I-3 - Taxation Act

Section 737.18.44 Disposition versions

2022-06-08

737.18.44. A qualified corporation for a particular taxation year may deduct, in computing its taxable income for the particular year, the aggregate of all amounts each of which is, in respect of a particular qualified intellectual property asset of the corporation (in this section referred to as the “particular asset”), an amount determined by the formula

{[A × (B/C)] – D} × E × F.

In the formula in the first paragraph,

(a)  A is the corporation’s income for the particular year;

(b)  B is the corporation’s gross revenue from the commercialization of the particular asset for the particular year;

(c)  C is the corporation’s gross revenue for the particular year;

(d)  D is the greater of

i.  the amount determined by the formula

10% × {G – [(H + I) × (G/J)]}, and

ii.  the amount determined by the formula

25% × [H × (G/J)];

(e)  E is, subject to the fourth paragraph, the quotient obtained by dividing by seven the total of all fractions each of which is determined, in respect of a year (in subparagraphs e and f of the third paragraph referred to as a “year concerned”) that is either the particular year or any of the six preceding taxation years, by the formula

K/L; and

(f)  F is the rate determined by the formula

(M – N)/M.

In the formulas in the second paragraph,

(a)  G is the amount by which the gross revenue from the commercialization of the corporation’s particular asset for the particular year exceeds the aggregate of all amounts each of which is, in respect of the particular asset for the particular year, a royalty or an amount obtained as damages in the context of a remedy of a judicial nature;

(b)  H is the corporation’s income for the particular year;

(c)  I is the amount of the expenditures of a current nature deducted in the particular year by the corporation under section 222;

(d)  J is the corporation’s gross revenue for the particular year;

(e)  K is an amount equal to the lesser of the amount determined under subparagraph f for the year concerned and the total of

i.  the aggregate of all amounts each of which is the amount of wages paid by the corporation and described in subparagraph a of the first paragraph of section 1029.7 for the year concerned,

ii.  the aggregate of all amounts each of which is the portion of a consideration paid by the corporation and referred to in any of subparagraphs b, b.1, d, d.1, f, f.1, h and h.1 of the first paragraph of section 1029.7 for the year concerned,

iii.  50% of the aggregate of all amounts, other than an amount described in subparagraph iv, each of which is the portion of a consideration paid by the corporation and referred to in any of subparagraphs c, e, g and i of the first paragraph of section 1029.7 for the year concerned,

iv.  80% of the aggregate of all amounts each of which is the total or partial amount of an expenditure paid by the corporation and described in subparagraph b of the first paragraph of section 1029.8.6 for the year concerned, and

v.  the product obtained by multiplying, by the proportion that the business carried on in Québec by the corporation in the year concerned is of the aggregate of its business carried on in Canada or in Québec and elsewhere in the year concerned, as determined under subsection 2 of section 771, half of the aggregate of the amounts that, for the year concerned, are described in neither subparagraph iii nor subparagraph iv but would be described in either of those subparagraphs if all the scientific research and experimental development work undertaken on behalf of the corporation outside Québec had been undertaken in Québec;

(f)  L is the greater of $1 and the total of

i.  the aggregate of the amounts that would be described in subparagraph i of subparagraph e for the year concerned if all the wages paid by the corporation in respect of scientific research and experimental development work had been paid to employees of an establishment situated in Québec,

ii.  the aggregate of the amounts that would be described in subparagraph ii of subparagraph e for the year concerned if all the scientific research and experimental development work undertaken on behalf of the corporation had been undertaken in Québec, and

iii.  50% of the aggregate of the amounts that, for the year concerned, would be described in subparagraph iii or iv of subparagraph e if all the scientific research and experimental development work undertaken on behalf of the corporation had been undertaken in Québec;

(g)  M is the basic rate determined in respect of the corporation for the particular year under section 771.0.2.3.1; and

(h)  N is 2%.

Where a corporation has incurred an amount described in any of subparagraphs i to iii of subparagraph f of the third paragraph for the first time in the particular year or any of the five preceding taxation years, subparagraph e of the second paragraph is to be read as if “seven” were replaced by the number of taxation years included in the period that begins at the beginning of the taxation year in which the corporation first incurred such an amount and ends at the end of the particular year.

For the purposes of subparagraphs e and f of the third paragraph, the following rules apply:

(a)  section 1029.7 is to be read without reference to subparagraphs i and ii of subparagraph b of its third paragraph; and

(b)  no reference is to be made to section 230.0.0.5.

A corporation may deduct an amount under the first paragraph in computing its taxable income for a taxation year only if it encloses, with the fiscal return it is required to file for the year under section 1000, the prescribed form containing prescribed information.

2021, c. 14, s. 76; 2022, c. 23, s. 54.

