Tax Assistance for Scientific Research and Experimental Development

Transcription

1 REVENU QUÉBEC Tax Assistance for Scientific Research and Experimental Development

2 This publication is provided for information purposes only. It does not constitute a legal interpretation of the provisions of the Taxation Act or any other legislation. ISBN Legal deposit Bibliothèque et Archives nationales du Québec, 2006 Legal deposit Library and Archives Canada, 2006

3 Contents Introduction What is scientific research and experimental development? Eligibility of work in support of R&D Criteria Deduction of R&D expenditures Qualified expenditures Current expenditures Capital expenditures Excluded expenditures Refundable R&D tax credits Tax credit for salaries and wages relating to R&D General information Salaries and wages giving entitlement to the tax credit for salaries and wages relating to R&D Amounts that do not give entitlement to the tax credit for salaries and wages Calculation of the tax credit for salaries and wages Tax credits for R&D expenditures Tax credit for university research or research carried out by a public research centre or a research consortium Requirements Tax credit for pre-competitive research Tax credit for fees or dues paid to a research consortium Tax holiday for foreign researchers, experts and professors, and foreign researchers on a post-doctoral internship General information Duration of the tax holiday Foreign researchers Foreign experts Foreign professors Foreign researchers on a post-doctoral internship Forms to be completed and filing deadline Forms to be completed Filing deadline Administrative aspects Scientific review of R&D projects How to file an application for R&D tax credits Confidentiality Contents 3

4 Introduction The importance of scientific research and experimental development (R&D) to economic activity in Québec is now recognized. The Québec government has acknowledged the role of R&D as an economic lever by granting refundable tax credits to eligible persons. These tax credits are available in conjunction with other measures to stimulate R&D in Québec. If you have undertaken or are about to undertake an R&D project, you may be entitled to the tax credits. For example, a tax credit of up to 37.5% 1 for the first $2 million paid in salaries and wages in Québec can be claimed for R&D conducted by small or medium-sized businesses (SMBs); the rate is 17.5% in the case of large businesses. Other equally advantageous credits are available, including the tax credit for university research or research carried out by a public research centre or a research consortium; the tax credit for pre-competitive research; the tax credit for fees or dues paid to a research consortium. This brochure is for you if you carry on a business in Canada and carry out R&D on your behalf or on behalf of another person, or have R&D carried out on your behalf. It covers the main points of the R&D tax measures in Québec. Among other things, it tells you how to claim deductions and obtain refundable tax credits for R&D expenditures. It also specifies the type of information to be provided to Revenu Québec in support of your application for a deduction or tax credit, as well as the forms to be filed. For more information, refer to the relevant statutes and regulations. The forms and general information relating to R&D are available on the Revenu Québec Web site at You can also contact the Revenu Québec office in your area. Contact information for all offices is given at the end of the brochure. 1. The rate announced in the Budget Speech. Introduction 5

5 What is scientific research and experimental development? Under the Taxation Act, "scientific research and experimental development" means systematic investigation or search that is carried out in a field of science or technology by means of basic 2 or applied 3 research undertaken for the advancement of scientific knowledge; experimental development undertaken in order to achieve technological advancement for the purpose of - creating new materials, products, devices or processes, - improving existing ones, even incrementally. Eligibility of work in support of R&D Work undertaken relative to R&D must directly support basic or applied research or experimental development for the purpose of technological advancement, and must be commensurate with the needs of such research or development. Eligible work Work related to the activities below is eligible: engineering or design operations research mathematical analysis or computer programming data collection testing psychological research Non-eligible work Work related to the activities below is not eligible: market research or sales promotion quality control or routine testing of materials, products, devices or processes research in the social sciences or the humanities prospecting, exploring or drilling for, or producing, minerals, petroleum or natural gas the commercial production of a new or improved material, device or product, or the commercial use of a new or improved process style changes routine data collection 2. Basic research is undertaken for the advancement of science without any practical application in mind. 3. Applied research is undertaken for the advancement of science with a practical application in mind. 6 Tax Assistance for Scientific Research and Experimental Development

