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Changes to the C3i Tax Credit: Fostering Business Investment and Innovation

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In the Fall 2023 Budget Update, the Quebec government announced an investment of $1.3B into the Investment and Innovation Tax Credit (C3i), extending its support for businesses for another five years until January 1, 2030. Initially introduced in the March 2020 budget to replace prior investment and innovation tax credits, the C3i tax credit aims to boost productivity in Quebec businesses while encouraging increased investments in economically disadvantaged areas.

Alongside the 5-year extension, several modifications have been announced to better serve the needs of Quebec businesses and bolster their efforts to improve productivity. This article will explore these changes.

Eligible Businesses and Expenses

The C3i tax credit remains accessible to businesses across diverse industries, with certain exceptions such as aluminum producers and oil companies. Eligible businesses, which are investing in equipment to improve their processes and increase productivity, can benefit from the C3i tax credit. This includes Quebec businesses that acquire manufacturing or processing equipment, general-purpose electronic data processing equipment, or eligible management software packages between March 10, 2020 and January 1, 2030.

As before, two exclusion thresholds apply. For manufacturing and processing equipment, only expenses over $12,500 are eligible for the tax credit. For the purchase of computer hardware and management software packages, a lower minimum, $5,000, applies.

Businesses claiming the C3i credit are also subject to a cumulative $100 million limit on eligible expenses over four years—an update compared to the previous five-year period.

Enhancement of Tax Credit Rates

The improvements to the tax credit rates are perhaps the most prominent change announced. C3i rates have increased by 5%, across all regions of Quebec. The tax credit rates vary depending on the location of the business, offering higher rates to businesses operating in areas deemed to have “low economic vitality”. These regions have been assigned an economic vitality index amongst the lowest 25% in the province.

As announced in the Information Bulletin 2023-4, RCM Appalaches and Témiscamingue are now included in the lowest quartile, while RCM Matawinie and Argenteuil are no longer included. These regional changes will apply to expenses incurred after June 30, 2025, ensuring a proper transition period for affected businesses. Consult the latest Regional Economic Vitality Index for the classification of regions across Quebec.

Below are the new rates for the regions across Quebec, applicable beginning January 1, 2024:

These new rates apply to eligible expenses incurred after December 31, 2023; or after March 25, 2021, and before January 1, 2024, for equipment acquired after December 31, 2023.

Please note, however, that some exceptions apply. Please consult Information Bulletin 2023-6 for more details.

Fully Refundable Tax Credit

Before the amendments to the C3i, the ability to receive a refundable tax credit was dependent on the businesses’ assets and gross income. Only businesses with assets and gross income below $50 million were eligible for a fully refundable tax credit.

However, in the recent budget update, requirements related to assets and gross income were removed. Now, all eligible companies can fully benefit from the refundable nature of the Investment and Innovation Tax Credit regardless of their assets or gross income.

Final Thoughts

The recent changes to the C3i Tax Credit represent a step forward in supporting Quebec businesses and fostering innovation and investment across the province. With the extension of the tax credit until 2029, increased rates, and various improvements, businesses, especially those in regions with low economic vitality, now have greater incentives and opportunities to improve productivity and expand their operations.

As businesses continue to navigate challenges and seize opportunities, the C3i Tax Credit stands as a valuable tool for driving progress and success in Quebec’s evolving economy.

Driving Digital Transformation: Funding for Canadian Businesses

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In an age dominated by digital innovation, Canadian businesses recognize the transformative potential of embracing cutting-edge technologies. As technology evolves rapidly, companies must not only keep up with trends but also innovate to gain a competitive edge. However, the financial investment required can often be a significant hurdle. To address this challenge, we’ve curated a list of key funding programs available to Canadian businesses seeking to advance their digital capabilities. By leveraging these funding opportunities, businesses can not only overcome the financial hurdles of digitization but also position themselves as leaders in their fields.

Innovation, Science and Economic Development Canada (ISED)

ISED’S Canada Digital Adoption Program (CDAP) is a cornerstone for small and medium-sized Canadian-owned businesses looking to embark on their digital journey. Under the Boost Your Business stream, this program offers grants covering up to 90% of the cost to develop a comprehensive digital adoption plan, up to a maximum of $15,000; 0% interest loans from the Business Development Bank of Canada (BDC) for technology acquisition; and a wage subsidy to leverage the help of talented post-secondary students and recent graduates. The CDAP provides vital financial support for businesses seeking to integrate advanced technologies into their operations. Additionally, the Grow Your Business Online stream extends micro-grants to small businesses, supporting their transition towards comprehensive digital integration.

Investissement Québec

Investissement Québec’s Productivité Innovation initiative extends loans starting at $50,000 to help Quebec companies enhance their competitiveness and accelerate growth through innovation projects, which may involve a product, a process, commercialization efforts or organizational processes. This initiative supports the adoption of innovative technologies and processes such as automation, digitization, robotization and the use of artificial intelligence.

Investissement Québec also funding for technological advancement through the ESSOR program. Component 1 offers up to $100,000 in grant money for Feasibility Studies and Digital Diagnosis. Component 2 offers loans and loan guarantees to support an innovative technological transition or the acquisition of new technologies. Finally, Component 3 offers loans and loan guarantees for the acquisition or implementation of clean technologies.

Développement économique de l’agglomération de Longueuil (DEL)

The Call for Projects in Digital Transformation 5.0 seeks to assist organizations in their industrial transformation towards Industry 5.0. Eligible projects must be related to either an already implemented technology or involve the implementation of a new technology. Additionally, they must impact at least one of the three other aspects of Industry 5.0: human, resilience, or environment. Funding up to $20,000 is available.

