Overview of Quebec’s C3i Tax Credit for Investment and Innovation

The Quebec provincial government first introduced the Tax Credit for Investment and Innovation – or C3i for short – in its March 2020 budget. It was initially intended as a replacement for prior investment and innovation tax credits, with more advantageous rates and broader eligibility.  

This article offers an overview of the tax credit’s criteria, reimbursement rates and other relevant details. It will also examine the changes the 2021-2 Budget introduced to the tax credit in response to the COVID-19 pandemic to further support economic revitalization and recovery.  

Company Eligibility 

The C3i tax credit is not restricted by industry – with a few notable exceptions we will touch on later. Its first stated goal is to encourage the purchase of manufacturing and processing equipment. It can also be used to purchase enterprise resource management software packages – ERP for short – and computers. The broader goal is to help Quebec businesses digitize their operations and modernize their equipment, and accelerate these investment projects by reducing the financial burden on the corporations that undertake them.   

Quebec “qualified corporations” – that is corporations carrying business and with an establishment in the province – are eligible for this credit. A few exceptions apply to certain aluminum producers and oil companies. Additionally, certain businesses engaged in partnerships that operate aluminum production sites or oil refineries may not qualify either.  

All businesses in Quebec are eligible regardless of location, but the economic vitality index for each region affects tax credit rates under this program. This means that businesses in more economically developed areas will have lower tax credit rates, and those in economically underdeveloped areas will have higher tax credit rates. We will examine these different rates in detail below.  

Tax Credit Rates 

Businesses with assets and gross income below $50 million can benefit from a fully refundable tax credit. Those with assets and gross income exceeding $100 million are instead eligible for a non-refundable tax credit. Finally, the C3i tax credit is partially refundable for businesses that fall in between the $50 and $100 million thresholds.  

As mentioned earlier, businesses located in areas considered to have “low economic vitality” are eligible for higher tax credit rates. Those areas are those with an economic vitality index amongst the lowest 25% in the province. The complete list of regions eligible for the highest tax credit rate, as well as a map showing the original tax credit rate for each administrative region of Quebec can be found in section C-42-43 of Budget 2020. Three new territories can also qualify as having low economic vitality for eligible purchases made after June 2021: Le Domaine-du-Roy, Maskinongé and Papineau. 

It is important to note the difference between the original tax credit rates that came with the tax credit’s original 2020 Budget announcement, and the temporarily bonified rates announced in the 2021 budget in response to the COVID-19 pandemic. The bonified rate is simply double the original rate.  

All eligible equipment purchased outside of the bonified tax credit rate period (March 25, 2021 to January 1, 2023 exclusively) will still be eligible for the tax credit at its original nonbonified rates – as long as it is purchased before January 1, 2025, the current final end date for this tax credit. At the time of publication, eligible businesses have a little bit less than a year to purchase equipment and software that will qualify for the bonified rates. 

Expenses 

All eligible equipment must have been purchased after March 2020, but before January 2025 in order to qualify for the tax credit.  

However, two exclusion thresholds apply. For manufacturing and processing equipment, only expenses in excess of $12,500 are eligible for the tax credit. A lower minimum $5,000 expense threshold applies to computer hardware and management software packages purchases.  

Businesses claiming the C3i credit are also subject to an overall $100,000 cap on eligible expenses over five years.  

C3i’s Interaction with Other Tax Credits  

First, the new C3i fully replaces the tax credit for the integration of IT in SMBs. This older tax credit was retired because ERP software packages are covered under the C3i. Expenses incurred on or after January 1st, 2021, are no longer eligible for the integration of IT in SMBs tax credit.  

The other tax credit that the C3i partially or fully replaces, depending on a business’s situation, is the tax credit for investments relating to manufacturing and processing equipment – ITC for short. Unlike the tax credit for the integration of IT in SMBs, however, the ITC tax credit remains available to businesses in specific resource regions at rates ranging from 4% to 24%. The businesses that are still eligible for the ITC will have the choice to continue using that tax credit for the time being or switch over to the new C3i credit. Businesses that are eligible for both will need to examine their specific circumstances and identify which credit maximizes their government funding.  

 

To find the C3i tax credit on our free, AI-powered funding search engine, click here.  

 

How R&D Partners can help

If you have any questions about this or other tax credit programs, do not hesitate to contact Dominik Klein at [email protected], or at 1-800-500-7733 ext. 103.

Further Reading: 

2020-1 budget PDF  

2021-2 budget PDF  

 

This article is intended for general informational purposes only and does not constitute professional accounting or tax advice.  

Enhancements to Quebec’s University Research R&D Tax Credit

Two major changes to the University Research Tax Credit were announced in the latest Quebec budget in March 2021. These changes will make the credit more accessible and advantageous for startups and smaller research projects.

In this article, we will go over the tax credit basics, changes recently announced, and the impact on your next university research tax credit claims.

You can also read this previous article for more details on incentives found in the 2021 Quebec budget.

University Research Tax Credit Basics

The Tax Credit for University Research or Research Carried out by a Public Research Centre or a Research Consortium – more commonly referred to as the University Research Tax Credit – is one of the four components of Quebec’s provincial research and development tax credit. The other three components are the Tax Credit for Salaries and Wages (R&D), the Tax Credit for Private Partnership Pre-Competitive Research, and the Tax Credit for Fees and Dues paid to a Research Consortium.

Eligible expenses for the University Research Tax Credit are limited to cash payments made to a university or research center acting as a first-level subcontractor. To be considered a first-level subcontractor, the university or research center must undertake the research themselves, meaning they cannot subcontract the research activities.

The reimbursement rates for all four components of the Quebec R&D Tax Credit were standardized in 2014. The maximum rate now varies between 14% and 30% depending on the status and size of the company. The maximum rate of 30% is for Canadian Controlled Corporations with less than $50 million in assets. This article describes the changes announced in 2014 in more detail.

The advantage of the University Research Tax Credit is a higher inclusion rates for subcontractor expenditure (80%) in comparison to the inclusion rate under the more traditional Tax Credit for Salaries and Wages (50%). For a company at the 30% refundable tax credit rate, this can make quite the difference.

Finally, the work undertaken must be eligible R&D work.  Moreover, the main researcher on the project cannot be named as a party in the contract and the company that subcontracts the research work must hold at least some rights to the research undertaken.

University Research Tax Credit Changes

First, the 2021-22 Quebec budget abolished the requirement to obtain a favourable advanced ruling (“décision anticipée”) from Revenu Québec regarding the eligibility of the research contract to claim the tax credit. This requirement was removed primarily to reduce the administrative burden on firms looking to benefit from the measure.

Previously, the need to obtain a favourable advanced ruling cost $318 plus tax in application fees paid to Revenu Québec. Besides the direct fees, the time invested in preparing all the documents required for the advanced ruling was considerable. For some prospective applicants, after all the fees, the time spent preparing the documentation, the excluded amounts, and their effective refund rate, the cost of the application outweighed the benefits.

