back on public services. From an economic perspective, there are several noteworthy measures, including the three tax measures below.

Enhancing the investment and innovation tax credit (C3i)

In order to encourage businesses to accelerate their new technology investment projects, the government is announcing that the C3i rates will be doubled for a two-year period, that is, to December 31, 2022. That means the rates will go:

  • from 10% to 20% for investments in the Montréal and Québec City metropolitan communities;
  • from 20% to 40% for investments in territories where economic vitality is low;
  • from 15% to 30% for investments in other territories or regions.

That temporary increase, which will cost close to $290M over five years, will help more than 10,000 businesses complete their investment projects more quickly.

Reducing the tax rate for SMEs

In the 2021-2022 budget, the government is announcing a reduction of the tax rate for all SMEs eligible for the small business deduction (SBD) from 4.0% to 3.2%, the same level as Ontario, starting March 26, 2021.

Improving the tax credit for on-the-job training

This five-year, $14.1M measure, combined with other measures to help young Quebecers integrate the job market, is part of initiatives totalling almost $97M, including $31.4M in 2022-2023, to support young people who are neither in studies, employment or training, in their integration into the labour market.

Other Measures

In terms of economic support, the 2021-2031 Quebec Infrastructures Plan (QIP) will be increased by $4.5B to $135B, together with a 60% increase in investments in the next five years, providing a powerful driver of economic vitality. The budget is also adding $404M over five years to support the requalification of workers and the integration of immigrants into the labour market. Additional support is being provided for culture and tourism with $392M and $204M respectively in new funds over five years. Furthermore, an additional envelope of $523M and $218M is being provided for economic development in the regions and innovation, respectively.

For more information on the tax measures announced in the 2021-2022 budget, please download our document.

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On March 24, 2021, Finance Minister Peter Bethlenfalvy tabled Ontario’s 2021-22 budget (Budget 2021). The two
main anchors for Budget 2021 are health and the economy.

Corporate tax rates

No further changes to the corporate tax rates or the $500,000 small business limit are proposed.

Ontario Small Business Support Grant

Budget 2021 announces that the government will be providing a second round of Ontario Small Business Support Grant payments. Eligible small businesses that received the first payment will automatically qualify for the second round of support grant for a minimum of $10,000 and up to $20,000. The government will provide more details on the second grant application.

Download the pdf below for more details.

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Christine Brosseau
Partner | CPA, CA | Assurance

The restaurant industry has been particularly hard hit by the pandemic. What should you do to plan for your business’ future?

Nobody knows how long the pandemic will last or what the fallout will be over the medium and long terms. Faced with ever-changing public health and government restrictions, as well as major changes in consumer habits, restaurant owners have to make tough decisions about the future of their operations. That’s why it makes sense to review your business practices now and create a reopening plan.

Is it time to review your business’ strategic plan?

In times of crisis, it’s common for people to reassess their future on both the personal and professional levels. The pandemic prompted many restaurant owners to adapt to new market trends by offering online ordering and sales, delivery and curbside pick-up. Now that those changes are in place, it’s time to take a step back and re-examine your procedures, work methods and maybe even your core business.

To do so, you’ll need to ask yourself important questions like:

  • Is my dining room too big?
  • Should I build or expand my outdoor patio?
  • Are my menu items aligned with new market trends?
  • Should I consider bringing in a new shareholder?
  • Can my bank representative help me plan new projects?
  • Is my current financial structure need to be optimized?
  • Can I change the rates, terms and repayment dates of my existing loans?

What do your partners and employees have to say?

Since your business’ future is at stake, be sure to seek input from your shareholders, banker, accountant and key employees. Based on these conversations, you should be able to come up with a plan to help your restaurant get through this challenging period and adjust to today’s new realities.

The situation is a difficult and delicate one. However, there are options out there—including some highly innovative solutions—that could give your business a brighter future. For instance, an external expert in business consulting could provide you with a fresh perspective on the situation and offer an assessment based on facts and figures.

Should I consider a turnaround plan?

Are you worried about your business’ financial situation? Rest assured that no matter how complicated things are right now, there are solutions that can help you plan for the future with peace of mind. A turnaround plan can provide you with an assessment of your strengths, weaknesses and business opportunities, so that you can make informed decisions on how to improve your prospects. With clear diagnostics and guidance, you’ll have a better idea of where your business stands and which solutions are best for you and your organization.

After a tough year, is hope on the horizon?

If anything, the past year has forced the hospitality industry to think outside the box and prove its ability to respond to consumer demands.

Despite the uncertainty of fast-changing restrictions, it’s clear that many new consumer habits are here to stay. Restaurant owners need to take customer needs into consideration when developing their long-term strategy, while also adjusting their business plan to capitalize on new opportunities.

This article is written by Christine Brosseau. You can watch this video (in French) to learn more about those issues.

25 Mar 2021  |  Written by :

Christine.Brosseau is an assurance expert at Raymond Chabot Grant Thornton. Contact her for good...

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