Ontario BIA Association & Digital Main Street

The Digital Transformation Grant (DTG) program from Digital Main Street helps small businesses in Ontario adopt new technologies. The grants, up to $2,500, offer support for training, advisory support, and the digitization of brick-and-mortar small businesses.

Alberta Innovates

Alberta Innovates’ Alberta Digital Traction offers grants of up to $50,000 to Alberta businesses looking to incorporate cutting-edge technologies into their operations. It targets candidates who are in the process of validating their product or service in the market and are aiming to scale their digital technology in the next few years.

Northwest Territories Business Development and Investment Corporation

The Accelerate Digital Adoption Projects for Tomorrow (ADAPT) Fund, available in the Northwest Territories (NWT), offers up to $2,600 in funding for digitization projects and can supplement the CDAP, up to a combined value of $5,000. Eligible NWT businesses can receive funding for the development of a new e-commerce website, the improvement of an existing one, digital marketing, hardware/software costs, and more.

National Research Council (NRC)

The NRC’s Construction Sector Digitalization and Productivity Challenge Program is a unique initiative aimed at driving innovation through digitalization in the construction sector. This program recognizes the potential of technology in improving productivity and contributes to the emerging low-carbon economy, offering crucial financial support to businesses looking to make this transition.

Final Thoughts

These funding programs serve as catalysts for Canadian businesses seeking to advance their digital capabilities. By leveraging these opportunities, companies can embrace a broader spectrum of cutting-edge technologies and position themselves for growth and competitiveness. It is imperative for businesses to carefully review the specific eligibility criteria and benefits provided by each program to make informed decisions tailored to their unique digital transformation needs and goals.

Need support applying for funding?

If you have questions about any of the above programs or are considering submitting an application, don’t hesitate to contact R&D Partners at 1-800-500-7733 for more information or to schedule a meeting with one of our funding experts.

Unlocking Innovation: Intellectual Property Funding for Quebec Businesses

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In the dynamic landscape of business and technology, intellectual property (IP) stands as a cornerstone for innovation and growth. For businesses in Quebec, a wealth of opportunities awaits through various funding programs tailored to support and foster the protection of intellectual property. In this blog post, we delve into the world of IP funding, shedding light on the avenues available for businesses to safeguard their ideas, products, and technologies. Join us to explore how these initiatives enable Quebec businesses to innovate and thrive on a global scale.

ElevateIP

The newly launched Elevate IP funding program, announced in Budget 2021, assists Canadian enterprises with up to 500 employees. It offers assistance in mastering intellectual property, including crafting and executing strategies like trademark and patent filings, copyright, trade secrets, and more. This initiative operates in collaboration with Canadian Business Accelerators and Incubators (BAI).

Industrial Research Assistance Program (NRC IRAP) – IP Assist

The National Research Council of Canada’s Industrial Research Assistance Program (NRC IRAP) has extended its advisory services with the IP Assist program to help profit-oriented small or medium-sized Canadian businesses drive growth through innovation. Qualifications include incorporation and a workforce of 500 or fewer employees. Successful applicants become integral to IRAP’s “portfolio,” receiving guidance from dedicated Industrial Technology Advisors (ITAs). The IP Assist program consists of three progressive levels of assistance:

Level 1, Awareness: Companies benefit from customized “IP 101” sessions, heightening their understanding of intellectual property and its significance.

Level 2, Strategy: Companies develop a comprehensive IP strategy guided by ITAs. This includes gap analysis, IP landscaping (excluding legal review), competitive analysis, and background art searching.

Level 3, Action: Building upon Level 2, companies execute initiatives aligned with their IP strategy. It covers expenses associated with implementation, such as trademark clearance searches, patentability assessment, IP audit, and branding strategy. Notably, filing fees for patents or trademarks are not covered.

Note that Levels 2 and 3 exclude expenses like legal fees, foreign agent costs, and conference fees.

Innovation Program

The Innovation Program’s Support for Innovation Projects Stream from Investissement Quebec supports for-profit businesses or business groups across diverse sectors. It covers a range of innovation projects, from the planning stage to pre-commercialization. Collaboration with partners outside Quebec is permissible, provided it generates substantial economic and technological benefits for the province.

The program provides comprehensive support for IP protection activities, including funding for IP strategy, rights/licenses, patent applications, agent fees, and IP portfolio assessment. It facilitates patent applications domestically and internationally.

The deadline to submit a complete application is September 22, 2023.

CanExport Innovation Program

The CanExport Innovation program, facilitated by Canada’s Trade Commissioner Service, is designed to support Canadian entities engaging in research and development with foreign partners. This initiative offers financial assistance of up to $75,000 CDN, covering 75% of expenses for a single technology. The program focuses on IP-related activities conducted in the foreign partner’s country, including application fees for patent or copyright protection through foreign agencies, as well as legal fees associated with pursuing IP safeguarding in international markets.

Applications are accepted year-round, but approved activities must be finished within the same government fiscal year (April 1 to March 31) as the approval.

Innovative Solutions Canada

Innovative Solutions Canada funds early-stage R&D and prototype testing through several streams. The Challenge stream issues challenges for early-stage innovations in a variety of industries and may cover IP costs for successful applicants. The Testing Stream issues calls for proposals for various themes or issues and funds late-stage innovations; IP is retained by the company.

Final Thoughts

The availability of IP funding programs offers a golden opportunity for Quebec companies to not only protect their innovative concepts but also fuel their expansion and success. By capitalizing on these initiatives, businesses can explore uncharted territories, drive economic growth, and amplify their presence on the global stage.

Need support applying for funding?