While the reduction of the administrative burden for applicants is a net positive – especially for smaller firms and earlier stage companies – the eligibility criteria previously verified at the advanced ruling stage have not been lifted. The same documentation will be required in event of audit.

Second, Revenu Quebec has also abolished its exclusion limit when it comes to the University Research Tax Credit for fiscal years beginning after March 2020. The exclusion limit previously made the first $50,000 spent on otherwise eligible R&D expenditures ineligible for tax assistance from Revenu Québec for companies with assets below $50 million. The threshold limit could be as high as $225,000 when the company’s assets were $75 million or more.

This exclusion previously applied to all four components of the Quebec R&D tax credit. With this change, it no longer applies to the University Research Tax Credit, but remains in place for the other three components of the Quebec R&D Tax Credit. This provides an even further incentive to claim the University Research Tax Credit in comparison to the other Quebec R&D tax Credits.

This change is also beneficial for businesses claiming other Quebec R&D Tax Credits in combination with the University Research Tax Credit. This is due to the fact that the total exclusion amount remains proportionately divided among the Quebec R&D Tax Credits the business claims, and then the portion associated with the University Research Tax Credit effectively gets discarded.


 

How R&D Partners can help

If you have any questions about this or other tax credit programs, do not hesitate to contact Dominik Klein at [email protected], or at 1-800-500-7733 ext. 103.

Further reading:

2021-2022 Quebec Provincial Budget (in French only): http://www.budget.finances.gouv.qc.ca/budget/2021-2022/fr/documents/Budget2122_RenseignementsAdd.pdf

Quebec’s Tax Credits for Scientific Research and Experimental Development: https://www.revenuquebec.ca/en/citizens/tax-credits/tax-credits-for-scientific-research-and-experimental-development-rd/

 

Disclaimer: This article is for informational and general guidance purposes only.

Funding Opportunities for Sustainable and Connected Vehicles Innovation

As one of the world’s leading vehicle manufacturing regions, Canada makes significant efforts to remain on the cutting edge of innovative automotive technologies.  

Canada leverages its innovation clusters and new ideas that emerge from startups, national, and international firms in Canada to revolutionize transportation and automotive technologies. The areas of focus include quantum technologies, AI, clean technologies, and advanced manufacturing. 

Several government agencies and not-for-profits across Canada focus on advancing greener transportation technologies, while others offer incentives that aid in the growth and development of automotive innovations.  

Below are some key sponsors interested in connected, sustainable, and autonomous vehicles in Quebec and Ontario that one should keep in mind when looking for funding. Within each funding program sponsor, we will highlight the flagship program(s) and sought benefits.  

Quebec
  

Quebec Ministry of Economy and Innovation (MEI) 

The Quebec Ministry of Economy and Innovation offers funding programs and partners with other sponsors to further accelerate scientific and technological advancements in Quebec. The Ministry emphasizes the importance of research and innovation and assists organizations dedicated to the promotion, development, and transfer of research and innovation.  

Call for Proposals in the Demonstration of Sustainable Transport Technologies  

This call for proposals plans to offer $6.5 million in grants over a five-year period to support SMEs within Quebec to carry out demonstration projects that showcase their land transport and sustainable mobility technologies.  

Eligible projects must develop a new product or process that has a significant advantage over existing solutions – or significantly improves current products and processes – and be undertaken in collaboration with a city or transportation company within Quebec. 

The grants offered through this program can subsidize up to 50% of project costs – up to a total contribution of $350,000 – and eligible projects may be no longer than 18 months in duration. 

Program details are currently only available in French, and the next deadline to apply is November 17th, 2021.  

This specific call for proposals is also part of the Quebec government’s larger Sustainable Mobility Policy for 2018-2030 (in French only).  

Ontario

Autonomous Vehicle Innovation Network (AVIN) 

The Ontario provincial government has dedicated significant resources to the development of the automotive industry, specifically for innovations related to autonomous vehicles.  

Ontario’s Autonomous Vehicle Innovation Network is dedicated to developing the economic potential of automotive and smart mobility innovations with the potential to radically change transportation methods and the related infrastructure.  

Through AVIN and the larger “Driving Prosperity” initiative, the Government of Ontario has dedicated $85 million to help Ontario SMEs develop, test, and commercialize mobility technologies for the future. This funding broadly supports research and development, talent acquisition, innovative initiatives, and more.  

AVIN directly offers several funding and support programs, but also partners with other organizations within Ontario to deliver targeted support for specific projects.  

AV Research and Development (R&D) Partnership Fund 

This program is divided into two streams and offers co-investment opportunities of up to 33.3% of project costs. Stream 1 offers up to $100,000 in total funding, while Stream 2 can offer a maximum of $1 million, as well as includes costs for hiring an intern as part of the project.  

Both streams are intended for projects developing connected and autonomous vehicles technology beyond the feasibility study stage and require the collaboration of at least one lead applicant and a partner. Ontario SMEs, Canadian or foreign corporations, municipalities, indigenous communities, not-for-profits, and post-secondary institutions are eligible applicants or partners for both streams. Publicly funded post-secondary institutions cannot act as the lead applicant for stream 2.  

AVIN Waterloo Ventures 

AVIN funds this program in partnership with Communitech and other partners. It is specifically designed to fund innovations in the fields of self-healing and high-definition maps that facilitate mobility.  

This program is intended for Ontario startups and scale-ups (500 employees or less) and offers grants of up to $50,000 to selected applicants. In addition to grant funding, the program also offers expert support and coaching to facilitate the development of a working prototype or improve the product in order to create additional market traction.  

Canada Wide
 

Sustainable Development Technologies Canada (SDTC) 

This National Canadian foundation was created by the federal government to help foster the growth of the clean technologies sector in Canada and promote environmental sustainability. Since its inception in 2001, SDTC has injected nearly $1.4 billion into 460 Canadian clean technologies companies and helped create over 16,000 jobs nationwide. 

Clean Tech Fund  

This fund provides grant financing to develop promising clean technology development and demonstration projects led by start-ups or scale-ups. The technology itself must be beyond the proof-of-concept stage, but not yet commercialized. The technology must also demonstrate a potential for GHG emissions reductions, reductions in water consumption and/or the reduction of water, soil or air contamination levels. The project must have demonstrated environmental and economic benefits for Canadians. These grants can subsidize up to $4 million or 40% of eligible project costs, with an average contribution of $3 million. 

The Clean Tech Fund’s portfolio of funded companies currently includes sectors ranging from agriculture and forestry to power generation and transportation. In the transportation sector, current accepted projects are also varied and show the wide range of the applications of new technologies to make the automotive and transportation sectors more sustainable: projects related to lithium-ion batteries, fleet management and route planning solutions, hybrid heavy vehicles and motion sensors for autonomous vehicles all qualified for the program!  

