Executive Summaries Mar 27, 2020
Budget 2020: Do You Know These Fiscal Measures That Support the Development of Your Technological Innovations, Even in Time of Crisis?
In these difficult times for everyone, and in order to promote good news for Quebec businesses, we would like to share with you a few provisions of the Quebec government's latest budget to support innovative entrepreneurs.
More specifically, this article is intended to be an overview of the fiscal measures announced in the last budget surrounding intellectual property in the context of technological innovations.These measures will be of particular importance to innovative entrepreneurs during the economic recovery that will follow the present situation with COVID-19.
Return of the Programme innovation – volet 1
The Programme innovation – volet 1 (in French only) will again be accepting applications as of April 1st, 2020. In addition, an additional $10 million was announced in the budget to enhance the Support for Innovation Projects component of this program. See section 4.2.9 of the Budget Plan (in French only) for more information.
The Programme innovation – volet 1 provides financial assistance for various activities related to the development of a technology. Note that in addition to activities related to obtaining title to intellectual property (e.g., patents), many other activities are eligible. For example, various research and development activities (design, engineering, testing) and the costs for prototyping a technology can be eligible for financial assistance.
Incentive Deduction for the Commercialization of Innovations
The deduction for innovative manufacturing companies is abolished. A new incentive deduction for the commercialization of innovations (IDCI) is created, and will allow a corporation that commercializes a qualified intellectual property asset developed in Quebec to benefit from a tax rate of 2% on the eligible portion of taxable income attributable to this asset. Note that in Quebec, the corporate tax rate is 11.5%.
The expression "qualified intellectual property asset" of a qualified innovative corporation, for a given taxation year, means a legally protected intangible property that is :
- an invention protected by a patent (or a supplementary protection certificate) or a plant breeders' certificate;
- software protected by copyright.
In addition, to qualify as an eligible intellectual property asset, the property must result from research and development activities carried out in whole or in part in Quebec.
In this regard, a corporation will be deemed to hold a patent if it has duly filed an application with the competent authorities and such application is pending. The patent, or supplementary protection certificate, must have been applied for after March 17, 2016. In summary, technologies for which a patent application is pending (patent pending status), and for which the filing date of the application is after March 17, 2016, are eligible.
An invention protected by a plant breeder’s right will be eligible if the application for the certificate was filed after March 10, 2020. Software protected by copyright must have been created after March 10, 2020 to be eligible.
A corporation will be eligible for the new deduction if it carries on business in Quebec through a permanent establishment and earns income from the commercialization of its intellectual property assets. Moreover, the income from the commercialization of such assets must be one of the following :
- royalty for the use of, or the right to use, the asset,
- income from a sale or lease of the asset,
- income from the provision of a service intrinsically linked to the asset, or
- an amount obtained as damages in a court action relating to the asset.
This deduction will apply in respect of a taxation year of a corporation that begins after December 31st, 2020.
See additional information of the Budget 2020-2021 (see pages A.20-A.26) for full details on the calculation of the IDCI deduction.
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