Tax Breaks for Innovative Companies!

2016-06-07

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TAXBREAKSFORINNOVATIVECOMPANIES!

LOUIS-PIERREGRAVELLE*
ROBIC,
LLP
L
AWYERS,PATENTANDTRADE-MARKAGENTS

TheQuébecgovernmentannouncedinitsbudgettabledMarch17,2016tax
measuresforinnovativecompanies.Thesemeasuresareinadditiontoother
measuresinplacetopromoteresearchanddevelopment,andthecommercialization
ofthisresearch.
R&DTaxCredits

Québec,likemanyotherjurisdictions,providesataxcreditforR&Dactivities.
Althoughthegovernmenthassetaneligibilitythresholdof$50,000non-repayablein
2015,thismeasureaimstoencouragebusinessestoconductR&D,andpromotesa
moredynamicenvironment.
FirstPatentProgram

Lastyear,thegovernmentalsolaunchedthefirstpatentprogram.Thisprogramis
designedtoreimbursethecostsassociatedwithfilingandobtainingapatentfor
Québeccompaniesthathavenotpreviouslyfiledpatentapplications.Theallocated
moniesforthe2015-2016yeararenowexhausted,butthisprogram,accordingtoall
expectationswillberenewedin2016-2017and2017-2018.Thegovernmentdidnot
disclosetheexactnumberofcompaniesabletoqualify,soitisdifficulttomeasure
therealimpactofthisprogram.
TaxReductionforInnovativeCompanies

Thegovernmentcontinuestobuildontheseincentives,andannouncedatax
reductionforinnovativecompanies,tooffersupporttothecommercializationof
intellectualpropertyinQuébec.Thismeasure,sometimescalled”patentbox”is
designedtotaxincomefromtheexploitationofapatentedtechnologydifferentlyfrom
otherincome.Thus,asof1January2017,thisdeductionwillallowmanufacturing
companiesmarketingaproductthatincorporatesapatentedtechnologytobenefit
fromataxrateof4%insteadof11.8%.

©CIPS,2016.*FromROBIC,LLP,amultidisciplinaryfirmofLawyers,andPatentandTrade-markAgents.Published
intheSpring2016(Vol.19,no.3)Newsletterofthefirm.Publication068.205E.

Thegovernment’savowedgoalistoencourageinvestmentininnovative
manufacturingcompanies,retainintellectualpropertyinQuébec,andtoincreasethe
competitivenessofQuébeccompanies.Italsotriestoencouragetheproductionand
marketingofgoodsresultingfrompatentsforinventionsmadeinQuébec.In
documentsaccompanyingtheprovincialbudget,italsostatesthatitwants
encourageinnovativecompaniestochooseQuébecfortheiractivitieswithhighvalue
addedmanufacturingandR&D.
Specificdetailsregardingeligibilityhavenotyetbeendisclosed.However,weknow
thatqualifyingcompaniesarecompaniescarryingonbusinessinQuébecwhose
capitalexceeds$15MandwhoseactivitiesinQuebecaremainlymanufacturingand
processingactivities.
RevenuesmustbegeneratedfromaproductmanufacturedinQuébecincorporating
technologycoveredbyaqualifyingpatent.Onemaythinkthatnotonlypatentson
objectsassuchwillqualify,butalsothemethodofpatentsformanufacturingthe
objectinquestion.ThequestionariseswithrespecttobiotechnologyandICT
industries-willthegovernmenttakeagenerousinterpretationoftheword”object”,or
isthegovernmenttargetingtraditionalmanufacturingcompanies?Weareclosely
monitoringthisissue,andassoonasmoreinformationbecomesavailable,wewill
provideupdates.
Forapatenttobeadmissible,itmustbeheldbyacorporationwithanestablishment
inQuébec.Itmustalsoprotectaninventionwhosedevelopmentwassupportedwith
R&DtaxcreditsclaimedinQuébec.Thisrequirementarticulatestheintentionofthe
governmenttoprovideaclosedlooppackage–forthecompanytobenefit,itmust
havepreviouslybeenactiveinQuébecandclaimedR&DtaxcreditsinQuébec.Itis
thereforenotintendedtoencouragecompanieswhodonotalreadyhavesuch
activitiesinQuébecfromimmediatelybenefitingfromthededuction.

Anotherimportantconditioninordertoqualifyintheprogramisthatthepatentisthe
resultofanapplicationthatwasfiledthedayafterthebudgetspeech.Anapplication
mustthereforebearafilingdateafterMarch17,2016.Thequestionariseswhethera
priorityapplicationfiledlessthanayearagocouldallowacompanytobenefitfrom
thededuction.
TheintroductionofthismeasureinQuébectaxationmakesitpossibletocrystallize
thevisionofthegovernment’sfiscalandbudgetarysupportmeasuresforinnovation,
whichnowformawholefromR&Dtocommercializationandproductionoftheobject
inquestion.
AdiscussionwithyourIPprofessionalandwithyourtaxationprofessionalisrequired
toputinplacetheprocessestoprepareandfilepatentapplicationsthatarethe
resultofR&DeffortsinQuébecandidentifyincomefromtheexploitationofIPforthe
benefitofthereducedtaxrate.

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