Applications for this program are accepted on a rolling basis, with five approval rounds per year. 

How R&D Partners can help   

If you have any questions about the programs we mentioned above, do not hesitate to contact Dominik Klein at [email protected], or at 1-800-500-7733 ext. 103 

 

SR&ED Frequently Asked Questions, Answered by R&D Partners Experts

Introduction

The federal scientific research and experimental development (SR&ED) tax incentive program (ITC) is one of the most generous in the world. As the largest federal funding program in support of business R&D in Canada, it awards more than $3 billion annually to companies that conduct eligible R&D activities. Compared to other programs, SR&ED is particularly accessible since it is industry agnostic and does not require businesses to be revenue-generating to be eligible for funding. However, its application process can often seem daunting – especially for new claimants – and its requirements are not always clearly understood.

We get questions about SR&ED all the time, so we decided to round up some of the more common ones and have the experts on our team answer them.

The Experts

Debbie Frail, P. Eng., MBA

Debbie has spent her professional career managing engineering, operations, and project teams in several technology fields. For over 20 years, she has successfully worked with clients ranging from entrepreneurs to multinational corporations to prepare and defend SR&ED tax credit claims. Debbie works primarily in the manufacturing, automation, and transportation sectors.

Patrick Campana , P. Eng., MBA

Patrick has been managing engineering and project teams in several technology fields for over 18 years. Patrick specializes in preparing and defending SR&ED tax credit claims for companies of all sizes operating in the telecommunications, software, and manufacturing sectors.

The Questions

How do I know if my project is eligible for SR&ED?

Patrick: SR&ED eligibility is based on a fundamental question: are you solving a technological uncertainty? If the current state-of-the-art technology available to you does not allow you to reach your technological objectives with a straightforward and known approach, your project is likely eligible for SR&ED tax incentives. However, the answer may not be that easy to ascertain depending on the situation.

Beyond technology specific criteria, the company’s size and experience in the field must be considered. Companies with extensive proprietary knowledge may have to push their experimental development efforts further than a less experimented company might need to do to qualify for the SR&ED program.  Conversely, a small company entering an unfamiliar area of technology for them may need to first go through a learning curve before reaching the state-of-the-art level of competency from where they can start working with the SR&ED program.

Ultimately, there is no one-size-fits all answer here, and each project still has to be evaluated on a case-by-case basis to determine eligibility.

Want to know more about how to evaluate your eligibility for SR&ED? Read one of our previous articles all about the topic here

What is the key to a successful SR&ED audit?   

Debbie: First, proper documentation is key. Keeping accurate time sheets and recording material and sub-contracting expenses is essential to a successful SR&ED claim.  Additional substantiating documentation to demonstrate the work done is also important. This can include records of tests carried out, analysis of results and conclusions made, meeting minutes, invoices, correspondence, modifications made to prototypes, and other contemporaneous information that can support the claim.

Additionally, it is important to be well prepared and knowledgeable as to the SR&ED program technical and financial tax requirements. For example, you can only claim the portion of an employee’s salary that is proportional to the amount of time they spent on eligible SR&ED activities – and not their entire salary for the year – unless they spent at least 90% of their time on activities that are eligible for SR&ED.

Want to know more about SR&ED audits and how to face them? Read our article dedicated to the subject here. 

What is the best way to track my project activities?

Patrick: The CRA doesn’t ask for any specific ways to track the project. The most important thing is to always have dated documentation, and there are a few ways to make it as simple and useful as possible.

Tracking individual tasks with a project management tool like Jira is not always the most helpful: this keeps the focus on low-level individual tasks and often lacks linkages to claimed SR&ED activities. Using an overall project map that gives a bird’s eye view of the project – its stages, who is assigned to which tasks and the general timeline – can be a simple and very useful tool. It can help anyone who is not familiar with your project – like a CRA auditor – understand it as a whole.  It is also a valuable resource to identify and justify which expenses can be claimed.

How should SR&ED program time be tracked? 

Debbie: You can only claim the salaries directly related to SR&ED eligible activities. This would exclude work that does not directly support experimental development, such as routine software development and routine quality control testing. It is important to track both eligible and non-eligible SR&ED program time to ensure you can demonstrate full work periods, and also to enable you to reclassify time in the event eligible SR&ED program time was improperly classified.

The worst way to track your time is of course to not track it at all: it often leads to either a refusal or underestimation of the time spent on eligible SR&ED work. This means that you are potentially losing money you could have been entitled to.

We recommend and work with three different kinds of time tracking systems: 1) intelligent spreadsheets we have developed for very small R&D teams; 2) our very popular, automated pull time tracking solution (contact us for a demo!) that requires very little training or work; and 3) established, customized web and ERP time tracking tools. This last option works best in large enterprises with well installed systems and methods.

How do I differentiate between SR&ED hours and non-SR&ED hours in my timesheets? 

Patrick: In most cases, it is not productive to ask individual contributors to classify their work as SR&ED or non-SR&ED in their timesheets, unless a project can be clearly circumscribed and identified as SR&ED work ahead of time.

Often, when a project encompasses both SR&ED and non-SR&ED activities, the final distinction can only be made retroactively, once one can determine what work went beyond the current state-of-the-art in an attempt to solve a technological uncertainty. Therefore, the important thing is to consistently label activities so they can later be easily retrieved and included in your SR&ED claim.

Artifacts naturally generated throughout the duration of the project – if they are dated and identify contributors and associated labels, will efficiently corroborate timesheet data down the road.

What is the best way to track my material expenses? 

Debbie: We often suggest that clients set up specific G/L codes for material and sub-contracting expenses that are related to a SR&ED claim in their internal accounting system. Tagging them and keeping track for when the claim is filed – and in case of audit – is crucial.

What should I do if I already received government funding for the project? Am I still eligible for SR&ED?

Debbie: Yes, you are still likely eligible for SR&ED even if you received other government funding – a grant, for example – for your project. However, you have to be aware of the stacking limits and of how the government aid you received or are expected to receive could reduce your eligible SR&ED expenses – or even your ability to claim the SR&ED tax credit.

The important element is understanding the stacking limits of every source of government funding, as well as the allowable interactions between these sources of funding.  Generally, more funding and funding programs are preferable. However, the cost of applying for, tracking, and reporting on the funding programs should be taken into consideration, as at some point additional funding programs will have diminishing or negative net funding returns.

Want to find out more about what to keep in mind when you apply for potentially competing government funding programs? Read our blog post all about it here. 