6 Criteria All of the criteria below must be met for a project to qualify as R&D: 1. Scientific or technological advancement The objective of the R&D project must be to acquire knowledge that advances the understanding of the underlying scientific relations or technology. 2. Scientific or technological uncertainty The probability of achieving a given objective or result, or the way in which it can be achieved, must not be known or determined in advance on the basis of generally available scientific or technological knowledge or experience. 3. Scientific or technical content, in keeping with the rigour of the scientific process The work must incorporate a systematic investigation beginning with the formulation of a hypothesis, followed by testing through experiment or analysis and the drawing of logical conclusions. Fulfilling this criterion also means properly documenting the various stages of the project. What is scientific research and experimental development? 7

7 Deduction of R&D expenditures The Taxation Act provides for the possibility of deducting expenditures incurred for R&D, subject to special rules. Current and capital expenditures are deductible from income for a given taxation year. However, not all expenditures give entitlement to refundable tax credits (see page 11, under "Refundable R&D tax credits"). The total expenditures must be reduced by the amount of any form of government assistance (e.g., grant or forgivable loan) or nongovernment assistance received or receivable, as well as by the federal investment tax credit for R&D expenditures for the year preceding the taxation year in question. Two methods can be used to determine the amount of deductible R&D expenditures: the proxy method and the traditional method. The proxy method The proxy method is simpler but more restrictive, as it takes into account only those expenditures that are generally readily associated with R&D activities. Consequently, certain current expenditures are excluded. Qualified expenditures are amounts that are directly related to R&D activities, that is, amounts that would not otherwise be incurred if R&D were not carried out. Excluded expenditures comprise, among other things, office supplies and the salaries and wages of certain employees not assigned to tasks relating to the technological aspects of R&D. The traditional method (formerly called the "regular method") More expenditures primarily current expenditures can be taken into account under the traditional method. For more information, see form RD-222, Déduction des dépenses engagées pour la recherche scientifique et le développement expérimental. Expenditures that are not deducted in a given taxation year can be placed in an account and carried forward to the subsequent years of your choice. 8 Tax Assistance for Scientific Research and Experimental Development

8 Qualified expenditures As a rule, there are two categories of deductible expenditures: current and capital expenditures. Current expenditures Current expenditutes generally comprise the following amounts: salaries, wages and other remuneration paid to staff whose activities are directly related to R&D, such as researchers, technologists and assistants with technical training, as well as R&D support staff. Persons who prepare the equipment and materials necessary for experiments, tests and analyses are considered to engage in R&D activities, as are those who, for example, record measurements, make calculations, prepare charts, graphs and computer programs, and conduct surveys and interviews. If such an employee devotes less than 90% of his or her time to R&D activities, the R&D expenditure corresponds to the portion of the salary or wages paid to the employee for the time spent on R&D activities. However, if 90% or more of the employee's time is devoted to research, the full amount of the salary or wages is deductible. The same is true for supervisors and managers; expenditures relating to the provision of premises (excluding rent paid for a building), facilities or equipment for R&D purposes; the cost of materials used in R&D activities; expenditures made under R&D contracts awarded to contractors and subcontractors; payments made to an entity such as a university, college, research institute or tax-exempt organization resident in Canada, where the taxpayer has the right to use the research results. If you opt for the traditional method to determine the amount of qualified R&D expenditures and you show that certain current expenditures would not have been incurred if you had not carried out the R&D, these expenditures may be qualified expenditures if they were incurred to support the R&D activities. Your current expenditures must be substantiated by supporting documents or relevant information showing that they were incurred for R&D. You must provide a breakdown of the amounts, explain how you established which of them were R&D expenditures, and justify your calculations. The amounts not related to R&D are not qualified expenditures. Capital expenditures As a rule, capital expenditures relating to the acquisition of a building (including a leasehold interest in a building, that is, an immovable under tenure of lease) are not deductible. However, you may deduct expenses incurred to acquire depreciable property other than a building (e.g., expenses incurred for equipment). For these expenses to be deductible, the depreciable property must be used all or substantially all (at least 90%) of the time for R&D purposes. If you deduct the cost of such property, you cannot claim capital cost allowance respecting the property in the year concerned or in a subsequent year. Deduction of R&D expenditures 9

