Research and development (R&D) tax credits are a cornerstone for supporting innovation and business growth. These tax measures are designed to encourage companies to invest in research and development, and play a vital role in strengthening competitiveness and technology within the province.
Our business tax experts put together this comprehensive guide to help you determine whether your company is eligible for the R&D tax credit. Keep reading to learn about who qualifies and how to apply for a research and development tax credit in Quebec.
Understanding R&D tax credits in Quebec
Quebec's research and development (R&D) tax credits are designed to directly reduce business taxes and stimulate innovation and technological progress.
In concrete terms, they enable companies to obtain partial reimbursement of costs associated with their R&D projects, such as researchers' salaries, equipment expenses and other operational costs related to research.
Tax Credits for Scientific Research and Experimental Development (R&D)
Now you know the basics of R&D tax credits. Let's move on to the next question: how do you get one?
Eligibility criteria
To be eligible for R&D tax credits in Quebec, companies must meet specific criteria. First, they must be engaged in research and development activities within Quebec. This includes companies of all sizes and in all sectors, whether Quebec-based or foreign companies with operations in Quebec.
Eligible activities must fall under the specific category of scientific research and experimental development. They must be conducted within Quebec and geared directly toward technological, scientific or industrial discoveries or improvements.
Eligible expenses include researchers' salaries, material costs, certain types of research contracts, and R&D overheads.
Eligible projects
A wide variety of projects are eligible for R&D tax credits. The main categories of eligible projects are as follows:
- Research: Projects covering a broad spectrum of research activities, from basic to applied research.
- Development of new products/processes: Creation of new products or processes.
- Improvement of existing products/processes: Substantial modifications leading to significant improvements of products or processes.
- Acquisition of new knowledge: Knowledge that can be applied in future development projects.
- Innovation and technological breakthrough: Projects distinguished by their novelty and/or technological innovation.
- Complexity and scientific/technological uncertainty: Projects presenting scientific or technological challenges requiring R&D expertise.
Application process
Do you think your company is eligible for this tax credit? Find out how to apply.
Documentation and submissions
To apply for R&D tax credits in Quebec, you’ll need to submit specific, well-prepared documents.
Companies need to write a clear and detailed description of their projects that shows what makes their projects innovative and how they meet the eligibility criteria. Also, include a breakdown of the expenses related to the project.
You will also need to complete relevant forms, available from the Revenu Québec website. All documents must be compiled and submitted with the company's annual tax return.
Processing times
Since R&D tax credit applications are submitted at the same time as corporate tax returns, documents must be ready before the tax return filing deadline.
Claims may take some time to process, depending on how complex they are and the agents’ workload. Companies should be prepared to accommodate delays, to avoid complications.
Once the application has been processed and approved, the tax credit is either applied to the amount of tax owed by the company, or refunded (if the credit exceeds taxes owed).
T2inc.ca can help you apply for Quebec R&D tax credits
At T2inc.ca, we understand the intricacies of R&D tax credits and are committed to helping your company thrive. Our tax accountants rely on their expertise to ensure full tax compliance and maximum optimization of your tax benefits.
With us at your side, you can navigate the complexities of tax credits and make the most of opportunities to drive innovation and growth in your business. Contact us to learn more.
Frédéric Roy-Gobeil
CPA, M. TAX
As President of T2inc.ca and an entrepreneur at heart, I have founded many start-ups such as delve Labs and T2inc.ca. A former tax specialist at Ernst & Young, I am also a member of the Ordre des comptables professionnels agréés CPA and have a master's degree in taxation from the Université de Sherbrooke. With a passion for the world of entrepreneurship and the growth mindset, I have authored numerous articles and videos on the industry and the business world, as well as on accounting, taxation, financial statements and financial independence.