 

If you have any questions about SR&ED that this blog post left unanswered, or if you are considering submitting a SR&ED claim, don’t hesitate to contact our team at:  1-800-500-7733, ext.2

 

Disclaimer: The views expressed in this article are provided for informational purposes only. Iis not intended to nor can it replace the evaluation of your specific SR&ED claim by a dedicated consultant. 

Funding Opportunities for AI Quebec Companies

The Pan-Canadian Artificial Intelligence Strategy, launched in 2017, has catapulted Canada as a leading global player in AI. According to a report by the University of Toronto, this initiative has injected $125 million into the country’s top AI talent and research institutions as of 2020. It has also made Canada a true leader of AI innovation, bringing 50,000 jobs and $3 billion in investments to the country since 2015. In Quebec alone, there were 131 companies developing flagship products using AI in 2020.  

The implementation of the Innovation Supercluster strategy in 2018 and the establishment of an AI innovation supercluster in Montreal – Scale AI – continues to make Quebec a great place to develop artificial intelligence’s potential.  

As a result, significant investments have been made by government, not-for-profits and other key stakeholders to facilitate the growth of companies developing AI-powered technologies. There are now countless funding opportunities that AI startups, SMEs and entrepreneurs at various stages of their journeys can leverage to continue developing and implementing innovations related to artificial intelligence. 

Keep reading to find out more about five key funders that any company developing or implementing AI in Quebec should know about.  

 

Scale AI 

The Supercluster Initiative was launched in 2018 with the goal of fostering innovation in key economic sectors, increasing collaboration between the private sector and researchers, creating jobs, and giving Canada a competitive edge when it comes to technological development. There are five superclusters across Canada, each focused on one key industry sector: digital technology, plant protein development, advanced manufacturing, marine technology and artificial intelligence. This last supercluster is known as Scale AI 

Scale AI offers grants meant to create customized training programs for companies to enhance their employees’ knowledge and understanding of AI tools. These training grants can subsidize up to 85% of the first $100,000 of eligible training costs. 

They also offer an Acceleration program, which supports accelerators, incubators, innovation hubs and others involved in supporting and scaling-up Canadian AI startups with great potential. This program does not offer direct support to startups, but rather seeks to develop a robust innovation ecosystem through accredited partners.  

Scale AI’s main hub is located in Montreal and its activities are co-funded by the Federal and Quebec governments, but funding is being made available to companies Canada-wide. For example, their Acceleration program was expanded to British Columbia and Ontario in 2020.  

Want to learn more about this supercluster and the four others available to innovators in various industries across Canada? Read our article dedicated to the Supercluster Initiative.  

 

IVADO Labs 

IVADO Labs is a leading provider of AI-driven supply chain solutions. This Montreal-based organization was launched in 2017 with major support from the provincial government and in partnership with IVADO and its founding academic institutions. Through this unique partnership, IVADO Labs has access to a world-renowned faculty fellow network of the largest Canadian AI R&D federation of labs. 

The INVEST-AI program is a division of IVADO Labs with the mission to help small and medium Quebec companies increase their performance by integrating and applying AI to their business processes. This program has 4 main objectives: 

  • Improve the productivity and competitiveness of businesses in Quebec through the application of AI 
  • Enable companies to implement the AI solutions they develop within two years 
  • Provide businesses with the capacity to maintain those AI solutions
  • Expand the use of AI to other areas of the business  

Mitacs 

Mitacs is a National Canadian non-profit organization that builds partnerships supporting industrial and social innovation nationwide through its partnerships with 70 universities, 6000 companies, and both the federal and provincial governments. From aerospace systems to childhood literacy rates, Mitacs-funded research helps to strengthen connections, improve economic performance, and create jobs. 

While they are perhaps best known for their paid internship program, Accelerate, Mitacs offers an eight-week Digital Revolution collaboration course for companies of all sizes hiring students and post-doctoral fellows who are well-versed in AI, quantum computing, and cybersecurity to help them develop and harness these new crucial technologies.  

 

Quebec Ministry of Economy and Innovation 

The Quebec Ministry of Economy and Innovation offers funding programs of its own and partners with other sponsors to further accelerate scientific and technological advancements in Quebec. The Ministry emphasizes the importance of research and innovation, and assists organizations dedicated to the promotion, development and transfer of research and innovation.  

The Partenar-IA Business program is aimed at business groups, including start-ups or a minimum of 2 SMEs, wishing to carry out an innovative and collaborative R&D project. This call for projects originates from the Ministry of Economy and Innovation, but is administered by Quebec’s nine Industrial Research Sectorial Groups – Regroupements sectoriels de recherche industrielle or “RSRI” in French. These groups are dedicated to promoting the development and adoption of AI in their specific industry areas. 

Eligible projects are those that highlight research related to the field of artificial intelligence and that is carried out in collaboration with an eligible public research center. At the time of publication, the next application deadline for this program is October 15th, 2021. It is important to keep in mind that, as with many Quebec Government funding programs, most information about the program is in French.  

The MEI also currently has an active Call for Innovative Artificial Intelligence Projects that offer grants to fund various AI projects through 3 components: 

Component 1 is geared towards SMEs and startups wishing to carry out an innovation project for the development and marketing or adoption of artificial intelligence (AI) technologies. Component 1 is intended for artificial intelligence startups that currently receive (or plan to receive) support from a business incubator or accelerator. 

Component 2 is open to all Quebec companies, with priority given to SMEs and startups wishing to carry out an innovation project for the development and marketing or adoption of artificial intelligence (AI) technologies. It is intended for artificial intelligence projects related to the production of goods and services or for carrying out in-house research and development activities. 

Lastly, Component 3 is intended for major collaborative projects undertaken by consortia composed of at least two Quebec companies. The businesses involved in these collaborative projects must share the costs, benefits, and intellectual property of the project.  

Program details for all components are only available in French, and, at the time of publication, the next deadline for all three components is October 15th, 2021.  

 

CEIM Montreal 

CEIM Montreal is a pioneer of Montreal’s startup ecosystem that has contributed to the successful launch and development of various companies. Through its offering of accelerator and incubator programs, CEIM’s mission is to support entrepreneurs with innovative projects by offering them tailored coaching and mentoring services. 

The AI for Supply Chains program offered by CEIM Montreal has both an incubator and accelerator that can offer $35,000 to both early-stage or growth-stage startups. Both programs are directed towards earlier stage startups developing an AI solution that can have applications in supply chain management.  

 

How R&D Partners can help   

If you have any questions about the programs we mentioned above, do not hesitate to contact Dominik Klein at [email protected], or at 1-800-500-7733 ext. 103 

 

Further reading:  

Canada’s AI Ecosystem: Government Investment Propels Private Sector Growth (University of Toronto) https://research.utoronto.ca/media/541/download 

Intro to the Tax Credit for the Production of Multimedia Titles

The tax credit for the Production of Multimedia Titles has been in place since 1996 and was created to develop the multimedia sector in Quebec and make the province an attractive place to develop video games and interactive digital media applications. A variety of interactive media products can be considered eligible for this credit, with varying rates.