9 Excluded expenditures The following expenditures do not qualify as R&D expenditures: expenses incurred for the general administration or management of the business; costs for the maintenance and upkeep of premises or equipment, to the extent that they are not related to R&D activities; bonuses or remuneration based on profits, in the case of specified employees (generally, shareholders that hold 10% of the shares of a given corporation); expenses incurred to purchase or rent animals, other than laboratory animals within the meaning of the regulations. Example Calculation of R&D expenditures Qualified expenditures Traditional method Proxy method Direct salaries and wages $100,000 $100,000 Materials + 15, ,000 Subcontractors + 40, ,000 Overhead: Office supplies + 15, Support-staff salaries and wages + 12, Equipment + 40, ,000 Total expenditures = $222,000 = $195,000 Investment tax credit (previous year) - ($25,000) - ($25,000) Total deductible = $197,000 = $170,000 expenditures 10 Tax Assistance for Scientific Research and Experimental Development

10 Refundable R&D tax credits All tax credits in this section are refundable. If you do not have income tax payable, the amount of the credits will be paid to you. If you do have income tax payable, the amount of the credits will be subtracted from the balance of income tax, tax on capital and compensation tax owing, and may also be used to determine the amount of your instalments of income tax and tax on capital. To be eligible for the tax credit for salaries and wages relating to R&D, the tax credit for university research or the tax credit for pre-competitive research, you must carry on a business and have an establishment in Québec. Tax credit for salaries and wages relating to R&D There are a number of refundable R&D tax credits. The tax credit for salaries and wages is the one most frequently claimed. General information If you conduct research in Québec on your behalf or on behalf of another person, or you have research conducted in Québec on your behalf, you may claim a refundable tax credit for the salaries and wages or for the consideration you pay in Québec. However, to be eligible for the tax credit, you must carry on a business and have an establishment in Québec. "Salary or wages" means the remuneration paid to an employee for work done by the employee in Québec. Salaries and wages giving entitlement to the tax credit for salaries and wages relating to R&D The following amounts give entitlement to the tax credit: salaries and wages paid to the employees of an establishment located in Québec; if you entered into a contract with a person or partnership related to you (a subcontractor) in order to have R&D carried out, the portion of the consideration you paid to the person or partnership that may reasonably be attributed to salaries and wages paid to the employees of an establishment of the person or partnership in Québec, or, if the person or partnership does not have employees, the amount that would have been paid as salaries and wages had there been employees; and if you entered into a contract with a person or partnership not related to you (a subcontractor) in order to have R&D carried out, half of the portion of the consideration you paid to the person or partnership that may reasonably be attributed to work carried out by the employees of an establishment of the person or partnership in Québec, or, if the person or partnership does not have employees, the amount that would have been so attributed had there been employees. Subcontractors include not only persons that engage directly in R&D on your behalf, but also persons that do work to support research you conduct. Amounts that do not give entitlement to the tax credit for salaries and wages The following amounts do not give entitlement to the tax credit: amounts paid under a university research contract or an eligible research contract (e.g., a contract entered into with a research consortium); amounts paid in conjunction with a pre-competitive research project; fees or dues paid to a research consortium. Refundable R&D tax credits 11

11 The above amounts may, however, give entitlement to other tax credits. See page 13, "Tax credit for university research or research carried out by a public research centre or a research consortium." In general, expenditures, such as salaries and wages, give entitlement to only one of the refundable tax credits. The amounts giving entitlement to the tax credit must be reduced by any government assistance (e.g., grant or forgivable loan) and non-government assistance received or receivable, as well as by contract payments and certain contributions. However, they are not reduced by the federal investment tax credit. Calculation of the tax credit for salaries and wages Taxpayers other than corporations carrying out R&D in Québec may claim a tax credit of 17.5% for salary and wage expenditures incurred under a contract. Taxpayers that are corporations may claim the tax credit, at one of the rates indicated below, on the first $2 million in eligible salaries and wages paid in a given taxation year: 37.5 %, for SMBs; a progressive reduction from 37.5% to 17.5%, for corporations with assets between $25 million and $50 million; 17.5%, for corporations with assets of $50 million or more. The tax credit rate for SMBs is also 17.5% on the amount in excess of $2 million in eligible salaries and wages paid for a given taxation year. To qualify as an SMB for the purposes of the R&D tax credits, a business's assets (including the assets of associated corporations) must be less than $25 million. Moreover, the business must not be controlled by one or more persons not resident in Canada. Note The assets used to establish the rates are those indicated in the financial statements of the corporation and any associated corporations, for the year preceding the year for which the credit is claimed. If the corporation is in its first fiscal period, the assets at the start of that period are taken into account. Tax credits for R&D expenditures Refundable tax credits for expenditures are granted to taxpayers that have R&D conducted on their behalf in Québec. In general, the tax credits relate to qualified R&D expenditures that are incurred under a university research contract or a contract for research by a public research centre or a research consortium; are incurred to implement a pre-competitive research project; represent fees and dues paid to a research consortium. The expenditures must be reduced by any government and non-government assistance, as well as by contract payments and certain contributions. However, the federal investment tax credit is not used to reduce the expenditures. 12 Tax Assistance for Scientific Research and Experimental Development