If you have questions about any of the above programs or are considering submitting an application, don’t hesitate to contact R&D Partners at 1-800-500-7733 for more information or to schedule a meeting with one of our funding experts.

The Funding Landscape for Canadian AI Startups

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The exponential growth of Artificial Intelligence (AI) has revolutionized industries worldwide, offering transformative potential and unprecedented opportunities for innovation. In Canada, the AI startup ecosystem is vibrant and dynamic, with pioneering companies continuously pushing the boundaries of what is possible in these fields.

However, as is the case with most startups, securing financing is a crucial step for AI entrepreneurs in bringing their visions to life. In this blog post, we will dive into the government funding landscape for AI and machine learning startups in Canada, to help them secure the necessary funding for their ventures.

IRAP and SR&ED

In Canada, technology companies benefit from two major funding programs: the National Research Council Canada’s IRAP (Industrial Research Assistance Program) and the Canada Revenue Agency’s SR&ED (Scientific Research and Experimental Development) funding. The National Research Council offers IRAP grant funding of up to $10 million (although generally less than $300k) for innovative R&D projects. Meanwhile, the Canada Revenue Agency offers SR&ED tax credits for eligible R&D activities. While the two programs are very different, both play vital roles in fostering technological advancements and driving innovation within the tech sector in Canada.

Beyond these programs, there are several funders in Canada that offer government programs specifically designed for AI companies. These programs offer a tailored funding experience for businesses developing AI and machine learning technologies, often offering industry expert advice in addition to financial support. Below are a few funders to consider:

Mitacs

Mitacs is a Canadian non-profit organization that fosters research collaborations between academic institutions and industry partners to support innovation and professional development. Mitacs’ AI, Quantum Computing, and Cybersecurity Initiative aims to advance research and development in these cutting-edge fields by connecting academic researchers with industry partners. The initiative provides funding for collaborative projects that address real-world challenges, facilitating knowledge transfer, and driving innovation in AI, quantum computing, and cybersecurity domains.

Scale AI

As part of Canada’s Innovation Supercluster initiative, Scale AI accelerates the adoption of artificial intelligence and machine learning technologies in various industries through funding and collaborative projects. It offers funding for projects that utilize AI in supply chain, involve the development or transformation of new technology, and involve multiple partners, including at least one SME.

NSERC  

NSERC, the Natural Sciences and Engineering Research Council of Canada, is a federal agency that supports and funds research and innovation in the fields of natural sciences and engineering. NSERC offers a variety of programs to support R&D projects. Among them, Alliance Grants provide up to $1M in funding and up to 100% of project costs for collaborative projects with partner organizations. Idea to Innovation Grants (I2I) and the Discovery Grants (Individual) Program may also offer support to AI companies engaging in R&D. As an artificial intelligence-focused program, NSERC Alliance – Alberta Innovates (AI) Advance grants supports projects by NSERC eligible researchers and Alberta-based universities.

Alberta IoT (Alberta)

Alberta IoT is an organization dedicated to promoting and supporting the growth of the Internet of Things (IoT) industry in the province. Alberta IoT’s Fast Track accelerator offers a technology ecosystem to help established IoT businesses in Calgary and the surrounding areas grow and increase collaboration. The program provides eight weeks of business training and courses, and one year of mentorship.

Québec Ministry of Economy and Innovation (Quebec)

The Québec Ministry of Economy and Innovation is a government department responsible for promoting economic growth, innovation, and investment in Quebec to enhance the province’s competitiveness. PARTENAR-IA, initiated by the Québec Ministry of Economy and Innovation, supports collaborative research projects in artificial intelligence by providing funding and resources to foster partnerships between academic institutions and industry, driving innovation in Quebec.

Ivado Labs (Quebec)

Ivado Labs is a research center based in Quebec specializing in data science and operational research, and focuses on generating innovative solutions to real-world problems. Its Invest-AI Program offers financial support and expertise to startups and small- and medium-sized enterprises in order to accelerate the development and commercialization of AI-based solutions, helping them overcome barriers and achieve growth in the evolving AI landscape.

Final Thoughts

Securing financing is a critical step for AI startups to thrive and bring their innovations to the market. Government funding initiatives, venture capital investments, research grants, strategic partnerships, and competitions all present opportunities for startups to access the necessary capital. By leveraging these funding sources, AI startups can fuel their growth, drive innovation, and make a significant impact across industries.

Need support applying for funding?

If you have questions about any of the above programs or are considering submitting an application, don’t hesitate to contact R&D Partners at 1-800-500-7733 for more information or to schedule a meeting with one of our funding experts.

Federal Budget 2023: Key Measures for Canadian Innovators

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On March 23, 2023, Deputy Prime Minister and Minister of Finance, Chrystia Freeland, unveiled the federal government of Canada’s budget for the 2023-2024 fiscal year. Titled “A Made-in-Canada Plan,” the budget is focused on ensuring Canadians have access to the resources they need to thrive, supporting businesses and workers to build a strong and inclusive economy, and taking a stand against climate change to ensure that Canada keeps pace with the large strides being made in the highly competitive global clean economy.

We have highlighted some of the key initiatives in the 2023 Federal budget and the impact these new measures may have on innovative Canadian companies in the years to come.

Scientific Research & Experimental Development (SR&ED) Tax Credit

Before delving into the new programs and initiatives outlined in Budget 2023, let us re-examine a critical Canadian program: the SR&ED Tax Credit. In the 2022 budget, the government announced their plan to review the SR&ED tax credit program, hoping to support Canadian R&D more effectively. To date, the results of this review have not been released. In fact, in the 2023 budget, there was no mention of any change to the program. It will be interesting to see what comes of this long-awaited review, and how the government endeavours to “provide adequate support” to Canadian innovators.