This credit is refundable and applies to the salaries of eligible employees or subcontractors for work done on eligible multimedia productions in Quebec. This work can include any stage of the production, with activities including initial design, writing, game development and user community management all being possibly eligible.

In this article, we will take a deep dive into Quebec’s Tax Credit for the Production of Multimedia Titles and go over the details of the funding as well as the specifics of the eligibility criteria.

Eligibility Criteria

First, this tax credit can only be claimed by businesses that meet specific criteria and that undertake eligible work. The work also needs to be done by eligible employees or subcontractors in Quebec. Therefore, several criteria must be met to claim the credit.

To be eligible for the Multimedia Tax Credit, companies must operate a corporation that has an establishment in Quebec and be the main producer of an eligible multimedia title. Only the producer of a title may claim the credit, so if a title is being developed in total or in part at the request of another corporation, Investissement Québec will not recognize the corporation as having produced the title.

A corporation that produces a portion of the eligible multimedia title on behalf of the main producer of the title can also claim the tax credit on the portion that they worked on, but only if the main producer of the title does not have an establishment in Quebec.

Eligible labour expenses related to production work can often be claimed in full – excluding any other source of government or non-governmental funding covering the same expenses – for salaried employees and subcontractors not at arm’s length. Eligible production work done by a subcontractor at arm’s length can be claimed at 50% of its total cost. In all these cases, the employee or subcontractor has to be based in Quebec for the tax credit to apply.

Eligible production work includes all activities necessary to design and produce the title, from the beginning of the design stage and continuing indefinitely, including after the title is initially commercialized. This includes principal development of the title’s interactive structure, architecture and programming, the core design of the title’s interactivity loops, and the production of the title’s content – art, text, scenario, sound design, music and more.

Activities necessary for further development and improvement of the title after it has been commercialized are also eligible. This can include developing and maintaining a community of users who can provide feedback on issues, additions to a title post-commercialization and the analysis of quantitative data to optimize the title.

Project Eligibility

Corporations can claim the Multimedia tax credit if they produce an eligible interactive digital media title in Quebec and intended for commercial release. Titles that are produced for internal use are not eligible, they must be available for sale. Interactive digital media titles can include video games, educational software, professional simulators, and more.

To be eligible, projects must include at least 3 of the following 4 media: text, sound, fixed images and animated images.

One important thing to keep in mind is that interactivity must be integral to the product’s functionality. Most – if not all – of the interactive elements should be contained within the electronic medium.

Investissement Québec specifies that the types of media – text, sound, fixed images and animated images – must be present in “appreciable quantity”, and they must all be an integral part of the functionality of the game, mobile app or another type of multimedia title. The loss of one of the elements should fundamentally affect the functionality of the software.

In addition to the basic eligibility criteria – the title must contain at least 3 of 4 types of media – the title must meet Investissement Québec’s criteria of interactivity within the electronic medium. This is evaluated with 3 main criteria: feedback, control, and adaptation.

Feedback is measured by the response given to the user – or player – of the title whenever an action is taken. This could be an audiovisual cue that an action has been completed, or a text-based comment on the quality of an answer given by the user for a puzzle, or other ways the title indicates a user’s performance in a level and suggestions on how to improve, for example.

Control is measured by the degree of influence the user can have on the electronic medium and its content. Examples of control include moving a character around, making choices between options provided by a game, or implementing a strategy to achieve a goal.

Adaptation is measured by the degree of variability of the actions available to the user of the title depending on specific situations. The presence of specific events that can only be engaged according to a user’s skill level or the skills they selected on a decision tree as they progressed through a game can satisfy this criterion.

Investissement Québec also evaluates the scenario of the title: what reason is the title giving the user to interact with it? This criterion can be met by having a series of objectives or a storyline.

All these elements work together and drive the criteria behind “interactivity” between the player and the multimedia title. While they are used in a broad sense to determine whether any digital media title or application available electronically is eligible as a “multimedia title,” in practice the tax credit is principally intended for video game production activities.

Tax Credit Rates

This refundable tax credit can fund up to 37.5% of eligible labour expenditures. However, different maximum amounts and percentages will apply depending on specific circumstances. The main factors that affect the tax credit rate and funding amounts of this program are the language in which the interactive title is released, the nature of the title – is it entertainment or educational? – and who conducted the eligible development work.

In the vast majority of cases, the base tax credit is 30% of eligible labour expenditures on an eligible multimedia title according to the criteria discussed above. Claimants can also receive a bonus 7.5% tax credit on a commercialized title if a French-language version is available at the time of its release. It is important to note that a corporation could not launch a title exclusively in English – or any other language – and then add French text or audio after it is released and claim the full 37.5%. Because the title was not available in French at the time of its release, the company could only claim up to 30% of labour expenditures in this case.

It is important to note that a lower tax credit rate of up to 26.25% applies to titles in any language that are intended for professional training purposes only.

Maximum Funding Amounts

Once we know the company’s overall tax credit rate for the project – 37.5%, 30% or 26.25% depending on the title – it is applied to the eligible labour expenses to calculate the actual amount the company can receive claiming the credit.

Three scenarios can apply depending on who conducted the eligible development work.

First, as mentioned earlier, production work done by a subcontractor at arm’s length can be claimed at 50% of its total cost. The maximum refundable tax credit amount, therefore, corresponds to 37.5% of half of the contract value in this case.

When the work is done by an employee or a subcontractor not dealing at arm’s length with the company claiming the credit, the eligible labour expenses are usually capped at $100,000 per employee or subcontractor per year. If an employee’s salary or subcontractor’s fee is lower than $100,000, the entire salary is therefore eligible. This means a maximum possible refund amount of $37,500 per employee in most cases.

That said, there are some exceptions. This is because, for employees and non-arm’s length subcontractors, the program allows companies to exceed the $100,000 of salary expenses per year for a certain number of eligible individuals. The entire salary of even the highest-paid employees can then be considered an eligible expense, even if it is well over $100,000 a year, making the potential refund per employee more than $37,500.

The number of employees who can have more than the first $100,000 of their annual salary be considered an eligible expense is determined by multiplying the total numbers of employees and non-arm’s length subcontractors for which the company is claiming the credit by 20% and rounding the number.

Application Process

While it is granted by Revenu Québec to incentivize companies to develop video games and interactive media products in Quebec, it is important to note that much of the application process for this credit first goes through Investissement Québec, not RQ itself.

The application process for this tax credit is divided into two parts. Companies must first obtain a certificate of eligibility to assess the eligibility of the title itself, followed by an attestation of production work, where IQ will certify the number of eligible hours worked by the corporation on the title. Both are issued by Investissement Québec. The first certificate confirms that the multimedia title qualifies for the credit and only needs to be obtained once, while the production work attestation has to be renewed for every taxation year in which the corporation claims the credit.