12 Tax credit for university research or research carried out by a public research centre or a research consortium Taxpayers that enter into a university research contract with an eligible university entity, public research centre or research consortium may claim a refundable tax credit of 35% of qualified R&D expenditures. If the research is conducted by an eligible university entity, public research centre or research consortium dealing at arm's length with the taxpayer, the credit is calculated on 80% of qualified expenditures (20% of the value of the contract being attributed to profits). All research centres that, since May 2, 1991, have been recognized by the Ministère des Finances du Québec as eligible public research centres for the purposes of the refundable tax credit for university research must file an annual return certifying that they still meet the eligibility criteria. The return covers a calendar year. An "eligible university entity" is a Québec university, a university hospital medical research centre or any other prescribed organization. An "eligible public research centre" is an entity that groups government research centres and college centres for the transfer of technology. An "eligible research consortium" is an organization located in Québec that groups corporations in a given sector of activity and conducts R&D on their behalf. To be recognized as a consortium, the organization must obtain a validation certificate from the Ministère du Développement économique, de l Innovation et de l Exportation. For more information on obtaining a validation certificate, contact the Ministère at the address below: Direction du développement de la recherche 2021, avenue Union, 10e étage Montréal (Québec) H3A 2S9 Telephone: Fax: Web site: Requirements To be entitled to the tax credit, you must carry on a business and have an establishment in Québec. You must obtain a favourable advance ruling from Revenu Québec by sending an application to Revenu Québec no later than 90 days after the day on which the contract was entered into or, in the event of a situation beyond your control, within three years after the day on which the contract was entered into. An advance ruling must be obtained for each contract, before any amounts provided for in the contract are paid. If you do not follow this procedure, no amount paid under the contract will give entitlement to the credit. The following information must be submitted for review: the signed research contract or the draft of the contract to be signed; the budget for project expenditures incurred under the contract; the description of the project; the identity of the partners in the project; the names of the corporation's shareholders (if the corporation is not a public corporation); the payment schedule regarding the entity; the work schedule for the project; the description of your field of activity. Refundable R&D tax credits 13

13 The application for an advance ruling must be submitted by you, as a party to the contract, or by your authorized representative. Your authorized representative may be the university entity, the public research centre or the research consortium concerned. An initial fee of $250 is payable for the advance ruling service, and $100 is charged for each additional hour. Your application must be sent to Revenu Québec, at the address below: Example Calculation of the tax credit Direction générale de la législation et des enquêtes 3800, rue de Marly Sainte-Foy (Québec) G1X 4A5 The taxpayer and eligible entity in this example are dealing at arm's length. Moreover, the taxpayer did not receive any assistance, benefits or contract payments with respect to the contract in question. Determining the credit R&D expenditures $10,000 Expenditures giving entitlement to the credit 80% Applicable rate 35% Credit amount $2,800 Tax credit for pre-competitive research Corporations that are not related and that conclude a co-operative agreement to carry out work themselves, or to have work carried out on their behalf, under a pre-competitive research project may claim a refundable tax credit of 35% of qualified R&D expenditures incurred in Québec. The tax credit is granted to each qualified corporation that is a member of the group, on the basis of the expenditures the corporation incurred in Québec in a given taxation year for pre-competitive research activities. In addition, the corporation must carry on a business and have an establishment in Québec to qualify for the tax credit for pre-competitive research. Before claiming the tax credit, the group or the corporation mandated by the group must file an application for a validation certificate with the Ministère du Développement économique, de l Innovation et de l Exportation. If the application is accepted, the Ministère will grant each corporation that is a party to the agreement a validation certificate for its research activities. For more information on obtaining a validation certificate, contact the Ministère (see the contact information on page 13, under "Tax credit for university research or research carried out by a public research centre or a research consortium"). Tax credit for fees or dues paid to a research consortium Each corporation that is a member of a research consortium recognized by the Ministère du Développement économique, de l Innovation et de l Exportation may claim a refundable tax credit of 35% of its eligible fee. As a rule, a taxpayer's eligible fee is the total fees or dues paid by the taxpayer to the research consortium to conduct R&D in Québec in relation to the taxpayer's activities. 14 Tax Assistance for Scientific Research and Experimental Development

