On August 15, 2018, the Government of Quebec announced an increase to the Investment Tax Credit (hereinafter referred to as “ITC”) for property acquired and expenses incurred in connection with manufacturing and processing equipment between August 16, 2018, and December 31, 2019.
Before the changes were announced, only eligible corporations in resource regions could benefit from the Investment Tax Credit, which ranged from 4% to 24%[1] of eligible fees incurred for the purchase of property. The government then expanded the ITC to include property used elsewhere than in resource regions, and increased the rates to 5% to 40% from 0% to 24%.
This enhancement will end on December 31, 2019, meaning there are only a few days left to take advantage of it. If a business is seeking to acquire eligible property or incur such expenses, it would be wise for them to do so before the end of the year in order to benefit from the enhanced credit.
That being said, simply signing an agreement with a provider by December 31, 2019, may not be sufficient. In fact, it is important to determine when the property is considered as having been acquired or when fees are considered incurred. According to the rules of ordinary law, if the acquired property already exists and the contract is signed before January 1, 2020, the property will generally be acquired as of the execution of the contract, and accordingly, will be eligible for the enhanced ITC. However, if the contract contains suspensive or resolutory conditions, i.e., if the contract can be cancelled following an inspection of the property, the property might not be considered as having been acquired before the deadline.
In addition, if the property outlined in the contract that was acquired has not yet been built, the property transfer will only take place when the purchaser is notified that the property is ready to be delivered. For this to happen, construction must be completed, a serial number must be attributed, and the purchaser must be notified no later than December 31, 2019. Whether delivery occurs before or after January 1, 2020, is not relevant, subject to the comments regarding special terms outlined above.
Considering the foregoing, the acquisition contract will need to be analyzed in order to determine whether the enhanced ITC can be claimed.
If you have any questions, please contact your FBL representative.
[1] However, corporations with $500M or more in paid-up capital were eligible for the ITC in other regions of Quebec (outside resource regions) at a rate of 4%.