TAX CREDIT TO SUPPORT DIGITAL TRANSFORMATION IN PRINT MEDIA COMPANIES INVESTISSEMENT QUÉBEC

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1 TAX CREDIT TO SUPPORT DIGITAL TRANSFORMATION IN PRINT MEDIA COMPANIES INVESTISSEMENT QUÉBEC Tax Measures Department

2 TABLE OF CONTENTS NATURE OF THE TAX MEASURE... 2 ELIGIBLE CORPORATIONS... 2 MEDIA CERTIFICATE... 3 Ineligible Media... 3 EMPLOYEE CERTIFICATE... 4 Eligible Emplyee... 4 Excluded Emplyee... 4 Qualified Wages... 4 Eligible Digital Transfrmatin Activities... 4 Excluded Activities... 5 DIGITAL CONVERSION CONTRACT CERTIFICATE... 5 OTHER TERMS OF APPLICATION... 6 APPLICATION FOR REVIEW... 6 AMENDMENT AND REVOCATION OF CERTIFICATE... 6 PENALTIES... 7 APPLICATION FOR ELIGIBILITY AND CLAIMING OF TAX CREDIT... 7 Filing f Dcuments with Revenu Québec... 7 SITE VISIT... 8 INTERACTION WITH OTHER TAX CREDITS, ASSISTANCE OR BENEFITS... 8 FEES... 8 PRECEDENCE OF LAWS

3 Refundable Tax Credit t Supprt Digital Transfrmatin in Print Media Cmpanies The Refundable Tax Credit t Supprt Digital Cnversin in Print Media Cmpanies (CTNP) is designed t help safeguard Québec s print media and maintain prductin f riginal written cntent n news f general interest specifically intended fr Quebecers. As print media cmpanies face stiff cmpetitin frm the giants n the Web that captures a significant prtin f advertising revenues, it is imprtant t supprt them in initiating r cntinuing the digital cnversin f their business mdels. NATURE OF THE TAX MEASURE This is basically a refundable tax credit 1 equivalent t 35% f all reasnable qualified digital cnversin csts incurred, after March 27, 2018, by an eligible crpratin 2 r an eligible partnership. 3 These digital cnversin csts are the ttal amunts paid by the crpratin in the taxatin year fr the qualified wages f its eligible emplyees and expenditures related t an eligible digital cnversin cntract. 4 An eligible crpratin will be able t benefit frm this tax credit until December 31, 2022, inclusively, except fr a cntract relating t the acquisitin f an eligible asset, which must be acquired befre January 1, 2022, in rder t qualify fr the tax credit. The tax credit is subject t an annual $20-millin cap n qualified digital cnversin csts applicable t each taxatin year (maximum annual amunt f the tax credit: $7 millin). In additin, where an eligible crpratin is assciated with ne r mre ther cmpanies in a taxatin year, the cumulative balance f the qualified digital cnversin csts must be determined by taking int accunt the qualified digital cnversin csts f the cmpanies with which it is assciated. ELIGIBLE CORPORATIONS An eligible crpratin is a cmpany, ther than an excluded crpratin, r a partnership, that has an establishment in Québec where it carries n a business and hlds an eligibility certificate issued by Investissement Québec, called a Media Certificate, indicating the eligible media that it has prduced and published fr the taxatin year. Under the Taxatin Act, an excluded (r exempt ) crpratin, fr the taxatin year, means: A crpratin that is exempt frm incme taxes fr the year; A Crwn crpratin r a whlly cntrlled subsidiary f such a crpratin. 1 A refundable tax credit means that the credit will be paid t the eligible crpratin minus all taxes payable. 2 A crpratin, ther than an excluded crpratin, that is a member f an eligible partnership fr a taxatin year in which the partnership s fiscal year ends, receives the credit in prprtin t its share f the incme r lss f the qualifying partnership fr the fiscal year in questin. 3 The rules apply t a partnership with the necessary adjustments, subject t ther prvisins. 4 An expenditure related t an eligible digital cnversin cntract designates 80% f the prtin f the crpratin s expenditure related t the csts prvided fr in the cntract. 2

