TAX CREDIT FOR PROCESSING ACTIVITIES IN THE RESOURCE REGIONS

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1 TAX CREDIT FOR PROCESSING ACTIVITIES IN THE RESOURCE REGIONS The tax credit for processing activities is extended until December 31, for the remote resource regions and those in difficulty, while for the other resource regions, the extension is limited to December 31,. The rate of the tax credit is reduced to 20% in 2010 and 10% thereafter. However, a company in a resource region can, beginning in 2010, claim both the tax credit for processing activities and the investment tax credit. TAX CREDIT FOR PROCESSING ACTIVITIES IN THE RESOURCE REGIONS AND Regions and territories Remote regions 1 Tax credit for processing activities AND credit Abitibi-Témiscamingue 30% 20% 10% 10% 40% Côte-Nord 30% 20% 10% 10% 40% Nord-du-Québec 30% 20% 10% 10% 40% Intermediate regions Eastern Bas-Saint-Laurent: La Matapédia, Matane and La Mitis 30% 20% 10% 10% 30% Mauricie: La Tuque, Mékinac and Shawinigan 30% 20% 10% 10% 20% Saguenay Lac-Saint-Jean: Le Domaine-du-Roy, Maria-Chapdelaine and Le Fjord-du-Saguenay 30% 20% 10% 10% 20% Antoine-Labelle (Laurentides) as well as La Vallée-de-la-Gatineau and Pontiac (Outaouais) 30% 20% 10% 10% 20% Other resource regions Saguenay Lac-Saint-Jean: Saguenay and Lac-Saint-Jean-Est 30% 20% 10% 20% Western Bas-Saint-Laurent: Rivière-du-Loup, Rimouski-Neigette, Témiscouata, Kamouraska and Les Basques 30% 20% 10% 20% Mauricie: Trois-Rivières, Maskinongé and Les Chenaux 30% 20% 10% 20% Note: Only companies created before April 2008 can benefit from this new system. 1 For the Madeleine region, secondary and tertiary processing activities as well as other activities covered by this tax credit are dealt with within the tax credit for Gaspésie and certain maritime regions. 1

2 A company that elects to keep the old system can claim the tax credit for processing activities at 30% in 2010, but may not aggregate this tax credit with the investment tax credit. As of 2011, the company will be entitled only to the investment tax credit. TAX CREDIT FOR PROCESSING ACTIVITIES IN THE RESOURCE REGIONS OR Regions and territories 2010 Remote regions Tax credit for processing activities OR 1 credit Madeleine 2 30% 40% Abitibi-Témiscamingue 30% 40% Côte-Nord 30% 40% Nord-du-Québec 30% 40% Intermediate regions Bas-Saint-Laurent 30% 20%/30% 3 Mauricie 30% 20% Saguenay Lac-St-Jean 30% 20% Antoine-Labelle RCM (Laurentides) as well as La Vallée-de-la-Gatineau and Pontiac RCMs (Outaouais) 30% 20% 1 For 2010, a company must choose between keeping its tax credit for processing activities or claiming the investment tax credit. As of 2011, only the investment tax credit will apply. 2 For ease of understanding, the Madeleine region is shown here, but beginning in 2010, the eligible activities to this tax credit will be dealt with within the tax credit for Gaspésie and certain maritime regions. 3 The rate of the investment tax credit will be reduced from 30% to 20% for western Bas-St-Laurent (Rivière-du- Loup, Rimouski-Neigette, Témiscouata, Kamouraska and Les Basques RCMs), but it will remain at 30% for the eastern part of the region (Matane, La Matapédia and La Mitis RCMs). 2