Read more.

Clean Electricity Investment Tax Credit

The Canadian government has proposed a 15% refundable tax credit to accelerate investments in clean electricity technologies, including non-emitting electricity generation, abated natural gas-fired electricity generation, stationary electricity storage systems, and equipment for electricity transmission. The tax credit will be available for new projects and the refurbishment of existing facilities. The government has also introduced labor requirements and commitments to achieve a net-zero electricity sector by 2035. The tax credit is expected to cost $6.3 billion over four years starting in 2024-25 and $19.4 billion from 2028-29 to 2034-35.

Learn more.

Clean Technology Manufacturing Investment Tax Credit

The Clean Technology Manufacturing Investment Tax Credit is introduced in Budget 2023 to support Canadian companies in the manufacturing and processing of clean technologies and critical minerals. This refundable tax credit is equal to 30% of the cost of investments in new machinery and equipment used to manufacture or process key clean technologies, and extract, process, or recycle key critical minerals. The investment tax credit is estimated to cost $4.5 billion over five years and an additional $6.6 billion from 2028-29 to 2034-35. The credit would apply to property acquired and available for use on or after January 1, 2024, and would expire after 2034.

Learn more.

Reduced Tax Rates for Zero-Emission Technology Manufactures

Budget 2023 proposes to extend the reduced corporate tax rates for zero-emission technology manufacturers for another three years beyond the expiry date in 2032, subject to a phase-out starting in 2032. The eligibility for the reduced rates will also include nuclear energy equipment and the processing/recycling of nuclear fuels and heavy water. The enhancements will cost $20 million over five years and an additional $1.3 billion from 2028-29 to 2034-35.

Learn more.

Canada Growth Fund

The Canadian government has established the $15 billion Canada Growth Fund to attract private capital for low-carbon projects, technologies, businesses, and supply chains. The fund will be managed by the Public Sector Pension Investment Board (PSP Investments) and will use investment instruments to absorb certain risks and encourage private investment in Canada’s clean economy. The Growth Fund will begin investing in the first half of 2023, and PSP Investments will establish an independent investment team with extensive experience to make investment decisions. The Growth Fund will maintain a reporting framework for public transparency and accountability, and contracts for difference will be provided to support clean growth projects.

Learn more.

Additional Funding for the Strategic Innovation Fund

Since 2018, the Strategic Innovation Fund has created over 105,000 jobs and leveraged $67 billion in private investment across 107 projects. In Budget 2023, the federal government announces plans to provide $500 million over ten years to support clean technology development, and up to $1.5 billion of existing resources will be directed toward clean technologies, critical minerals, and industrial transformation.

Learn more.

Final Thoughts

Budget 2023 focuses heavily on developing a green economy and innovating in clean technologies. It will be interesting to see how the proposed tax credits, funds, and programs incite change and affect the business ecosystem. Is this budget perhaps a turning point for Canada in the competitive global green economy? Only time will tell.

5 Sources of Funding for Your Aerospace Company

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Canada is one of the most prominent players in the global aerospace industry and is home to many companies that are known on an international scale—Bombardier, CAE, Pratt & Whitney Canada, Héroux-Devtek and Thales are just a few among them. In fact, the aerospace industry accounted for over $24 billion in Gross Domestic Product (GDP) in 2021.  

However, like any industry, it requires funding to support research and development (R&D), expansion, and operations. 

In this article, we will discuss five funding opportunities that are designed to fuel companies in the Canadian aerospace industry. 

1. NRC Industrial Research Assistance Program (IRAP)   

The National Research Council’s Industrial Research Assistance Program (IRAP) is a federal program that provides funding to small and medium-sized enterprises (SMEs) to support R&D projects. IRAP offers a variety of services, including financial assistance, advice and guidance, and networking opportunities. Eligible aerospace companies can receive up to $10 million in funding for very large R&D projects, although funding is generally under $1M per client. 

2. Strategic Innovation Fund (SIF) 

Offered by Innovation, Science and Economic Development, the Strategic Innovation Fund (SIF) seeks to promote innovation, especially in several priority areas, including the aerospace and automotive industries and net zero initiatives.    

Through five streams, the SIF offers investments toward R&D and commercialization, firm growth, industrial research, and collaborative research. Streams 1 to 3 offer repayable contributions of a minimum of $10 million. Stream 5 supports national innovation ecosystems through investments in collaborations between corporations, academic and research institutions and not-for-profits.  

3. Aerospace Regional Recovery Initiative (ARRI) 

The Government of Canada supports Canadian companies in the aerospace industry or supply chain through the Aerospace Regional Recovery Initiative (ARRI). The program offers funding in the form of an interest-free government loan for projects that improve sustainability practices, increase productivity and promote integration into regional and global supply chains. Applications for the ARRI must be submitted through your regional development agency.  

4. Canadian Space Agency (CSA) 

The Canadian Space Agency (CSA) is a federal organization responsible for coordinating and managing Canada’s space program. The CSA provides funding for space-related R&D and technology development, as well as for space missions’ operations.  

The CSA has a number of programs and initiatives that provide funding to aerospace companies, including the Space Technology Development Program, which supports R&D projects, and the Lunar Exploration Accelerator Program (LEAP), which provides funding for the development of new technologies linked to Lunar exploration.  

Both programs are currently closed to applications but should reopen soon. 

5. Innovative Solutions Canada (ISC) 

Innovative Solutions Canada (ISC) is a grant program run by Innovation, Science and Economic Development (ISED), the government organization responsible for driving investment, innovation, and Canada’s share of global trade. The program offers grants for solutions to challenges that are opened frequently for short periods.  

