I-3 - Taxation Act

Section 1029.7 Disposition versions

2021-06-04

1029.7. A taxpayer, other than a tax-exempt taxpayer, who carries on a business in Canada, who undertakes scientific research and experimental development related to a business of the taxpayer, in Québec, or causes such research and development to be undertaken in Québec on the taxpayer’s behalf as part of a contract, and who encloses the prescribed form containing the prescribed information with the fiscal return the taxpayer is required to file under section 1000, or would be required to file if tax were payable under this Part by the taxpayer, for the taxation year in which the research and development was undertaken is deemed, subject to the second paragraph, to have paid to the Minister, on the taxpayer’s balance-due day for that year, on account of the taxpayer’s tax payable for that year under this Part, an amount equal to 14% of the aggregate of

(a)  the wages paid by the taxpayer in respect of the research and development undertaken in the year to his employees of an establishment situated in Québec;

(b)  where the taxpayer has not made an election under subparagraph c of the first paragraph of section 230 for the year, that portion of the consideration paid under the contract by the taxpayer in respect of the research and development undertaken on the taxpayer’s behalf in the year to a person or partnership with whom the taxpayer was not dealing at arm’s length at the time the contract was entered into and who has undertaken all or part of the research and development, that may reasonably be attributed to wages paid to employees of an establishment of that person or partnership situated in Québec, or that could be so attributed if that person or partnership had such employees;

(b.1)  where the taxpayer has made an election under subparagraph c of the first paragraph of section 230 for the year, that portion of the consideration paid under the contract by the taxpayer in respect of the research and development undertaken on the taxpayer’s behalf in the year to a person or partnership with whom the taxpayer was not dealing at arm’s length at the time the contract was entered into and who has undertaken all or part of the research and development, that may reasonably be attributed to that portion of an expenditure incurred for salary or wages of employees of an establishment of that person or partnership situated in Québec who are directly engaged in scientific research and experimental development in Canada that can reasonably be considered to relate to such work having regard to the time spent by the employees thereon, and, for this purpose, where the employees spend all or substantially all of their working time on such scientific research and experimental development, that portion of the expenditure is deemed to be equal to the amount of the expenditure, or that could be so attributed if that person or partnership had such employees;

(c)  one-half of that portion of the consideration paid under the contract by the taxpayer to a person or partnership who has an establishment situated in Québec and with whom the taxpayer was dealing at arm’s length at the time the contract was entered into,

i.  that may reasonably be attributed to such research and development undertaken on the taxpayer’s behalf in the year by the employees of an establishment of that person or partnership situated in Québec or that could be so attributed if that person or partnership had such employees, or

ii.  that may reasonably be attributed to such research and development undertaken on the taxpayer’s behalf in Québec in the year by an individual, other than a trust, who is, if that person is a corporation, a shareholder of that person or who is a member of that partnership;

(d)  where the taxpayer has not made an election under subparagraph c of the first paragraph of section 230 for the year, that portion of the consideration paid by the taxpayer under a particular contract, other than a contract by which the taxpayer causes scientific research and experimental development to be undertaken on the taxpayer’s behalf, for work undertaken in the year, relating to the research and development undertaken in any taxation year, to a person or partnership with whom the taxpayer was not dealing at arm’s length at the time the particular contract was entered into and who has undertaken all or part of the work, that may reasonably be attributed to wages paid to employees of an establishment of that person or partnership situated in Québec, or that could be so attributed if that person or partnership had such employees;

(d.1)  where the taxpayer has made an election under subparagraph c of the first paragraph of section 230 for the year, that portion of the consideration paid by the taxpayer under a particular contract, other than a contract by which the taxpayer causes scientific research and experimental development to be undertaken on the taxpayer’s behalf, for work undertaken in the year, relating to the research and development undertaken in any taxation year, to a person or partnership with whom the taxpayer was not dealing at arm’s length at the time the particular contract was entered into and who has undertaken all or part of the work, that may reasonably be attributed to wages paid to employees of an establishment of that person or partnership situated in Québec, or that could be so attributed if that person or partnership had such employees;