14 Tax holiday for foreign researchers, experts and professors, and foreign researchers on a post-doctoral internship General information Duration of the tax holiday An individual who is not resident in Canada and who comes to Québec to work may claim a total or partial tax holiday respecting his or her salary or wages. The tax holiday, which covers five calendar years, is calculated on a continuous or non-continuous basis, depending on whether the employment contract was signed after March 30, 2004, or before March 31, Continuous period An individual is entitled to only one five-year tax exemption period even if he or she holds more than one type of employment giving entitlement to the exemption. The exemption period is continuous for an individual who signed an employment contract after March 30, Non-continuous period If an individual signed a contract before March 31, 2004, and renews the contract after March 30, 2004, and if the contract is not deemed to be separate from the contract signed prior to March 31, 2004, the individual's exemption period may be non-continuous. This means that if the individual stops working before the end of the five-year exemption period, the period in which he or she is not working is not taken into account in calculating the five-year period as long as the individual does not sign a new (separate) contract. Exemption rates The percentage varies according to the date on which the employment contract was concluded. If the contract was entered into before June 13, 2003, the rate is 100%. If it was entered into before March 31, 2004, the rate is 75%. If it was entered into after March 30, 2004, the rate varies sequentially from 100% to 75%, to 50%, and to 25%, on the anniversary of the holiday granted. Tax holiday for foreign researchers, experts and professors, and foreign researchers on a post-doctoral internship 15

15 Exemption rates Contract entered into before March 31, 2004* Contract entered into before June 13, 2003, and employment taken up no later than September 1, 2003: 100% Other cases: 75% Special situation: 100% This exemption applies to an employee's salary or wages for the remainder of the five-year period, if the employee is in the following situation: The employer continues to operate a business further to a corporate reorganization (for example, a corporate amalgamation or the winding-up of a corporation wholly owned by another corporation) and remains eligible for the purposes of the tax exemption. Contract entered into after March 30, 2004* 1st and 2nd year of the five-year exemption period: 100% 3rd year of the five-year exemption period: 75% 4th year of the five-year exemption period: 50 % 5th year of the five-year exemption period: 25% * If, after March 30, 2004, an employee renews an employment contract entered into before March 31, 2004, the employee continues to be entitled to the rates that apply for contracts entered into before March 30, 2004, unless the renewed contract is deemed under the tax legislation to be a new contract. Note Income received by these individuals from any other source must be included in the calculation of their income, as is the case for any other Québec resident. 16 Tax Assistance for Scientific Research and Experimental Development

16 Foreign researchers A foreign researcher is an individual who must meet the following main conditions: At a particular time, he or she took up employment, as an employee, with an eligible employer under a contract entered into with the employer. He or she was not resident in Canada immediately before the date on which he or she entered into the employment contract or took up employment, as an employee, with an eligible employer. From the particular time to the end of the year or part of the year, he or she must work exclusively or almost exclusively for the eligible employer; perform duties in Québec for the eligible employer that consist in carrying on R&D (see the table of eligible R&D work on page 6). The duties cannot, for example, be performed for an eligible university entity or an eligible public research centre, within the meaning of the Taxation Act; be specialized in the field of pure or applied science or a related field, and hold, or possess knowledge equivalent to the knowledge acquired by the holder of, a master's degree recognized by a Québec university, as certified by a certificate from the Ministère du Développement économique, de l Innovation et de l Exportation that has not been revoked. Among other things, the employer must be a person or a partnership that carries on a business in Canada, that is not an eligible university entity within the meaning of the Taxation Act, that is not exempt from income tax and that undertakes R&D, or causes R&D to be undertaken on its behalf, in Québec; obtain from the Ministère du Développement économique, de l Innovation et de l Exportation a certificate, which is not subsequently revoked, certifying that the individual is specialized in the field of pure or applied science or a related field, and holds, or possesses knowledge equivalent to the knowledge acquired by the holder of, a master's degree recognized by a Québec university. The employer must apply for the certificate before March 1 of the calendar year following the taxation year. For more information or to obtain a certificate, contact the Ministère du Développement économique, de l Innovation et de l Exportation (see the contact information on page 13, under "Tax credit for university research or research carried out by a public research centre or a research consortium"). Tax holiday for foreign researchers, experts and professors, and foreign researchers on a post-doctoral internship 17