 

How R&D Partners can help  

Still have questions about this tax credit? Contact Dominik Klein at [email protected]

 

Additional Resources:

Investissement Québec program page: https://www.investquebec.com/quebec/en/financial-products/smbs-and-large-corporations/tax-credits/production-of-multimedia-titles.html

Detailed program factsheet: http://www.investquebec.com/Documents/qc/FichesDetaillees/FTTITRES_general_en.pdf

7 Funding Opportunities for Life Sciences & Health Technology Businesses

While the life sciences and health technology sector – LSHT for short – has seen an average of about 5% growth per year over the past decade, 2020 was a critical year for medical innovations as the world faced the COVID-19 pandemic. This crucial industry encompasses everything from prosthetics to pills, as well as therapeutics, diagnostic tools and methods, medical devices, pharmaceuticals, and any other product designed to treat a disease or aid in the treatment of patients.  

Now more than ever, the importance of R&D in the medical and pharmaceutical sectors is collectively understood, and topics like vaccine manufacturing capacity and the rapid development of new therapeutic treatments and technologies like ventilators has come to the forefront of our discussions as a society. 

Of course, with the increased need for PPE, new medical technologies, treatments, vaccines and more, the government as well as private sponsors have dedicated increased funds to projects related to the LSHT sector. In 2020 and 2021, Innovative Solutions Canada launched innovation challenges to develop new, compostable surgical masks and more inclusive respirators, for example.  

Other program sponsors have always been focused on funding life sciences and health technology innovations and helping ground-breaking Canadian LSHT companies grow. The rest of this article will highlight some key sponsors offering funding programs, support services, and accelerators specifically meant for pharmaceutical, health technology, and life sciences companies across Canada and in Quebec.  

 

Support Organizations and Research Consortia 

Montreal InVivo 

Montreal InVivo is a non-profit that represents the LSHT cluster of Greater Montréal and is a credible source of information and reference for the LSHT sector. It aims to create a business environment that fosters innovation, growth, and competitiveness of the public and private organizations in the LSHT sector. Their recent partnership with Fundica allows SMEs to search for private and public funding through a powerful search tool with smart filters and advanced customization.  

CQDM 

The CDQM is a biopharmaceutical research consortium that funds the development of innovative tools and technologies to accelerate the discovery and development of safer and more effective drugs. Their business model is based on a collaborative approach between world-class pharmaceutical corporations, several Canadian biotech companies, the best scientists from both the public and private sectors, as well as the Canadian and Quebec governments. The CQDM has raised over $90M and has established 11 funding programs, launched 49 calls for proposals and more than 800 evaluated projects, for a total of over $850 M in funding applications. 

The Quantum Leap program offered by the CDQM is a funding program for drug discovery research and strongly encourages public-private partnerships between Canadian universities and SMEs to achieve innovative translational biopharmaceutical research projects. The deadline to participate in the current selection round is August 12th, 2021.  

MEDTEQ 

MEDTEQ is a focus point for Canada’s medical technology sector in terms of research, innovation and the integration of leading-edge solutions in the delivery of health care. Through collaborative industry-led projects, MEDTEQ’s mission is to accelerate innovation and to position products and services developed by the Canadian medical technology industry on a global scale.  

MEDTEQ’s Impact and Partenar- IA program is aimed at all public research centers and Quebec businesses (primarily SMEs and startups) wishing to carry out an innovation project for the development and commercialization or adoption of artificial intelligence technologies. The deadline for their 17th Call for Project is July 15th, 2021, with eligible projects required to be carried out by public research centers in collaboration with at least two companies. 

 

Startup Support & Accelerators 

Because the pharmaceutical and medical industries are constantly evolving, various accelerator programs can help LSHT startups grow. Montreal Universities Concordia and McGill also offer their own accelerator programs for startups in the LSHT sector.  

AdMare Bioninnovations 

adMare Bioinnovations is a Canadian global life sciences venture that works with academic researchers and companies to advance research, scale existing companies and technology, and provide professionals in the field with the skills they need to succeed.  

They offer an acceleration program supported by the Canadian and Quebec government to scale up promising young life sciences companies. Companies will receive capital up to $150,000 and other resources such as coaching/mentoring and discounts on office or lab spaces.  

District 3 

Concordia’s District 3 focuses on advancing an open, collaborative ecosystem that enables entrepreneurs to thrive and succeed while taking no equity from the companies they work with. Their Biohub 8-week accelerator offers weekly workshops, networking events with industry professionals, and potential access to their state-of-the-art wet lab.  

McGill Dobson Centre for Entrepreneurship 

In the Spring of 2021, McGill’s Dobson Centre for Entrepreneurship opened applications for a Health Sciences Lean Startup Program to accelerate health-related innovation through the development of entrepreneurship. The 8-week program includes weekly workshops and exposure to industry experts and business frameworks. The deadline to apply is September 26th, 2021, with the program activities taking place from October 19 and December 7th of the same year.  

Quantino 

In a recent press release, high-tech business incubator provider Quantino announced a new partnership with Université Laval’s Québec Heart and Lung Institute Research Centre that will provide incubation services to emerging medical businesses.  

Their goal is to develop made-in-Québec solutions for preventing, diagnosing, and treating cardiovascular and respiratory diseases (including COVID-19 and other emerging viruses) as well as type 2 diabetes and obesity. Quantino offers first-rate facilities, world-renowned experts and top-of-the-line technology to their incubatees to further accelerate their progression. Interested LSHT startups can apply to become an incubatee as of June 22nd 2021. 

 

How R&D Partners can help  

If you have any questions about the programs we mentioned above, do not hesitate to contact Dominik Klein at [email protected], or at 1-800-500-7733 ext. 103. 

The Dos and Don’ts of Grant Stacking

Entrepreneurs looking for funding in Canada have access to a large number of government programs that can support many of the costs associated with running a business: from R&D salaries and subcontractor costs to export-related expenses like market research and advertising to name only a few.

Despite the variety of programs in existence—whether they be tax credits, grants, low-interest government loans or other—many end up having overlapping eligible costs. Meanwhile, “double-dipping”—the practice of covering the same expense twice with two or more programs, under certain conditions and scenarios—is not allowed, for obvious reasons.

In fact, governments often put out multiple grants and tax credits intentionally focused on the same expenditures. Therefore, the number of programs available explodes. However, the expenses that can be covered are finite and to what extent they can be funded is generally capped at a certain percentage. This creates two problems:

1) The government is inefficiently and independently managing applications, claims, and audits for two or more programs that could be just one since they essentially cover all the same expenses.