4 T qualify fr this tax credit, the crpratin must btain the fllwing certificatins fr each taxatin year: An eligibility certificate fr each f the media prduced and published that meets the applicable rules referred t as a Media Certificate ; A certificate in respect f each emplyee fr whm the crpratin is claiming a tax credit referred t as an Emplyee Certificate ; A certificate in respect f each digital cnversin cntract fr which it is claiming a tax credit referred t as a Digital Cnversin Cntract Certificate. MEDIA CERTIFICATE T be eligible, the media must meet the fllwing cnditins: It must be prduced and published daily r peridically (at least 10 times a year) by the crpratin in the frm f a print publicatin, a website r an infrmatin-nly mbile applicatin. Fr the first applicatin, the crpratin will have t demnstrate that it has been prduced and published fr at least 12 mnths prir t the filing f the applicatin. It must disseminate riginal written infrmatin cntent relating t news f general interest specifically addressing Quebecers and cvering at least three f the fllwing seven news tpics: plitics, municipal internatinal cultural business and ecnmy, as well as lcal interest, and miscellaneus. The media s newsrm must be lcated in the crpratin s establishment lcated in Québec and be cmpsed f jurnalists respnsible fr the riginal written infrmatinal cntent including reprts, prtraits r interviews, news analysis, regular clumns, investigative reprts and editrials. The fllwing are nt cnsidered riginal written infrmatin: Cntent frm a news agency r anther media cmpany; Specialized cntent relating t a specific type f persnal, recreatinal r prfessinal activity intended specifically fr a grup, an assciatin r a categry f individuals; Cntent fr which remuneratin is paid by a third party. Ineligible Media Advertising r prmtinal cntent media such as advertrials; Thematic cntent media n specific subjects such as hunting and fishing, hme decr r science. 3

5 EMPLOYEE CERTIFICATE An Emplyee Certificate certifies that the individual cncerned is recgnized as an eligible emplyee f the crpratin fr the taxatin year fr which the applicatin is made r fr a part f a year indicated therein. Eligible Emplyee Eligible emplyee, fr the taxatin year, means an emplyee, ther than an excluded emplyee, wrking primarily at an establishment in Québec f the eligible crpratin fr which Investissement Québec has issued an eligibility certificate cnfirming that the fllwing cnditins have been met: The emplyee hlds a full-time jb fr the crpratin invlving a minimum f 26 hurs f wrk a week, fr an expected minimum f 40 weeks; At least 75% f the emplyee s duties are devted t carrying ut, supervising r directly supprting eligible digital cnversin activities fr the eligible crpratin. In additin, when an individual is temprarily absent frm wrk fr reasnable cause (temprary illness r maternity leave, fr example), Investissement Québec may, in rder t determine whether the individual meets the cnditins t be recgnized as a an eligible emplyee, find that the emplyee cntinued t wrk and perfrm duties thrughut this perid f absence, exactly as the individual had been ding befre the absence started. Excluded Emplyee The expressin excluded emplyee, fr the taxatin year, means a designated sharehlder f the crpratin fr that year r, where the emplyer is a partnership, a member f that partnership, a designated sharehlder f such member, r an emplyee nt dealing at arm s length with the member f that partnership r the designated sharehlder, as the case may be, fr the fiscal year f that partnership. Qualified Wages The expressin qualified wages f an eligible crpratin, fr the taxatin year, refers t the wages calculated accrding t the Taxatin Act and incurred during the year by the eligible crpratin fr its eligible emplyees fr that same year. Eligible Digital Cnversin Activities The eligible digital cnversin activities f a print media cmpany are activities related t the determinants f prductivity f that cmpany as ppsed t perating activities. Cnsequently, the term eligible digital cnversin activities refers t the fllwing activities: The develpment f infrmatin systems r the integratin f technlgical infrastructures, as well as any activity related t the maintenance r evlutin f such infrmatin systems r technlgical infrastructures, insfar as it is incidental t a develpment r integratin activity. The design and develpment f slutins fr interactive decisin-supprt tls (business mdelling), excluding the peratin f such tls. The design and develpment f tls t prvide an image f the current state f the crpratin fr data analysis (business intelligence) purpses, excluding the regular peratin f such tls. 4