3 TAX CREDIT FOR GASPÉSIE AND CERTAIN MARITIME REGIONS OF QUÉBEC A company can claim the tax credit for Gaspésie and certain maritime regions of Québec until December 31,, while keeping its current reference calendar year (eg : 1999) for calculating the increase in its payroll. However, the rate is generally reduced to 20%, but a company can, beginning in 2010, claim both this tax credit and the investment tax credit. The tax credit will be broadened regarding manufacturing activities based on peat or slate in the Bas-Saint-Laurent, Côte-Nord and Madeleine regions. The tax credit will also be improved for companies that process sea products, since the 20% assistance will henceforth be calculated based on the eligible wages paid and not the increase in payroll. TAX CREDIT FOR GASPÉSIE AND CERTAIN MARITIME REGIONS OF QUÉBEC AND Activity sectors Territories covered Manufacturing sector 1 Peat or slate products 2 Wind-power sector Processing of sea products 4 Sea farming and marine biotechnology 5 Tax credit for Gaspésie (initial reference year) AND credit Madeleine 20% 20% 20% 20% 40% and Bas-Saint-Laurent 20% 20% 20% 20% 3 / 30% / 40% Madeleine and Matane RCM 40% 20% 20% 20% 30% / 40% and Matane RCM 40% 20% 20% 20% 30% / 40% and Bas-Saint-Laurent 40% 40% 40% 40% 20% 3 / 30% / 40% 1 As of 2010, the secondary and tertiary processing activities as well as other activities covered by the tax credit for processing activities, carried out in Madeleine, will be covered solely by this component. Primary processing activities have been eligible for the tax credit since 2008 at a 20% rate. 2 Just for these regions, the manufacturing of products from peat or slate will be treated as of 2010 in this tax credit rather than the tax credit for processing activities. 3 The rate of the investment tax credit will be reduced from 30% to 20% for western Bas-St-Laurent (Rivière-du- Loup, Rimouski-Neigette, Témiscouata, Kamouraska and Les Basques RCMs), but it will remain at 30% for the eastern part of the region (Matane, La Matapédia and La Mitis RCMs). 4 As of 2010, the assistance will be calculated on eligible wages paid, instead of the increase in payroll based on a reference year. 5 For these sectors, the special feature of assistance calculated on eligible wages paid is maintained. 3

4 A company that elects to retain the old system will receive the tax credit for Gaspésie and certain maritime regions of Québec based on the following parameters: In 2010 : at a rate of 40% or 30% depending on the activity sector, but calculated on the basis of the actual reference calendar year (eg : 1999). The company will not be able to aggregate this tax credit with the investment tax credit. From : at a 20% rate, but calculated on the basis of a new reference calendar year (2010). However, the company may aggregate this tax credit with the investment tax credit. TAX CREDIT FOR GASPÉSIE AND CERTAIN MARITIME REGIONS OF QUÉBEC OR Activity sectors Territories covered 2010 Manufacturing sector: Tax credit for Gaspésie (modified reference year) OR 1 credit 1 st processing Madeleine 20% 20% 20% 40% 2 nd and 3 rd processing Madeleine 30% 20% 20% 40% Peat or slate products 4 Wind-power sector 3 Processing of sea products 3 6 Sea farming and marine biotechnology 7 and Bas-Saint-Laurent 30% 20% 5 / 30% / 40% Madeleine and Matane RCM 40% 20% 20% 30% / 40% and Matane RCM 40% 20% 20% 30% / 40% and Bas-Saint-Laurent 40% 40% 40% 20% 5 / 30% / 40% 1 For 2010 and regarding a number of sectors (secondary and tertiary processing, peat or slate products, wind power and sea products processing), a company must choose between keeping its tax credit for Gaspésie and certain maritime regions or claiming the investment tax credit. In other cases, and in particular as of 2011, any company can aggregate both tax credits. 2 In 2010, the secondary and tertiary processing activities as well as other activities normally covered by the tax credit for processing activities, carried out in Madeleine, will be covered by this component. 3 The rate applicable in 2010 concerns companies created before April 2008 and is calculated on the basis of the actual reference calendar year. For companies created after March 2008, the applicable rate is 20%. As of 2011, all companies are at the 20% rate, and companies created before April 2008 are assigned a new reference calendar year. 4 Just for these regions, processing of products from peat or slate will be dealt with within this tax credit rather than the tax credit for processing activities. 5 The rate of the investment tax credit will be reduced from 30% to 20% for western Bas-St-Laurent (Rivière-du-Loup, Rimouski-Neigette, Témiscouata, Kamouraska and Les Basques RCMs), but it will remain at 30% for the eastern part of the region (Matane, La Matapédia and La Mitis RCMs). 6 As of 2011, the assistance will be calculated on eligible wages paid, instead of the increase in payroll based on a reference year. 7 For these sectors, the special feature is that the assistance is calculated on eligible wages paid instead of the increase. 4