2) Entrepreneurs need to apply for several programs rather than one. They try to maximize government funding but often do so without realizing that there are restrictions on the amount of funding a project or an expense can receive. This often ends up being less than the combined maximum offered by the programs the entrepreneur applied to, and the programs essentially “cannibalize” each other.

Over the last year, we have seen the second issue reach new heights as several—albeit very important—COVID-19 support programs, like the Canada Emergency Wage Subsidy (CEWS), became available to businesses. Since both the CEWS and the CRA’s Scientific Research & Experimental Development tax credit program (SR&ED) fund employee salaries, businesses claiming SR&ED in 2020 that benefited from the CEWS see a layer of complexity added to their SR&ED claim—they essentially need to remove their CEWS funding from their eligible expenditures for SR&ED when calculating their tax credit.

This process is further complicated by the changing funding rates of the CEWS—a subsidy that offered varying rates of financial support depending on the calculated revenue loss—as well as the SR&ED’s eligible activities and time tracking requirements. The CEWS / SR&ED cannibalization scenario was previously documented here, but this problem is not exclusive to emergency COVID-19 support.

Here is an example to illustrate the grant “cannibalization rate” concept more broadly. Take an imaginary company headquartered in Quebec with annual salary expenditures of $50,000. They develop innovative products and are eligible for the SR&ED tax credit. They find a grant to cover 50% of their payroll expenses for the year. Should they go for that grant?

The quick, obvious answer might seem to be “yes”. If they apply to the grant program and are accepted, they will ultimately receive more money from the government to cover the year’s salary expenses. But is that extra money worth it? When we break it down further, we quickly find that it might not be as advantageous as it first appears. This fictional company would benefit from running the following scenarios before making a final decision:

Note that in this example, we assume that the company is a Canadian Controlled Private Corporation (CCPC) where the incremental expenditure is above the minimum QC threshold. We can see that 54% of the grant ($13,625) is cannibalized before you even get to the cost of applying for or managing the grant, or the expected success rate. This leaves our example company with an $11,375 possible grant that is further reduced to $5,688 when we take typical success rates into consideration.

The cannibalization rates are generally between 35% and 55% for the situation above across other provinces prior to grant management costs. These cannibalization rates increase even more when dealing with other grants competing for the same expenditures until a ceiling is reached. In many cases, the cannibalization rates can reach 100% as early in the process as the second grant because the stacking ceiling has already been reached.

The simulation above is also interesting because we notice that the cost of applying for, managing, monitoring, and—heaven forbid—supporting the audit for, a grant is important to understand as well. It is estimated to cost $5,000 in the example.

When we add everything up, this fictional company only has a weighted incremental benefit of $688 if they go for the grant. However, the grant also may also provide this business with greater cash flow as it is received before the SR&ED tax credit. The value it can bring is not exclusively in terms of the total contribution received from the government; the timing is also important when considering this added cash flow.

In the end, always make sure you understand the success rates, cost, cash flow needs, net benefit, and what is important to you in a grant application before you pursue it. If you are planning to access competing government programs, then make sure you understand the cannibalization rates associated with combining them as well.

There are some excellent government grants that we use regularly for our business, but make sure you are informed before devoting time, energy, and money to applications that may not yield the return on investment you hoped for.

If you have more questions about grant stacking and cannibalization rates or want to find out how R&D Partners can help you maximize your government funding and simplify your life, please contact Mike Lee at [email protected] 1-800-500-7733, ext 110.

The 2021 Federal Budget: What’s in it for Canadian Innovators?

On April 19th, 2021, Deputy Prime Minister and Finance Minister Chrystia Freeland presented the first Federal budget in two years. Despite the proposed $101 billion investment and projected $154.7 billion deficit in 2021-2, no personal or corporate tax increases are planned. The budget’s focus on economic recovery and growth means several measures and investments will benefit Canada’s leading technology and innovation sectors. It is described as “a plan to invest in Canadian innovation, for long-term growth.” (127)   

This blog post will focus on what we consider to be the announcements most likely to lead to direct funding for Canadian technology companies or startups, and less so on general economic or personal tax measures. For more information about the rest of the budget, we have linked some other helpful articles, as well as the full budget document, at the end of this post.   

Economic Recovery and Small Business Support  

The Canada Recovery Hiring Program (CRHP) will be introduced in June 2021 and stay in place until November 2021 (128). It will help Canadian-controlled private businesses hire more employees as the economy recovers from the COVID-19 pandemic. At its height, the program will cover up to 50% of incremental remuneration paid to employees, going down to 20% by the planned end of the program in November.   

Additionally, the government is extending the Canada Emergency Wage Subsidy and Canada Emergency Rent Subsidy programs until September 25th, 2021. These programs will see their subsidy rates go down gradually starting in July, right after the CRHP comes into effect. It is important to note that, when it comes to the CEWS and the CRHP, a business will only be able to use one of the programs but will be able to choose the one that would offer them the largest amount of support.   

The Canada Small Business Financing Program will see its annual funding increased by $560 million (135). This additional funding will serve a variety of purposes. Maximum loan amounts will be able to go from $350,000 to $500,000 and new loan classes will be introduced to better serve the startup and technology ecosystem: Intellectual property, as well as startup expenses, will become eligible for funding.  

To help small businesses adopt digital technologies, the government is introducing the Canada Digital Adoption Program (131). The program is expected to have an impact in two areas: job creation and helping SMEs adopt new digital technologies faster. “Main street” businesses with a storefront and business location will be eligible to receive microgrants to support costs associated with technology adoption. Manufacturers, processors and other SMEs will also be eligible to receive advisory services for technology planning and development of e-commerce strategies, as well as access to zero-interest loans with the Business Development Bank of Canada.   

Technology and innovation funding  

Zero-emission technology manufacturers will benefit from a new temporary tax reduction until 2032 (161-2). Their corporate tax rates will be slashed by 50% as of January 2022: from 9% to 4.5% for small businesses and from 15% to 7.5% for general corporations. These tax cuts are meant to facilitate the growth of the already significant clean manufacturing sector in Canada. While the products that make a company eligible for the tax cut will be re-evaluated with time, currently the tax reduction could apply to manufacturers of electric vehicles, solar panels, green hydrogen and many others.   

MITACS will receive $708 million over 5 years to create 85 000 work-integrated learning placements (130). MITACS work placements allow students in high technology and science fields to bring their skills to eligible companies. Their Accelerate internships generally offer $7,500 (or 50% of the intern’s total salary) per 4-month work term.   

NRC-IRAP will receive $500 million in funding over 5 years (139). These additional funds are expected to help support 2,500 more innovative SMEs across the country through the popular Industrial Research Assistance Program (IRAP).    

A total of $450 million is being made available for a Venture Capital Catalyst Fund to support innovative companies and entrepreneurs, $50 million of which will be reserved for the life sciences and health technology sectors (139).   