6 In additin, t be eligible, an activity must be directly related t the initiatin r cntinuatin f the digital cnversin f the eligible media indicated n the annual eligibility certificate issued t the crpratin. Excluded Activities The fllwing activities are nt cnsidered eligible digital cnversin activities: Management r peratin f cmputer systems, applicatins r technlgical infrastructure; The peratin f a custmer relatinship management service; The management r peratin f a marketing infrmatin system aimed at increasing the visibility f the media and prmting it t current r ptential custmers; Any ther activity f the same nature qualifying as a management r perating activity fr the purpses f the eligible media. Mre precisely, administrative tasks such as peratins management, accunting, finance, legal affairs, public relatins, cmmunicatins, business prspecting and management f human and material resurces will nt be cnsidered tasks invlving an eligible digital cnversin activity. DIGITAL CONVERSION CONTRACT CERTIFICATE Eligible digital cnversin cntract, fr a given taxatin year, means a cntract that relates t ne r mre f the fllwing: The acquisitin r lease f an eligible prperty: this prperty cnsists f universal electrnic data prcessing equipment and related perating sftware, including ancillary data prcessing equipment, as well as the required applicatin sftware. Mre precisely, t be eligible, this prperty must: nt have been used r purchased r rented t be used r rented in any way befre it is acquired r leased by the crpratin; be used by the eligible crpratin exclusively t carry ut eligible digital cnversin activities that are attributable in whle r in part t an eligible media; be used fr the first time in the manner described abve within a reasnable perid f time fllwing its acquisitin and cntinue t be s used fr a minimum perid f 730 days frm the time f its acquisitin, unless the prperty ceases t be used due t its lss, its invluntary destructin caused by fire, theft r water, majr breakage r bslescence. Supply f eligible services: These services cnsist f eligible digital cnversin activities attributable in whle r in part t eligible media. In this respect, services rendered t the crpratin under such an eligible digital cnversin cntract must be reasnably attributable t the wages paid t emplyees f a Québec establishment f the crpratin r partnership that prvides such services, r that culd be paid if it had such emplyees. Eligible right f use r licence: A right f use r a licence in respect f anther persn s prperty will be eligible nly if it is intended that this right f use r licence will be used in 5

7 whle r in part by the eligible crpratin t carry ut digital cnversin activities that relate t an eligible media. Each f these elements will be eligible nly if used t initiate r cntinue the digital cnversin f an eligible media indicated n the eligibility certificate issued t the crpratin and if it relates t r is used at the Québec establishment f the eligible crpratin where it prduces and publishes the eligible media. OTHER TERMS OF APPLICATION In rder fr an eligible crpratin t qualify fr this refundable tax credit, the qualified digital cnversin expenses fr a taxatin year must have been paid at the time f the applicatin fr the refundable tax credit. In additin, this refundable tax credit, r the part f it that is attributable t the acquisitin f a qualified prperty by an eligible crpratin, as the case may be, will be recvered by way f a special tax, accrding t the usual rules, if the eligible prperty is dispsed f befre the end f the 730-day perid that began at the time f its acquisitin, unless the prperty is dispsed f due t lss, invluntary destructin caused by fire, theft r water, r majr breakage. A special tax will als apply, accrding t the usual rules, when an amunt included in the eligible digital cnversin expenses is subsequently refunded t the eligible crpratin. Finally, the tax legislatin will be amended s that the crpratin prviding the eligible services nevertheless benefits frm the refundable tax credit fr the develpment f e-business as lng as the cnditins applicable t that tax credit have been met. The refundable tax credit can be deducted frm an eligible crpratin s incme tax and capital tax instalment payments, accrding t the usual rules set ut in the Taxatin Act. APPLICATION FOR REVIEW A crpratin that disagrees with a decisin made by Investissement Québec may file an applicatin fr review within 60 days f being ntified f that cntested decisin. T d s, it must send Investissement Québec the Applicatin fr Review frm available n the website. T be admissible, the applicatin fr review must be accmpanied by payment f the applicable fees. AMENDMENT AND REVOCATION OF CERTIFICATE Investissement Québec may amend r revke a certificate if warranted by infrmatin r dcuments that have been brught t its attentin. In this case, Investissement Québec will ntify the crpratin in writing f its intentin t amend r revke the certificate and state the reasns fr ding s. The crpratin has 30 days frm the date f the ntice t present its arguments and file any relevant dcuments. Nte that it is imprtant t infrm Investissement Québec f any change that may result in an amendment r revcatin. Mrever, if a crpratin has received a tax credit when it shuld nt have received it in whle r in part, Revenu Québec will recver the amunt f the verpayment by means f a special tax. 6