ISC has partnered with the Canadian Space Agency (CSA) on several challenges, including calls for various AI technologies and sensor systems for space robots. Other relevant challenges have been launched in partnership with Transport Canada (TC), Innovation, Science and Economic Development Canada (ISED), and the Department of National Defence (DND).  

Although ISC is not exclusively aerospace-focused, it is always a good idea to keep an eye out for challenges that may be relevant to your company.   

How to find funding 

There are a number of funding opportunities available to Canadian aerospace companies, including programs from the federal government such as the Industrial Research Assistance Program (IRAP) and Strategic Innovation Fund (SIF), as well as programs from organizations like the Canadian Space Agency (CSA) and National Research Council of Canada (NRC). To find these and other relevant programs, please create a profile on our funding search engine. 

By taking advantage of these funding opportunities, Canadian aerospace companies can support their R&D, expansion and operations, and continue to innovate and compete in the global aerospace industry. 

SR&ED vs CDAE: Everything You Need to Know

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For innovators in Canada, investments in research and development (R&D) are vital; however, funding innovation often proves challenging, especially for growing companies with limited resources.

The Canadian and Provincial Governments have several programs to help propel investment in R&D in companies across the country. Among them are the Canada Revenue Agency’s Scientific Research and Experimental Development (SR&ED) tax credit and Revenu Quebec’s Tax Credit for the Development of E-Business (TCBE), often referred to as “CDAE,” its French-language abbreviation.

We will explore the key similarities and differences between the two programs available to companies operating in Quebec so that you can get a better idea of whether the programs are the right fit for your company. Keep in mind that CDAE and SR&ED are not necessarily mutually exclusive—we will explore this later.

Nature of funding

Both the SR&ED and CDAE programs are tax credits.

A tax credit is an amount of money that a company can subtract from the taxes they owe the CRA and their provincial agency or it can be a direct refund regardless of taxes paid or owing.

In the case of a refundable tax credit, a company will receive a cash reimbursement at the end of the year, deducting any taxes due. Meanwhile, non-refundable tax credits are capped at the company’s tax liability—even if the credit exceeds the owed taxes, the company will not receive any additional reimbursements and the full value of the credit will not be used. Having said that, non-refundable tax credits can often be carried forward or back.

SR&ED is generally a refundable tax credit for Canadian-controlled Private Corporations (CCPCs). When claimed by non-CCPCs, the program offers a non-refundable tax credit. On the other hand, CDAE offers a combination of refundable and non-refundable tax credits.

Eligibility Criteria

Eligible Companies

Most significantly, SR&ED supports companies across Canada, while CDAE only offers credits to companies in Quebec.

The CDAE requires that eligible companies be focused on developing and selling software licenses or services. Your company’s gross revenue must be at least 75% derived from IT sector activities; 50% of these activities must be related to a core subset of the IT sector, as defined here.

Additionally, to qualify for CDAE credits, your company must have at least 6 full-time, eligible technical employees for the entire fiscal year of the claim.

This minimum requirement is more flexible for startups that have existed for less than 2 years. For these companies, they will meet the eligibility criteria once they reach 6 eligible technical employees in the fiscal year.

The SR&ED credit does not have revenue requirements, nor does it require a minimum number of employees.

Beyond the eligibility of the company, there is a second level of eligibility for CDAE: the eligibility of employees and their salaries.

Eligible Activities

SR&ED supports R&D activities in any industry. R&D activities must demonstrate a systematic approach, an attempt at technological advancement, and technological uncertainty. As such, projects related to technology that have already been validated and for which there is readily accessible information cannot be claimed.

Contrarily, the CDAE covers activities in E-business, SaaS, and B2B software companies. While CDAE’s revenue requirements are more restrictive, its eligible activities are less rigid and can include routine development.

It is important to note that CDAE does not cover programs that involve software that controls hardware or is built into hardware. As such, projects in the IoT or robotics are essentially ineligible because they involve software that controls mechanical elements.

Additionally, projects that rely on external data sets, such as AI or AI-adjacent projects, are ineligible for CDAE as well. To be eligible, data used in the project must be internally owned and generated by your clients.

Interested in learning more about SR&ED Eligibility? Read our guide here.

Eligible Expenses and Amounts

Both tax credits cover salaries; however, they have different requirements and credit amounts.

CDAE covers only the salary of employees in technical roles across the product development life cycle – including developers and QA. The CDAE offers a refundable tax credit of up to 24% and a non-refundable tax credit of up to 6% of each eligible employee’s salary. These credits are applied to the total salary, regardless of the portion that is directly related to the CDAE activities.

Note, however, that the CDAE only covers salaries up to $83,333, meaning that companies can only receive up to $20,000 in refundable credit and up to $5,000 in a non-refundable credit per employee salary. There are no restrictions on the number of employees that can be covered by CDAE; however, a fee must be paid to Invest Quebec for the annual eligibility certificates requested and this fee varies based on the number of employees claimed.

Unlike CDAE, companies applying to SR&ED can only claim tax credits on expenses such as salaries, wages, materials consumed or transformed, subcontractor expenses, and overhead.

The SR&ED tax credit covers only the portion of employee salaries and subcontractor expenses that are related to eligible R&D activities in Canada. In other words, the SR&ED refundable tax credit is based on the percentage of time spent on R&D activities relative to the employee’s salary. However, there is a tradeoff: this program also covers the salaries and wages of support employees, such as HR or payroll employees who specifically spend time recruiting engineers for the SR&ED project or handling payroll for project employees. This is known as indirect SR&ED and is claimed in different manners federal and provincially.