17 Foreign experts To help corporations hire experts in the commercialization of research for example, the marketing and transfer of advanced technologies a tax holiday was introduced for foreign experts employed by a corporation. However, the corporation must be an eligible employer engaged in commercializing the results of R&D conducted in Québec. A foreign expert is an individual who must meet the following main conditions: After March 9, 1999, he or she took up employment, as an employee, with an eligible employer under a contract entered into with the employer subsequent to that date. He or she was not resident in Canada immediately before the date on which he or she entered into the employment contract or took up employment, as an employee, with an eligible employer. From the particular time to the end of the year or part of the year, he or she must work exclusively or almost exclusively for the eligible employer; perform duties as an employee of the eligible employer as part of an R&D project (see the table of eligible R&D work on page 6), either before, during or after the carrying out of the project; be specialized in the management or financing of innovation activities or in the foreign marketing or the transfer of advanced technologies, as certified by a certificate from the Ministère du Développement économique, de l Innovation et de l Exportation that has not been revoked. Among other things, the employer must be a person or a partnership that carries on a business in Canada, that is not an eligible university entity or a government or Crown corporation that is or is not exempt from income tax and that undertakes R&D, or causes R&D to be undertaken, on its behalf, in Québec; obtain from the Ministère du Développement économique, de l Innovation et de l Exportation a certificate, which is not subsequently revoked, certifying that the individual is specialized in the management or financing of innovation activities or in the foreign marketing or the transfer of advanced technologies. The employer must apply for the certificate before March 1 of the calendar year following the taxation year. For more information or to obtain a certificate of competency, contact the Ministère du Développement économique, de l Innovation et de l Exportation (see the contact information on page 13, under "Tax credit for university research or research carried out by a public research centre or a research consortium"). 18 Tax Assistance for Scientific Research and Experimental Development

18 Foreign professors A foreign professor is an individual who must meet the following main conditions: At a particular time after June 29, 2000, he or she took up employment, as an employee, with an eligible employer pursuant to an employment contract entered into after that date. He or she was not resident in Canada immediately before the date on which he or she entered into the employment contract or took up employment, as an employee, with the eligible employer. From the particular time to the end of the year or part of the year, he or she worked exclusively or almost exclusively for the eligible employer. From the particular time to the end of the year or part of the year, he or she performed duties for the eligible employer that consisted exclusively or almost exclusively in acting as a professor in the field of science and engineering, finance, health or new information and communication technologies. He or she is specialized in the field of science and engineering, finance, health or new information and communication technologies and holds a doctoral degree in such a field. Among other things, the employer must be a Québec university; obtain from the Ministère de l Éducation, du Loisir et du Sport an annual certificate, which is not subsequently revoked, certifying that the individual is specialized in the field of science and engineering, finance, health or new information and communication technologies and holds a doctoral degree in such a field, and that, from the particular time to the end of the year or part of the year, the individual performed duties for the employer that consisted exclusively or almost exclusively in acting as a professor in the field of science and engineering, finance, health or new information and communication technologies. The employer must apply for the certificate before March 1 of the calendar year following the taxation year. For more information or to obtain a certificate, contact the Ministère de l Éducation, du Loisir et du Sport at the address below: Édifice Marie-Guyart, 20 e étage 1035, rue De La Chevrotière Québec (Québec) G1R 5A5 Telephone: Tax holiday for foreign researchers, experts and professors, and foreign researchers on a post-doctoral internship 19

