ENHANCED INVESTMENT TAX CREDIT FOR MANUFACTURING AND PROCESSING EQUIPMENT
On October 7, the Minister of Finance delivered good news about the investment tax credit for manufacturing and processing equipment (hereinafter “ITC”).
To encourage investment by manufacturing SMEs, the following measures have been proposed:
- an additional 10% surcharge on the credit rate;
- amendment to the definition of “eligible property”.
1. ADDITIONAL 10% INCREASE IN CREDIT RATE
The prime rate for the ITC has been 10% since December 10, 2009. This rate can rise to 40% when the qualifying property is used mainly in a remote area.
The additional 10% increase announced on October 7 brings the minimum ITC rate for manufacturing SMEs to 20%. Assets must be acquired after October 7, 2013 and before December 31, 2017.
SMEs will be considered “manufacturing SMEs” when the following conditions are met:
SMEs will be considered “manufacturing SMEs” when the following conditions are met:
- the proportion of manufacturing and processing activities for the taxation year exceeds 50%;
- maximum paid-up capital of $15 million1 of the corporation and all associated corporations for the taxation year.
2. AMENDMENT TO THE DEFINITION OF “ELIGIBLE PROPERTY
The definition of “eligible property” for the purposes of the ITC is amended to include property acquired, which would be included in Class 50 (general-purpose electronic data processing equipment and operating software for such equipment), and which is used primarily (more than 50%) in the manufacturing and processing of items for sale or lease.
Qualification period: acquisitions from February 1, 2011 to December 31, 2017.
The tax legislation will be amended to allow an ITC claim for a taxation year even if the claim is made more than 12 months after the taxpayer’s filing due date for that year. Applications must be submitted by the latest of the following dates:
- April 7, 2014;
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the last day of the 12-month period following the applicable production due date for the taxation year for which ITC is claimed in respect of such property.
For more information, contact us today.
We’ll be happy to answer your questions
Liliane Fortier, CPA, CA, LL.M. Fiscal authorities.
Partner, Canadian Taxation, SR&ED
514 878-0258
lfortier@demersbeaulne.com
514 878-0258
lfortier@demersbeaulne.com
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1 Linear reduction of the additional premium if paid-up capital is between $15 million and $20 million. Loss of additional increase if paid-up capital exceeds $20 million.