Note that, unlike CDAE, SR&ED tax credits are not restricted by a maximum eligible salary amount for non-owners.

Application Process

The CDAE’s application process is done in two levels: first, you must apply to Invest Quebec within 15 months of the fiscal year-end in which the expenses were incurred to receive an eligibility certificate confirming eligibility of the company and for all employees for which a tax credit is being requested. These CDAE applications automatically get reviewed—the process is standardized and systematic. Then, you must submit an application to Revenue Quebec (RQ) within 18 months of the same fiscal year.

Meanwhile, SR&ED tax credit must be claimed within 18 months of the fiscal year within the tax return to CRA and RQ and do not always get audited, but you can expect at least a first-year visit by the CRA.

SR&ED vs CDAE

So, we’ve discussed the two programs and their differences. Now, which one will be more beneficial to your business?

CDAE can help companies that are more advanced and are looking to scale up. Many companies receive more SR&ED tax credits in the early days of their innovation projects and then move towards increasing their CDAE funding amounts as SR&ED covers fewer of their activities.

Because routine development activities are covered under CDAE, businesses that are looking to maintain or improve existing technology will benefit. Meanwhile, these activities are not covered under SR&ED.

CDAE is also more beneficial to large or foreign companies since its tax credits are fixed regardless of size or ownership structure, unlike SR&ED which offers lower, non-refundable credits to non-CCPC and larger companies.

Stacking SR&ED and CDAE

If both programs seem like they’d benefit your business, how do you choose which one to claim? There’s good news: it is possible to claim both SR&ED and CDAE.

A few options exist if you want to benefit from both programs. Claiming federal SR&ED tax credits and provincial CDAE tax credits is a great combination. It is also possible to optimize both CDAE and SR&ED on the provincial level to maximize the tax credit amount, but this is tricky.

If you like to learn more about how to stack SR&ED and CDAE or need some help, speak with our experts to find the best option for your company’s specific needs.

Still Have Questions?

Read what our experts have to say in our SR&ED FAQ and CDAE FAQ articles.

If you’re considering submitting a CDAE claim or combining credits, don’t hesitate to contact R&D Partners at 1-800-500-7733 for more information or to schedule a meeting with one of our expert consultants.

Disclaimer: The views expressed in this article are provided for informational purposes only. It is not intended to nor can it replace the evaluation of your specific SR&ED or e-business tax credit claim by a dedicated professional.

5 Funding Opportunities for Robotics & Advanced Manufacturing Companies

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Advanced manufacturing is at the core of the Canadian economy—without it, creating better products and services and improving productivity would be difficult, if not impossible. Robotics, additive manufacturing, and big data analytics are key to developing innovative and efficient manufacturing processes. 

Canada has been seriously investing in robots since the 1990s. According to Statistics Canada, Canadian firms were using over $1.5 billion worth of robots by 2017. The majority of this technology was used in manufacturing. Invest in Canada reports that the manufacturing industry contributed to 9.5% of the Canadian GDP in 2021. 

However, there are still many efforts to make greater strides in the industry and to increase Canada’s competitiveness and global prominence in the development of cutting-edge technologies. Several not-for-profits and government agencies across Canada have programs and initiatives that promote the advancement of the manufacturing industry.  

Below are some key sponsors interested in fueling robotics and manufacturing innovation, as well as several major programs to look out for. 

NGen  

In 2018, the Government of Canada established five Innovation Superclusters, each representing a key industry sector in the Canadian economy: artificial intelligence, digital technology, plant protein development, marine technology, and advanced manufacturing. This initiative exists to foster innovation, collaboration between researchers and the private sector, and job creation, ultimately, strengthening Canada’s competitive edge in emerging technologies.  

Next Generation Manufacturing Canada, or NGen, is the not-for-profit organization spearheading Canada’s Innovation Cluster for Advanced Manufacturing. NGen strives to build world-leading advanced manufacturing capabilities in Canada, delivering better products and creating more jobs. As of October 2022, NGen has supported 167 projects, with a total value of $605M, and has helped create 1,030 jobs.   

NGen’s Pilot Projects & Feasibility Studies support collaborative projects, involving at least one Canadian SME and a partner organization, that seek to implement, develop, and/or de-risk the adoption of an advanced manufacturing technology or process.  

Innovation, Science and Economic Development Canada  

Innovation, Science and Economic Development Canada (ISED) is a department of the federal government with a mandate to build a competitive, growing Canadian economy. Through a variety of funds and programs, ISED fosters trade and investment, promotes science and innovation, and supports enterprise growth.   

One such initiative is the Strategic Innovation Fund (SIF). This fund’s Business Innovation and Growth streams promote research and development projects that will accelerate the implementation and commercialization of innovative products, processes and services. The Collaborations and Networks streams support research and development through industry collaboration between private sector organizations, not-for-profits, and researchers. The SIF strengthens the competitive advantage of Canadian industries through technological advancement and collaboration.  

Funding opportunities for Robotics and Advanced Manufacturing firms also exist through ISED’s Innovative Solutions Canada (ISC) program. ISC is a competitive research and development program stream that seeks pre-commercial innovations that respond to challenges issued by federal departments or agencies. These challenges are updated frequently and require high-tech solutions in various industries. Past challenges have included a call for prototypes in autonomous systems and robotics and request for proximity sensor systems for space robotics.  

The National Research Council of Canada 

The National Research Council of Canada (NRC) is the country’s largest federal research and development organization. The NRC partners with Canadian industry to bring innovation from lab to market, collaborating with over 1,000 companies each year. 