8 PENALTIES Anyne wh prvides false r incrrect infrmatin r impedes the wrk f an Investissement Québec representative in his r her duties is guilty f an ffence. In such a case, the persn is liable t a fine f nt less than $2,000 and nt mre than $25,000. APPLICATION FOR ELIGIBILITY AND CLAIMING OF TAX CREDIT The applicatin fr the tax credit and its calculatin are made at the end f the taxatin year, at the time the crpratin files its incme tax return with Revenu Québec. In rder t qualify fr this tax credit fr a given taxatin year, an eligible crpratin must attach t its tax return: The frm prescribed by Revenu Québec relating t the digital cnversin tax credit; The Media Certificate issued by Investissement Québec in respect f eligible media; The Emplyee Certificate issued by Investissement Québec in respect f eligible emplyees; The Digital cnversin Cntract Certificate issued by Investissement Québec in respect f eligible cntracts. T apply fr certificatin f media, emplyees and cntracts, the crpratin must cmplete the prescribed frm available n the Investissement Québec website. The issuance f a certificate des nt guarantee that the tax credit will be granted. Under the Act respecting the sectral parameters f certain fiscal measures, the crpratin must file its applicatin fr certificatin with Investissement Québec by the last day f the fifteenth (15th) mnth fllwing the end f the crpratin s fiscal year. If an applicatin fr certificatin is filed after that date, but befre the expiratin f the 18th mnth fllwing the end f the crpratin s fiscal year, Investissement Québec may, at its discretin, grant the applicatin fr an eligibility certificate if it deems the reasns fr the delay t be reasnable and t justify late filing. Hwever, an applicatin fr certificatin submitted t Investissement Québec after the 18-mnth perid has expired will be rejected. Cnsequently, we strngly recmmend that yu submit the applicatin fr certificatin befre the end f the fifteenth (15th) mnth fllwing the end f the crpratin s fiscal year. Furthermre, nly cmplete applicatins will be prcessed. T be cnsidered cmplete by Investissement Québec, the applicatin fr a media, emplyee and cntract certificate must be duly signed and cmpleted and include all appendices. It must cntain all the prescribed infrmatin and be accmpanied by all the dcuments requested in the appendices. Filing f Dcuments with Revenu Québec The crpratin must submit its applicatin fr a tax credit and the relevant eligibility certificates t Revenu Québec by the later f the fllwing dates: The last day f the 18th mnth fllwing the end f the crpratin's fiscal year in questin; The last day f the three (3) mnth perid fllwing the date n which the eligibility certificates were issued by Investissement Québec. 7

9 SITE VISIT Investissement Québec reserves the right, at any time during the eligibility perid, t visit the facilities f an eligible crpratin. Therefre, the latter must agree t allw access t Investissement Québec representatives and t prvide the infrmatin that they may require during the visit. INTERACTION WITH OTHER TAX CREDITS, ASSISTANCE OR BENEFITS Tax legislatin cntains rules designed t prevent the stacking f tax assistance in respect f an expenditure that may give rise t mre than ne tax credit, whether fr mre than ne taxpayer r fr the same taxpayer. These rules als apply t crpratins that qualify fr the tax credit t supprt the digital cnversin f print media cmpanies. In additin, the cst f wages and expenses incurred by an eligible crpratin in a particular taxatin year must be reduced by the amunt f any gvernment r nn-gvernment assistance and any benefit r advantage attributable t such wages and expenses, accrding t the usual rules. FEES Investissement Québec charges fees fr the analysis f any eligibility applicatin r any applicatin fr review it administers. Fr mre infrmatin, cntact an Investissement Québec advisr r see the fee schedule available n the website. PRECEDENCE OF LAWS This fact sheet is a summary f the main prvisins f the sectin f the Budget 5 regarding additinal infrmatin n the fiscal measures f the Québec Ecnmic Plan in relatin t the sectral parameters f this tax measure and certain prvisins cntained in the Taxatin Act. Other cnditins may apply in sme cases. Thus, this fact sheet des nt cnstitute an interpretatin by Investissement Québec f the legislative prvisins pertaining t the fiscal measure. Fr mre infrmatin, please see the varius applicable laws. August Budget tabled n March 27,

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