Tax Holiday for Foreign Experts and Researchers

Is your company carrying out scientific research or experimental development (SR&ED) projects in Quebec? Did you recently hire a foreign expert/researcher to help with those projects? Are you looking for a qualified expert or researcher to conduct your project but can’t find one in Canada? 

If you answered yes to any of these questions, you should learn about Quebec’s tax holiday for foreign experts and researchers. 

Working with R&D partners on the Foreign Expert Tax Holiday was one of the best decisions I have made since moving to Quebec. The program itself had a material impact on my finances, giving me the flexibility to pursue my work in Montreal’s startup ecosystem. As for the R&D Partners team, they made it easy and painless to navigate the system, even helping me re-qualify when I changed roles. 

– Isaac Souweine, Partner at Real Ventures 

These tax credits are designed to facilitate the recruitment of foreign experts or foreign researchers capable of aiding in the commercialization of innovation activities or the advancement of technology, respectively, within private companies in Quebec. It helps Quebec companies remain competitive by attracting highly qualified researchers/experts to perform scientific research and experimental development (SR&ED).  

Foreign Researcher or Expert Eligibility 

Both foreign experts and foreign researchers can be eligible for this tax holiday. However, it is important to distinguish the criteria that applies to each.  

A foreign researcher is a highly qualified individual with a second cycle university degree (Master’s, Doctorate, PhD) or significant experience in their field of research, or both. To be considered highly qualified, they must demonstrate research specialization in the pure or applied sciences. This requirement can be satisfied in many ways, such as having written a thesis, having completed post-doctoral studies, holding a patent, receiving relevant honors (awards, fellowships), or having relevant research experience. 

The emphasis is on the competence of the field of study, either academic or through experience. The candidate for foreign researcher will work directly on the company’s R&D projects. 

A foreign expert, on the other hand, is a qualified and experienced individual with a first cycle university degree (Bachelor’s), but with a focus on a high level of relevant experience in the management of financing or commercializing of R&D and technological innovations. For experts, the emphasis is on the experience in funding and managing innovation projects from start to finish.  

Foreign experts will not necessarily work on the company’s R&D project directly, but will manage its success during its development phase, go to market phase, or both.  

Finally, to qualify for the tax holiday, neither experts nor researchers may have resided in Canada prior to their employment term with the company.  

Tax Holiday Rates 

The provincial tax holiday will directly benefit the foreign employee for a maximum of 5 consecutive years and is applied to the salary received by the expert/researcher on: 

• 100% of their taxable income for the first 2 years
• 75% the third year
• 50% the fourth year
• 25% the fifth year

Application Process 

Applications are submitted to the Ministry of Economy and Innovation (MEI) before the 1st of March of the calendar year that immediately follows the start year of the expert or researcher at the company, or they will lose the first or even subsequent years of their tax holiday. 

For example, if a foreign expert starts working at the company in October 2021, they must submit their application to MEI by February 28th, 2022, to benefit from the full 5 years of the tax holiday 

One of the key documents to prepare for the tax holiday is the Comparative evaluation for studies done outside Québec, which should first be prepared and submitted to the Ministère de l’Immigration, de la Francisation et de l’Intégration (MIFI). The comparative evaluation indicates which educational benchmarks, main diplomas, and curriculum in Quebec can be compared with the expert or researcher’s studies completed abroad. It establishes a comparison between two official education systems. Once the form is reviewed by the MIFI, the applicant will receive a certificate attesting that the applicant’s degrees abroad are equivalent to degrees obtained in Quebec, a key requirement for the tax holiday application. 

It is also important to justify the fit between the candidate and the role they will fulfill for the company by demonstrating exactly what their expertise will bring to the project.  

This will require the inclusion in the application package of a detailed description of the candidate’s previous experience and competence demonstrating their expertise in their field as well as a description of the role’s key responsibilities and reasons why it is vital to the success of the R&D project.  

How R&D Partners Can Help

If you have questions or comments about these tax credits, please do not hesitate to contact Sahar Ansary at 1-800-500-7733 for more information.