The NRC is best known for its Industrial Research Assistance Program (IRAP), an initiative that helps Canadian SMEs develop and adopt new technologies, conduct research and development, and drive business growth through financial assistance, advisory services, and networking. In 2018-2019, IRAP increased its funding limit to $10 million; however, assistance typically ranges from $50,000 to $500,000.  

Quebec’s Innovation Program 

In Quebec, the Innovation Program supports innovation projects that are either conducted in-province or with partners in other provinces or countries. This government initiative, funded by the Quebec Ministery of Economy, Innovation and Energy (MEI), is administered by Investissement Québec, a business development corporation that aims to help businesses establish subsidiaries in Quebec and to strengthen the Quebec business ecosystem.  

The program has two components: Support for Innovation Projects and Support for Mobilizing Projects. Both support for-profit corporations and groups of corporations, and social economy organizations including cooperatives and not-for-profit organizations. For robotics and advanced manufacturing organizations that thrive off of efficiency and cutting-edge technologies, the first component offers funding for the development or improvement of a product or process. Applicants must demonstrate a need for new innovation and for research and development efforts, and show a potential for commercializing the innovation. 

Business Scale-up and Productivity Program 

The Business Scale-up and Productivity (BSP) program helps high-growth firms adopt and commercialize leading-edge technologies and processes in advanced manufacturing, clean resources and technology, digital industries, health sciences, natural resources value-added processing, ocean technology, and value-added agriculture. The program accepts applications on an ongoing basis with no submission deadlines. 

The BSP program operates across Canada under different Federal Economic Development Agencies. In Quebec, the program is led by Canada Economic Development for Quebec Regions (CED) and offers SMEs interest-free, repayable contributions equivalent to up to 50% of eligible project costs. It focuses on firms operating in manufacturing, food processing, information, communications and multimedia technologies, and life sciences, but other sectors may also be eligible. 

The FedNor BSP program, which operates in Northern Ontario, offers the same.  

The FedDev Ontario BSP program provides between $500,000 and $10 million in interest-free, repayable contributions supporting up to 35% of eligible project costs. 

The Atlantic Canada Opportunities Agency BSP program serves businesses in New Brunswick, Newfoundland and Labrador, Nova Scotia, and Prince Edward Island, offering unsecured, interest-free, repayable contributions. Additional funding may be available to Indigenous businesses. 

Finally, the PrairiesCan BSP serves Alberta, Manitoba, and Saskatchewan and funds up to 50% of eligible project costs, offering interest-free repayable contributions between $200,000 and $5 million. Preference will be given to applicants that are operating in food and ingredients processing, zero-emission heavy equipment vehicles, and critical minerals processing. 

How R&D Partners Can Help 

If you have any questions about the above programs or other funding opportunities, please reach out to Veronica Campbell at vcampbell@partenairesrd.com. 

Changes to the Tax Holiday Program for Foreign Researchers and Foreign Experts

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The Ministère de l’Économie et de l’Innovation (MEI) recently announced changes to the eligibility criteria for the Tax Holiday Program for Foreign Researchers (FR) and Foreign Experts (FE). This program is designed to facilitate the recruitment of foreign researchers or foreign experts capable of aiding in the commercialization of innovation activities or the advancement of technology, respectively, within private companies in Quebec. Quebec companies remain competitive by attracting highly qualified researchers/experts to perform scientific research and experimental development (SR&ED).

What’s New?

1. The tax holiday is applicable as of the date of hire on contract.

The tax holiday is now based on the hiring date and the number of months that pass after this date, rather than in calendar years following the year in which the hiring date fell – making it much more beneficial.  If a candidate is hired October 9, 2021, the tax holiday begins on October 9, 2021, and lasts for 60 months, i.e., October 9, 2026.

2. Applications must be submitted prior to moving to Quebec.

The rules also state that candidates now need to apply before their arrival to Québec. This means that employers should apply prior to the candidate’s hiring date and arrival into Québec. Those who are already in Québec and that have not yet applied should move forward with applications as soon as possible to avoid any issues. These changes are on-going and may be further refined in the next couple months.

3. The comparative evaluation requirement has been updated.

Previously, the approval of the tax holiday depended on the receipt of the comparative evaluation certificate. Going forward, the comparative evaluation may not be required for approval. However, it may be requested during the review process on a case-by-case basis; it is therefore recommended to apply in advance to minimize the processing time as the comparative evaluation issuance process is the longest part.

One of the following documents must now be submitted with the tax holiday application:

  1. Copies of post-secondary diplomas with a list of courses taken for each diploma and a certified copy of the applicant’s last relevant diploma, OR;
  2. Comparative evaluation of studies completed outside Quebec issued by the Ministry of Immigration, Francisation and Integration (MIFI) and sent directly to MEI

4. No annual renewal is required for FRs, but it is still required for FEs.

Foreign researchers only need to submit one application to receive the full tax holiday, no longer needing to submit annual follow-ups. For foreign experts, annual renewal applications are still required for the five-year duration of the tax holiday. Once the initial expert certificate has been issued and the candidate is employed in Québec, the employer must submit an annual application for the expert certificate annually before March 1 of the calendar year following the tax year for which the applicant is taking the tax holiday.

Additional information on the comparative evaluation

Along with the comparative evaluation document, the candidate should include certified copies of all post-secondary diplomas they wish to have evaluated by the Ministry, noting that the minimum education requirement for the tax holiday is a graduate degree for foreign researchers and a first cycle university degree (bachelor’s) for foreign experts. If you would like to learn more about the tax holiday program requirements, please read our previous article.