19 Foreign researchers on a post-doctoral internship A foreign researcher on a post-doctoral internship is an individual who must meet the following main criteria: At a particular time after March 31, 1998, he or she took up employment, as an employee, with an eligible employer pursuant to an employment contract entered into after that date. He or she was not resident in Canada immediately before the date on which he or she entered into the employment contract or took up employment, as an employee, with the eligible employer. From the particular time to the end of the year or part of the year, he or she must work exclusively or almost exclusively for the eligible employer and perform duties as an employee of the eligible employer that consist exclusively or almost exclusively in being a researcher on a post-doctoral internship and in performing scientific research and experimental development; be specialized in the field of pure or applied science or a related field and hold a doctoral degree in such a field. Among other things, the employer must be an eligible public research centre or an eligible university entity within the meaning of the Taxation Act; obtain from the Ministère de l Éducation, du Loisir et du Sport an annual certificate, which is not subsequently revoked, certifying that the individual is specialized in the field of pure or applied science or a related field and holds a doctoral degree in such a field, and that, from the particular time to the end of the year or part of the year, the individual performed duties for the employer that consisted exclusively or almost exclusively in being a researcher on a post-doctoral internship. The employer must apply for the certificate before March 1 of the calendar year following the taxation year. For more information or to obtain a certificate, contact the Ministère de l'éducation, du Loisir et du Sport (see the contact information on page 19, under "Foreign professors"). 20 Tax Assistance for Scientific Research and Experimental Development

20 Forms to be completed and filing deadline Forms to be completed To deduct qualified R&D expenditures or claim refundable R&D tax credits, you must complete the forms below, where applicable: Déduction des dépenses engagées pour la recherche scientifique et le développement expérimental (RD-222) Crédit d impôt relatif aux salaires R-D (RD ) Crédit d impôt pour la recherche universitaire ou la recherche effectuée par un centre de recherche public ou par un consortium de recherche (RD ) Crédit d impôt relatif aux cotisations et aux droits versés à un consortium de recherche (RD ) Crédit d impôt pour la recherche précompétitive (RD ) Entente concernant la limite de dépenses entre sociétés associées (RD ) You can obtain these forms from any Revenu Québec office, or on the Revenu Québec Web site at The required forms must be enclosed with your corporation income tax return (form CO-17). Filing deadline As a rule, the corporation return, along with the related schedules and forms, must be sent to Revenu Québec within six months after the end of the corporation's taxation year. However, the forms required to claim R&D tax credits must be filed within 18 months, that is, 12 months after the filing deadline for the return. The 12-month filing deadline also applies to form RD-222, Déduction des dépenses engagées pour la recherche scientifique et le développement expérimental. Forms to be completed and filing deadline 21

21 Administrative aspects Scientific review of R&D projects Under an agreement reached between Revenu Québec and the Canada Revenue Agency (CRA) in 1994, the CRA is responsible for carrying out scientific reviews of R&D projects. (In 1994, these administrative units were known as the Ministère du Revenu du Québec and the Canada Customs and Revenue Agency.) Like the Québec government, the federal government offers R&D tax credits, and the scientific eligibility criteria of their respective programs are the same. In fact, the criteria are recognized worldwide by the Organization for Economic Co-operation and Development (OECD). Consequently, once scientific projects are submitted to the CRA, research and technology advisors assess the R&D work to determine whether it meets the eligibility criteria of CRA and Revenu Québec programs. Afterward, confirmation of the eligibility of the projects is sent to Revenu Québec so that the tax credits to which the taxpayer is entitled may be granted. How to file an application for R&D tax credits To claim R&D tax credits, you must first complete form RD-222, Déduction des dépenses engagées pour la recherche scientifique et le développement expérimental, and the forms required for the specific credits claimed. In particular, you must be able to specify the R&D projects covered by your application for tax credits and provide certain related information; justify all salaries and wages for R&D activities, especially if you are applying for more than one credit pertaining to salaries and wages; show other R&D expenditures (e.g., those relating to subcontractors). An application is considered to be complete only if it contains all of the prescribed forms, duly completed, and all other information requested. Your application will be processed once Revenu Québec receives confirmation from the CRA that your projects meet the scientific eligibility criteria. Confidentiality The tax file of a person is confidential; no information contained in a person's tax file may be used or communicated unless the person consents thereto or the use or communcation is authorized by law. A person's tax file consists of the information held by the Minister of Revenue of Québec in respect of the person, in whatever form, for the application of a tax law. Thus, Revenu Québec must ensure that all information transmitted to it, including information relating to R&D activities, remains confidential. 22 Tax Assistance for Scientific Research and Experimental Development

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