New 2021 Tax Deduction for Intellectual Property Protected Innovations in Québec
March 18, 2020
By Carmela De Luca and Alissa Hyppolite
On March 10, 2020, the Government of Québec announced an incentive tax deduction for the commercialization of innovations in Québec (IDCI), applicable as of January 1, 2021.
Under this incentive, qualifying innovative corporations are entitled to an effective tax rate of 2% on the portion of their taxable income attributable to the commercialization of a qualified intellectual property asset developed in Québec. This effective tax rate is significantly lower than Québec’s basic corporate tax rate of 11.5%, and will apply for corporate taxation years beginning after December 31, 2020.
A qualifying innovative corporation must have an establishment in Québec, carry on business in Québec, and derive income from the commercialization of a qualified intellectual property asset for which it holds rights. Corporations exempt from taxation, crown corporations, or wholly owned subsidiaries of crown corporations do not qualify for this deduction.
Qualified intellectual property assets include patents, certificates of supplementary protection (CSP), plant breeder’s rights (PBRs), or pending applications thereof, protecting inventions resulting from research and development carried out at least partially in Québec. Patents, CSPs, or pending applications thereof, must be filed after March 17, 2016 under the Canadian Patent Act or the equivalent law of a foreign jurisdiction. PBRs or pending applications thereof must be filed after March 10, 2020 under the Canadian Plant Breeder’s Rights Act or the equivalent law of a foreign jurisdiction.
Software protected by copyright is also a qualified intellectual property asset, where the date of creation of the software is after March 10, 2020 and it has resulted from research and development carried out at least partially in Québec.
For more information on ICDI, please consult the Budget 2020-2021 Additional Information Document, published by the Government of Québec. For more information about other Québec and Federal government support for innovators, please consult our article “Québec and Federal Governments can Support Your Innovative Projects”.
If you need advice on protecting your innovation or have further questions, please do not hesitate to contact a member of our firm.
Content shared on Bereskin & Parr’s website is for information purposes only. It should not be taken as legal or professional advice. To obtain such advice, please contact a Bereskin & Parr LLP professional. We will be pleased to help you.