To find recognized authorities to certify your degree as a true copy please see the List of authorities recognized by the Ministère for certifying documents. It explains how to obtain a certified copy of your diploma depending on the country or territory where your documents were issued. A copy certified by the issuer of the document (your university) is always the preferred format.

Further reading

If you have any questions about the Tax Holiday Program that this blog post left unanswered, or if you are considering submitting a claim, don’t hesitate to contact our team at:  1-800-500-7733, ext.102.

 

Disclaimer: The views expressed in this article are provided for informational purposes only. It is not intended to nor can it replace the evaluation of your specific tax credit claim by a dedicated consultant.

Your Questions About CDAE, Answered by an R&D Partners Expert

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Introduction

The Tax Credit for the Development of E-Business, commonly referred to as “CDAE” – its French-language abbreviation – is a provincial tax credit available in Quebec for businesses developing e-business software solutions in the province.

To be eligible, a business must have a minimum of 6 eligible employees spending 75% or more of their time on technical activities, and 75% of the company’s gross revenue must be coming from IT sector activities.

The funding is structured as a maximum 24% refundable and 6% non-refundable tax credit for each eligible employee’s salary.

This quick overview does not cover every detail of the CDAE tax credit. For more information on the program, read our dedicated blog post.

We often get questions about CDAE, so we’ve asked a member of our team of experts to answer the most common ones for you below.

The expert

Sahar Ansary, M. Eng.

Sahar has assisted hundreds of small to large-sized organizations across Canada with SR&ED and E-business tax credit programs for over ten years and has led work on over $50M in related claims.

She specializes in identifying and optimizing the technical and financial aspects of various funding programs, maximizing overall tax credits, and managing major accounts. Sahar has significant experience in the aerospace, medical device, and software industries.

The questions

What is meant by “e-business” when it comes to the CDAE credit?

The CDAE Tax Credit criteria defines “e-business” much more broadly than just e-commerce.  It is not limited to the transactional side of e-commerce that we traditionally think of; the program guidelines state that it “concerns the organization of work in a company as well as how the company communicates and exchanges data with its customers, subcontractors, suppliers and partners.”

Eligible companies are therefore those who develop software for other businesses to evolve in that direction and digitize their operations at various levels – HR, procurement, accounting, and more. Traditional e-commerce is also eligible if a company is developing a software solution allowing monetary transactions, but the program includes a lot more than this under the umbrella of “e-business.”

Who can be considered an eligible employee?

Eligible employees for the CDAE tax credit are full-time indeterminate salaried employees in Quebec that work a minimum of 26 hours per week and spend over 75% of their time on technical activities.

When an individual is temporarily absent from his or her work for grounds considered to be reasonable (e.g. temporary illness, maternity leave, paternal etc.), Investissement Québec (IQ) may deem that the employee continued to work throughout the period of absence for the purpose of determining tax credit eligibility. For instance, someone who worked  20 weeks during the fiscal year because they were on sick leave during the rest will still be considered as an eligible full-time employee.

What counts as a “technical activity”?  

The CDAE eligibility guidelines stipulate that an employee must be devoting at least 75% of his/her time to carrying out, supervising, or directly supporting eligible activities to be eligible. Those activities must be technical and some examples include the following:

  • Design and development of e-business solutions
  • Quality control (testing, 2nd and 3rd level support)
  • Maintenance and evolution of e-business solution
  • IT consulting services for e-solution (customization, integration, deployment)
  • Technical coaching and supervision of technical employees/team.

If an employee spends more than 25% of their time on non-eligible activities during the fiscal year, then that employee will not be eligible for the CDAE tax credit because they won’t respect the 75% rule (ex. an HR employee or a CEO would not be eligible, because they spend a lot of time on administrative tasks and very likely do not spend 75% of their time on eligible technical work).

Do you need to continuously have 6 technical employees or more to remain eligible for the CDAE credit?

Yes, and no. What you need are 6 eligible positions maintained throughout the year. The requirement is not tied to any individual employee because you obviously do not control if someone leaves the company during the year.

For example – if one back-end developer leaves, and you fall below the 6 required eligible employees, you do not suddenly become ineligible. As long as you have the intention to replace this employee with another back-end developer (i.e. someone in the same position) and do so within around 6 months, everything should work out fine. You will essentially have had two employees in one role in the year, and both will be eligible.

Past the 6 month timeline, you may need to provide stronger arguments to explain why a replacement could not be found. However, note that none of this applies if you “lay off” an employee (i.e. ROE indicates code A in box 16 ) as no replacement can be justified in this case.

Can employees join during the year and still be eligible?

If an employee was hired towards the end of the fiscal year and, as such, worked for less than 40 weeks, they are eligible if they still hold the same position at the company beyond the fiscal year end. If an employee worked less than 40 weeks and quit during the fiscal year, they will only be eligible for the tax credit if the company found a replacement or if the company is still actively looking for one. The rule stating that they must have spent 75% of their time on eligible technical activities also still applies, of course.

How is the CDAE calculated if an employee joins during the year?

When employees join during the year and they meet the 75% rule, their maximum eligible salary cap of $83,333 is prorated based on the number of days they worked in that fiscal year.

For example, if an employee is hired at the beginning of Q3 and worked 100 days before the end of the fiscal year, their salary cap will be prorated by the following ratio:  Once we apply it to the maximum cap offered by the program, we get 100/365 x $83,333 = $22,830.

 

If you have any questions about CDAE that this blog post left unanswered, or if you are considering submitting a claim, don’t hesitate to contact our team at:  1-800-500-7733, ext.102.

 

Disclaimer: The views expressed in this article are provided for informational purposes only. It is not intended to nor can it replace the evaluation of your specific e-business tax credit claim by a dedicated consultant.