2021-06-02

737.18.44. A qualified corporation for a particular taxation year may deduct, in computing its taxable income for the particular year, the aggregate of all amounts each of which is, in respect of a particular qualified intellectual property asset of the corporation (in this section referred to as the “particular asset”), an amount determined by the formula

{[A × (B/C)] – D} × E × F.

In the formula in the first paragraph,

(a)  A is the corporation’s income for the particular year;

(b)  B is the corporation’s gross revenue from the commercialization of the particular asset for the particular year;

(c)  C is the corporation’s gross revenue for the particular year;

(d)  D is the greater of

i.  the amount determined by the formula

10% × {G – [(H + I) × (G/J)]}, and

ii.  the amount determined by the formula

25% × [H × (G/J)];

(e)  E is, subject to the fourth paragraph, the quotient obtained by dividing by seven the total of all fractions each of which is determined, in respect of a year (in subparagraphs e and f of the third paragraph referred to as a “year concerned”) that is either the particular year or any of the six preceding taxation years, by the formula

K/L; and

(f)  F is the rate determined by the formula

(M – N)/M.

In the formulas in the second paragraph,

(a)  G is the amount by which the gross revenue from the commercialization of the corporation’s particular asset for the particular year exceeds the aggregate of all amounts each of which is, in respect of the particular asset for the particular year, a royalty or an amount obtained as damages in the context of a remedy of a judicial nature;

(b)  H is the corporation’s income for the particular year;

(c)  I is the amount of the expenditures of a current nature deducted in the particular year by the corporation under section 222;

(d)  J is the corporation’s gross revenue for the particular year;

(e)  K is an amount equal to the lesser of the amount determined under subparagraph f for the year concerned and the total of

i.  the aggregate of all amounts each of which is the amount of wages paid by the corporation and described in subparagraph a of the first paragraph of section 1029.7 for the year concerned,

ii.  the aggregate of all amounts each of which is the portion of a consideration paid by the corporation and referred to in any of subparagraphs b, b.1, d, d.1, f, f.1, h and h.1 of the first paragraph of section 1029.7 for the year concerned,

iii.  50% of the aggregate of all amounts, other than an amount described in subparagraph iv, each of which is the portion of a consideration paid by the corporation and referred to in any of subparagraphs c, e, g and i of the first paragraph of section 1029.7 for the year concerned,

iv.  80% of the aggregate of all amounts each of which is the total or partial amount of an expenditure paid by the corporation and described in subparagraph b of the first paragraph of section 1029.8.6 for the year concerned, and

v.  the product obtained by multiplying, by the proportion that the business carried on in Québec by the corporation in the year concerned is of the aggregate of its business carried on in Canada or in Québec and elsewhere in the year concerned, as determined under subsection 2 of section 771, half of the aggregate of the amounts that, for the year concerned, are described in neither subparagraph iii nor subparagraph iv but would be described in either of those subparagraphs if all the scientific research and experimental development work undertaken on behalf of the corporation outside Québec had been undertaken in Québec;

(f)  L is the greater of $1 and the total of

i.  the aggregate of the amounts that would be described in subparagraph i of subparagraph e for the year concerned if all the wages paid by the corporation in respect of scientific research and experimental development work had been paid to employees of an establishment situated in Québec,

ii.  the aggregate of the amounts that would be described in subparagraph ii of subparagraph e for the year concerned if all the scientific research and experimental development work undertaken on behalf of the corporation had been undertaken in Québec, and

iii.  the product obtained by multiplying, by the proportion that the business carried on in Québec by the corporation in the year concerned is of the aggregate of its business carried on in Canada or in Québec and elsewhere in the year concerned, as determined under subsection 2 of section 771, half of the aggregate of the amounts that, for the year concerned, would be described in subparagraph iii or iv of subparagraph e if all the scientific research and experimental development work undertaken on behalf of the corporation had been undertaken in Québec;

(g)  M is the basic rate determined in respect of the corporation for the particular year under section 771.0.2.3.1; and

(h)  N is 2%.

Where a corporation has incurred an amount described in any of subparagraphs i to iii of subparagraph f of the third paragraph for the first time in the particular year or any of the five preceding taxation years, subparagraph e of the second paragraph is to be read as if “seven” were replaced by the number of taxation years included in the period that begins at the beginning of the taxation year in which the corporation first incurred such an amount and ends at the end of the particular year.

For the purposes of subparagraph e of the third paragraph, section 1029.7 is to be read without reference to subparagraphs i and ii of subparagraph b of its third paragraph.

A corporation may deduct an amount under the first paragraph in computing its taxable income for a taxation year only if it encloses, with the fiscal return it is required to file for the year under section 1000, the prescribed form containing prescribed information.

2021, c. 14, s. 76.