The Innovation Superclusters Initiative will receive an additional $60 million in funding over the next two years. The initiative, launched in 2018, includes five organizations across the country, each focusing on a key economic sector: advanced manufacturing, digital technology, plant protein and agricultural technology, oceans and artificial intelligence.   

The Pan-Canadian Artificial Intelligence Strategy will receive $ 443.8 million in the next 10 years (148). The funding will mainly go towards the commercialization of AI-related technologies and will also support several academic training and research initiatives.   

The government is also launching a new National Quantum Strategy to invest in companies, researchers and other major actors of the emerging quantum technology field. This new initiative represents an investment of $360 million (149).  

A Pan-Canadian Genomics Strategy is also in the works, with a total investment of $400 million over six years planned (150). Few details are currently available on how the funding will be administered for these new Quantum and Genomics initiatives, but more will be announced in the next few months.   

We hope that this overview of some key proposals found in the 2021 Federal Budget can be useful to you and your business. As previously mentioned, we have included some additional resources below if you want to find out more about the many measures included in the 2021 federal budget.   

 

Other resources:  

Highlights of budget 2021: Billions for green economic growth, healthier Indigenous communities (CBC) 

Budget 2021: Building an Innovation Economy of the Future (Government of Canada) 

Read or download the official 2021 Federal Budget here 

If you are wondering what funding is available for innovative companies at the provincial level, read our other recent blog post about the provincial Ontario and Quebec budgets here 

Ontario and Quebec Budget Highlights for Canadian Tech Companies

As soon as the Ontario and Quebec provincial budgets were released, R&D Partners combed through their pages to find out what kind of financial support innovative companies from both provinces could expect from these highly anticipated government releases. In this month’s blog, we will share with you the announcements that most caught our eye.

This article will focus on some new investments that will likely have a direct impact on funding programs for innovative companies in Ontario and Quebec, and less so on measures for individual taxpayers or other industries. If you want to read more on general provincial budget highlights, we have linked other helpful articles at the end of this blog. Since it has yet to be tabled, we will also not be covering Canada’s Federal 2021-2022 budget, set to be released on April 19th.

 

Ontario

On March 24th, Minister of Finance and President of the Treasury Board Peter Bethlenfalvy presented Ontario’s 2021 provincial budget. The Ontario government projects a deficit of $33.1 billion by the end of the 2021-2021 financial year, with the hope of a return to a balanced budget in 2029 (CBC). Despite this, Ontarians will find that no corporate or personal tax increases were announced in this year’s budget.

Many measures to support the health sector, digitize access to government services and help families were announced, but we will focus on the key measures that will most benefit Ontario’s innovation sector.

There are few “funding programs” per se announced in the budget, but we can presume that some of the money attributed to various initiatives will be distributed as grants or other forms of government funding in the following months. Several other key investments are also likely to benefit Ontario’s innovative ecosystems and flagship industries in an indirect way.

$400 million to create the Invest Ontario Fund: Invest Ontario is a relatively new initiative with the mandate to encourage investments into Ontario’s advanced manufacturing, information technology and life sciences sectors. Invest Ontario is not a direct grant fund to which companies can apply for project funding but offers a repertory of Ontario government incentives and a panoply of consulting and investment attraction services and incentives. Later in the year, more details about how this $400 million investment will be used to support Ontario’s innovative companies will be announced.

$56.4 million to create the Ontario Vehicle Innovation Network (OVIN): This brand-new innovation network with continue and expand on the work achieved by its predecessor AVIN (Autonomous Vehicle Innovation Network). The new organization aims to bring together two of the most important innovative industries in Ontario: automotive manufacturing and information technology. Again, specific challenges and funding programs were not disclosed in the budget, but more details should follow soon. If OVIN adopts a similar approach to its predecessor, we can reasonably expect innovation challenges and hiring programs to be delivered by the Ontario Centre of Innovation (OCI). Companies developing electric or autonomous vehicles and connected mobility solutions will be the ones best positioned to benefit from this investment.

Doubled rates for the Regional Opportunities Investment Tax Credit: This refundable Corporate Income Tax credit introduced in the 2020-2021 provincial budget is being temporarily doubled, going from 10% to 20%. The credit is available to Canadian-controlled private corporations that invest at least $50,000 into the renovation or purchase of commercial or industrial buildings in targeted regions of the province where employment rates have historically been below those of the rest of the province, with the goal of increasing employment and strategic investments.

 

Quebec

A day after the release of Ontario’s provincial budget, it was Quebec’s finance minister Eric Girard’s turn to table his own. Like in Ontario, despite a large projected deficit of $12.3 billion and an anticipated slow return to a balanced budget for 2027-2028, no tax increases are planned (The Gazette). In Quebec, SMEs will in fact benefit from a tax reduction making their effective tax rate equal to that of Ontario SMEs: from a previous 4% to a 3.2% rate.

As far as a high-level budget highlights go, Quebec is relying heavily on infrastructure funding to kick-start its pandemic-stalled economy, and significant help is also planned for the tourism, culture, aerospace and IT sectors (Global News).

The Quebec budget offered a few more details than Ontario’s in terms of what portion of the major investments announced can be expected to affect government funding programs, but we will be waiting for many details until later this year.

$27 million for cybersecurity innovation: Prompt Quebec will use this investment to increase the funding allocated to the Quebec Cybersecurity Innovation Program. This program supports Quebec SMEs working on cybersecurity solutions, but also aims to attract foreign cybersecurity companies to settle in Quebec.

$6 million for accelerators and incubators: The government is allocating this amount to increase support available for existing accelerators throughout the province. The goal of this investment is to facilitate the rapid growth of innovative startups and to help Quebec technology accelerators and incubators take their place in global networks.

Doubled rate of the Investment and Innovation Tax Credit (C3i): The base rate of this tax credit first announced in the 2020-2021 budget will be doubled until December 31st, 2022, meaning the minimum tax credit rate will go from 10% to 20% and the maximum rate will increase to 40%. The credit is for businesses that acquire manufacturing and processing equipment, computer hardware and management software packages before January 1st, 2025. Its goal is to incentivize Quebec companies to adopt new technologies.

Simplification of the application process for the University Researcher Tax Credit: The Quebec Government is making this tax credit, which is very useful for innovative companies eligible for the Federal SR&ED credit, more accessible by removing requirements to obtain a pre-authorization from Revenu Quebec to access it. Eligible companies can now simply claim their research and development expenses subcontracted to a university or research center when filing their taxes. The tax credit rates vary from 14% to 30% depending on if the eligible company is an SME or a large corporation.

 

Other resources: 

Read the official Ontario 2021 provincial budget here. 

Here’s what you need to know about Ontario’s 2021 budget (CBC) 

Read the official Quebec 2021 provincial budget here 

Highlights of the 2021-22 Quebec budget (The Gazette)