Recruiting the Best International Talent: Tax Holiday for Foreign Researchers and Experts

Since 1999, the Government of Quebec has been offering an excellent tax incentive that serves as an economic leverage to help Quebec businesses attract foreign researchers and experts with the high-level skills required to carry out innovation projects.

The two profiles of intelligent and talented people who excel in their field of knowledge are: "researcher" and "expert". These specialised profiles are intended to support activities related to scientific research and experimental development ("SR&ED") in particular, as well as the management and financing of innovation-related activities.

Eligible Foreign Researcher

A foreign researcher is an individual eligible for this tax incentive upon signing an employment contract in Quebec, if:

• The employer is a person who operates a business in Canada and carries out SR&ED activities in Quebec;
• He or she has a graduate degree with a research thesis recognised by a Quebec university or has equivalent knowledge;
• He or she does not reside in Quebec or Canada immediately before beginning his or her position with the employer;
• He or she specialises in the field of pure or applied sciences;
• He or she has the skills required to carry out SR&ED activities with a Quebec business.

Eligible Foreign Expert

A foreign expert is an individual eligible for this tax benefit after having signed an employment contract in Québec, if:

• The employer is a person who operates a business in Canada and carries out SR&ED activities in Quebec;
• He or she has an undergraduate degree recognised by a Quebec university or has equivalent knowledge;
• He or she does not reside in Quebec or Canada immediately before beginning his or her position with the employer;
• He or she must devote themselves almost exclusively, and have the required skills to carry out SR&ED activities for the Quebec business, either in the management, financing or marketing of SR&ED activities, or transfer of technology.

Amount of the Tax Holiday

This tax holiday is granted to the individual by means of a Quebec tax exemption, according to the following terms:

• 1st and 2nd years of employment: 100% tax deduction on the salary (0% of the salary received from the Quebec business is taxable)
• 3rd year of employment: 75% tax deduction on the salary (25% of the salary received from the Quebec business is taxable)
• 4th year of employment: 50% tax deduction on the salary (50% of the salary received from the Quebec business is taxable)
• 5th year of employment: 25% tax deduction on the salary (75% of the salary received from the Quebec business is taxable)

How to Obtain this Tax Holiday

The individual's employer must apply for a certificate from the Government of Quebec in order to take advantage of the tax holiday. It is important to note that the request must be submitted to the government before the 1st of March for the calendar year following the given tax year in order for the holiday to apply for that tax year. For example, to qualify for the tax holiday for the year 2020, the application must be submitted before the 1st of March 2021.

In addition, it is the responsibility of both the employer and the employee to ensure that all the legal criteria are met.

The employer is required to provide the following documentation in their application:

• Application form for a certificate for either a researcher or an expert (N.B. forms are different);
• Curriculum vitae of the employee;
• Certified true copy of the original university diploma recognised in Quebec in English or French;
  – If the applicant does not have a diploma recognised in Quebec, he must provide a Comparative evaluation for studies undertaken outside of Quebec issued by the Ministère de l'Immigration, Francisation et Intégration (Ministry of Immigration, Francisation and Integration);
• Copy of the employment contract signed by both parties;
• Copy of the business incorporation certificate, in the case of a first request by the employer.

Finally, the Government of Quebec will process the application and the certificate will be issued by Revenu Québec to the employer once the eligibility conditions have been met. After receiving the certificate, the employer will be able to adjust the deductions from the salary of the employee receiving the tax holiday.

Quebec employers should be aware of and take advantage of this simple tax measure that can save significant income tax for key employees and render them more attractive in the eyes of foreign workers.