Doing Business in Quebec: An Analysis of Investment Tax Credits

When companies like Google, Facebook, or Samsung are asked what motivated them to set up a team in Montreal, Quebec, Canada, they talk about the access to high-quality university talent in Artificial Intelligence (AI), the affordability of real estate, the ease of immigration for foreign talent, or even the quasi-European way of life.

One thing is for certain, the tech scene in Quebec, and more specifically Montreal, has never been more vibrant and consequently, opportunities for international companies are endless.

With the proliferation of collaboration software, technology companies, earlier than ever before, now find their teams distributed across multiple zip codes and time zones.

With that in mind, we have always preached the fiscal advantages of setting up an engineering team in Quebec, Canada, but noticed that foreign CEOs, CFOs, and COOs alike had difficulties quantifying the benefits.

So, we have compiled an easy-to-understand infographic that compares the expected tax benefits for a Canadian-controlled private corporation (CCPC) and a non-CCPC. The analysis was done using a fictional B2B SaaS company with ten engineers.

For a quick primer on the tax incentives included in the case study, be sure to read up on the SR&ED program and the Development of E-Business tax credit.

Straddling the US and Canadian Border

As a CCPC, if you are raising equity funding from American investors, it is commonplace to have investors ask you to set up a Delaware C-Corporation. This could have drastic effects on your SR&ED and E-business incentives, so be sure to consult a tax expert well before receiving a term sheet.

As a non-CCPC entering Quebec, Canada, there are ways of effectively becoming a CCPC, which, as demonstrated in the infographic above, would make you entitled to enhanced tax credit rates. A thorough analysis is needed to determine your eligibility, so it is always best practice to consult a tax expert before making a decision.

How R&D Partners Can Help

If you have questions or comments about building your team in Quebec, please do not hesitate to contact Mike Lee, President of R&D Partners at 1-800-500-7733 for more information.