5 TAX CREDIT FOR THE VALLÉE DE L ALUMINIUM A company can claim the tax credit for the Vallée de l aluminium until December 31,, while keeping its current reference calendar year (eg : 1999) for calculating the increase in its payroll. However, the rate is generally reduced to 20%, but a company can, beginning in 2010, claim both this tax credit and the investment tax credit. TAX CREDIT FOR THE VALLÉE DE L ALUMINIUM AND Region Tax credit for the Vallée de l aluminium (initial reference year) AND credit Saguenay Lac-St-Jean 30% 20% 20% 20% 20% A company that elects to retain the old system will receive the tax credit for Vallée de l aluminium based on the following parameters: In 2010 : at a 30% rate, but calculated on the basis of the actual reference calendar year (eg : 1999). The company will not be able to aggregate this tax credit with the investment tax credit. From : at a 20% rate, but calculated on the basis of a new reference calendar year (2010). However, the company may aggregate this tax credit with the investment tax credit. TAX CREDIT FOR THE VALLÉE DE L ALUMINIUM OR Tax credit for the Vallée de l aluminium (modified reference year) OR 1 credit Region 2010 Saguenay Lac-St-Jean 30% 20% 20% 20% 1 For 2010, a company created before April 2008 can keep its tax credit for the Vallée de l aluminium at 30%. If not, it can elect to benefit, like any new company, from the possibility of aggregating the investment tax credit and the tax credit for the Vallée de l aluminium at 20% (calculated on the basis of a new reference calendar year). As of 2011, both tax credits are at 20% and can be aggregated. 5

6 The investment tax credit applies to acquisitions of manufacturing and processing equipment. The base rate of the tax credit is 5% and the increased rates of 20%, 30% or 40% apply in the resource regions for investments made by companies with consolidated paid-up capital of $250 million or less. The following changes are made to the investment tax credit: The rate of the tax credit is increased from 5% to 10% in the central regions. The Bas-Saint-Laurent, which enjoyed a tax credit rate of 30%, will be split in two for the purposes of the investment tax credit. The rate of the tax credit for western Bas-Saint-Laurent will be 20%; The rate of the tax credit for eastern Bas-Saint-Laurent will be 30%. Remote zone (40% rate) Central zone (10%) Abitibi-Témiscamingue Côte-Nord Nord-du-Québec Madeleine Intermediate zone (rate of 20% or 30%) Saguenay Lac-St-Jean (20%) Mauricie (20%) Antoine-Labelle, Pontiac and La Vallée-de-la- Gatineau RCMs (20%) Western Bas-Saint-Laurent: Rivière-du-Loup, Rimouski-Neigette, Témiscouata, Kamouraska and Les Basques RCMs (20%) Eastern Bas-Saint-Laurent: La Matapédia, Matane and La Mitis RCMs (30%) Capitale-Nationale Estrie Montréal Outaouais, except La Vallée-de-la-Gatineau and Pontiac RCMs Chaudière-Appalaches Laval Lanaudière Laurentides, except Antoine-Labelle RCM Montérégie Centre-du-Québec For companies with consolidated paid-up capital of $500 million or greater, the rate of the tax credit is 5% throughout Québec and the tax credit is not refundable. Between $250 million and $500 million of consolidated paid-up capital, the increased rates and the refundable portion decrease linearly. In addition, a cumulative limit of $75 million of eligible investments that may qualify for an increased rate and refundability applies for each three years period. Oil refining and aluminum production companies are not eligible for the investment tax credit. 6