Part 1 of this series focused on recent changes to federal capital cost allowance (CCA). 

For taxpayers residing in Quebec, the 2018 and 2021 Federal legislative proposals were harmonized by the Quebec Ministry of Finance.

Part 2 below therefore focuses on Quebec changes as well as new tax credits.

December 2018 Quebec Economic Update

Additional Capital Cost Allowance (CCA) of 30% on the Acquisition of Qualified Properties

The March 2018 Quebec budget increased CCA by 60% for qualified properties belonging to Class 53 (manufacturing and processing equipment) and Class 50 (computer equipment) meaning 160% of the purchase price could ultimately be depreciated. This was a temporary measure set to expire after March 31, 2020.

The December economic update decreased the enhancement to 30% but it has become permanent and did not expire in 2020.

Qualified properties include:

• manufacturing and processing equipment that is included in class 53, or property acquired after 2025 included in class 43 but that would have been included in class 53 had been acquired in 2025.
• clean energy equipment included in classes 43.1 or 43.2.
• general-purpose electronic data processing equipment and systems software for that equipment included in class 50.
• qualified intellectual property that is a patent or a right to use patented information, a license, a permit, know-how, a commercial secret or other similar property constituting knowledge that is included in class 14, 14.1 or 44. The property must also have been acquired for the purpose of realizing an innovation or invention used in the taxpayer’s business operations.

Immediate Expensing of Certain Qualified Properties

The economic update also introduced the immediate deduction of the full cost of general-purpose electronic data processing equipment and systems software and qualified intellectual property.

To qualify, general-purpose electronic data processing equipment and systems software included in Class 50 must be acquired after December 3, 2018, made available for use before 2024 and must be used primarily in the Province of Quebec in the course of carrying out a business.

Qualified intellectual property included in class 14, 14.1 or 44, must be acquired after December 3, 2018, and made available for use before 2024.

March 2020 Quebec Budget

Tax Credit for Investments and Innovation – 3Ci

The March 10, 2020 budget introduced the new 3Ci credit intended to give Quebec businesses incentive to purchase specified property for the purpose of acquiring and developing new technologies and manufacturing processes.

The credit rate varies by region and is based on the economic vitality of the region in which the specified property is acquired.

The tax credit applies to acquisitions made on or after March 10, 2020 and before January 1, 2025.

Specified property includes the following:

• manufacturing and processing equipment that is included in class 53.
• general-purpose electronic data processing equipment and systems software for that equipment included in class 50.
• a qualified management software package included in class 12.
• a property used mainly in the course of processing ore extracted from a mineral resource located in a country other than Canada, that is, a property in Class 43 of that Schedule.
• a property used mainly in activities involving the smelting, refining or hydrometallurgy of ore, other than ore from a gold or silver mine, extracted from a mineral resource located in Canada.

Depending on the type of property acquired, the first $5,000 or $12,500 of acquisition cost is excluded from the calculation of the tax credit.

The tax credit is fully refundable for corporations and their associated group having total assets of less than $50 million. The tax credit is non-refundable for corporations and their associated group having total assets of more than $100 million. For corporations and their associated group having assets between $50 and $100 million, the credit is partially refundable and partially non-refundable.

March 2021 Quebec Budget

The March 25, 2021 budget doubled the 3Ci rate for each economic vitality zone for specified property acquired on or after March 26, 2021 and before January 1, 2023 including acquisitions made up to March 31, 2023 provided the taxpayer entered into a contractual agreement prior to January 1, 2023 to acquire the specified property or the taxpayer commenced construction/development of the specified property before January 1, 2023.

The following table summarizes the credit rate depending on region and date of acquisition:

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