The Refundable Tax Credits for the Development of E-Business (CDAE)
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The Refundable Tax Credits for the Development of E-Business
This tax measure, administered by Investissement Québec, is designed to consolidate the development of information technologies (IT) throughout Quebec. It enables eligible corporations to obtain a refundable tax credit until December 31, 2025.
Nature of Tax Assistance
The tax assistance consists of a refundable tax credit equal to 30% of the eligible salaries, designated by the Taxation Law, paid by an eligible corporation. The eligible salary is limited to $66,667 per employee ($75,000 as of January 1, 2016), for a taxation year, and may not exceed $20,000 ($22,500 as of January 1, 2016) per eligible employee. The tax credit claim form must be filled in at the end of the taxation year, when a corporation produces its income tax return. Furthermore, the credit obtained may be deducted from the quarterly income tax and capital tax instalments.
To be eligible, a corporation must have an establishment in Quebec where it carries on a business during the year and respect the following criteria:
1. Percentage of activities in the IT sector
At least 75% of the corporation’s activities must constitute activities in the IT sector, and these activities are grouped under the following NAICS codes:
- 334110 – Computer and Peripheral Equipment Manufacturing;
- 334220 – Radio and Television Broadcasting and Wireless Communications Equipment Manufacturing;
- 417310 – Computer, Computer Peripheral and Pre-Packaged Software Wholesaler-Distributors;
- 443120 – Computer and Software Stores;
- 511210 – Software Publishers;
- 51821 – Data Processing, Hosting and Related Services;
- 541510 – Computer Systems Design and Related Services.
In addition, at least 50% of the corporation’s gross income be earned from activities included under the following NAICS codes:
- 511210 – Software Publishers;
- 541510 – Computer Systems Design and Related Services; or a combination of these activities;
- 561320 – Temporary Help Services;
- 561330 – Professional Employer Organizations.
2. Services Provided
For a corporation to be considered eligible, at least 75% of its activities covered by NAICS code 541510 must consist either of services ultimately provided to a person with whom it is at arm’s length or services relating to applications developed by the corporation that are used exclusively outside Quebec, or a combination of these two items.
3. Retention of Six Eligible Jobs
The corporation must maintain a minimum of six eligible employees at all times during a given taxation year.
An employee is eligible if the following conditions have been satisfied:
1. He or she is not a “specified shareholder” within the meaning of the Taxation Act;
2. He or she held a full-time job involving at least 26 hours of work a week, for an expected minimum period of 40 weeks.
3. He or she devoted at least 75% of his or her time to carrying out, supervising or directly supporting the work relating to the execution of an eligible activity:
- Information technologies consulting services relating to technology, systems development, e-business processes and solutions;
- Development, integration, maintenance and evolution of information systems technology infrastructure;
- Design and development of e-commerce solutions;
- Development of security and identification services relating to e-commerce activities.