(e)  one-half of that portion of the consideration paid by the taxpayer under a particular contract, other than a contract by which the taxpayer causes scientific research and experimental development to be undertaken on the taxpayer’s behalf, for work relating to such research and development undertaken in any taxation year, to a person or partnership who has an establishment situated in Québec and with whom the taxpayer was dealing at arm’s length at the time the particular contract was entered into,

i.  that may reasonably be attributed to work undertaken in the year by the employees of an establishment of that person or partnership situated in Québec or that could be so attributed if that person or partnership had such employees, or

ii.  that may reasonably be attributed to work undertaken in Québec in the year by an individual, other than a trust, who is, if that person is a corporation, a shareholder of that person or who is a member of that partnership;

(f)  where the taxpayer has not made an election under subparagraph c of the first paragraph of section 230 for the year, that portion of the consideration paid under the contract by the taxpayer in respect of the research and development undertaken on the taxpayer’s behalf in the year to a person or partnership with whom the taxpayer was not dealing at arm’s length at the time the contract was entered into, and paid again by that person or partnership, under a particular contract, in respect of that research and development, to another person or partnership with whom the taxpayer was not dealing at arm’s length at the time the particular contract was entered into and who has undertaken all or part of the research and development, that may reasonably be attributed to wages paid to employees of an establishment of that other person or partnership situated in Québec, or that could be so attributed if the other person or partnership had such employees;

(f.1)  where the taxpayer has made an election under subparagraph c of the first paragraph of section 230 for the year, that portion of the consideration paid under the contract by the taxpayer in respect of the research and development undertaken on the taxpayer’s behalf in the year to a person or partnership with whom the taxpayer was not dealing at arm’s length at the time the contract was entered into, and paid again by that person or partnership, under a particular contract, in respect of that research and development, to another person or partnership with whom the taxpayer was not dealing at arm’s length at the time the particular contract was entered into and who has undertaken all or part of the research and development, that may reasonably be attributed to that portion of an expenditure incurred for salary or wages of employees of an establishment of that other person or partnership situated in Québec who are directly engaged in scientific research and experimental development in Canada that can reasonably be considered to relate to such work having regard to the time spent by the employees thereon, and, for this purpose, where the employees spend all or substantially all their working time on such scientific research and experimental development, that portion of the expenditure is deemed to be equal to the amount of the expenditure, or that could be so attributed if the other person or partnership had such employees;

(g)  one-half of that portion of the consideration paid under the contract by the taxpayer to a person or partnership with whom the taxpayer was not dealing at arm’s length at the time the contract was entered into, and paid again by that person or partnership, under a particular contract, to another person or partnership who has an establishment situated in Québec and with whom the taxpayer was dealing at arm’s length at the time the particular contract was entered into,

i.  that may reasonably be attributed to such research and development undertaken on the taxpayer’s behalf in the year by the employees of an establishment of that other person or partnership situated in Québec or that could be so attributed if that other person or partnership had such employees, or

ii.  that may reasonably be attributed to such research and development undertaken on the taxpayer’s behalf in Québec in the year by an individual, other than a trust, who is, if that other person is a corporation, a shareholder of that other person or who is a member of that other partnership;

(h)  where the taxpayer has not made an election under subparagraph c of the first paragraph of section 230 for the year, that portion of the consideration paid by the taxpayer under a particular contract, other than a contract by which the taxpayer causes scientific research and experimental development to be undertaken on the taxpayer’s behalf, for work undertaken in the year, relating to the research and development undertaken in any taxation year, to a person or partnership with whom the taxpayer was not dealing at arm’s length at the time the particular contract was entered into, and paid again by that person or partnership, under another particular contract, to another person or partnership with whom the taxpayer was not dealing at arm’s length at the time the other particular contract was entered into and who has undertaken all or part of the work, that may reasonably be attributed to wages paid to employees of an establishment of that other person or partnership situated in Québec, or that could be so attributed if the other person or partnership had such employees;

(h.1)  where the taxpayer has made an election under subparagraph c of the first paragraph of section 230 for the year, that portion of the consideration paid by the taxpayer under a particular contract, other than a contract by which the taxpayer causes scientific research and experimental development to be undertaken on the taxpayer’s behalf, for work undertaken in the year, relating to the research and development undertaken in any taxation year, to a person or partnership with whom the taxpayer was not dealing at arm’s length at the time the particular contract was entered into, and paid again by that person or partnership, under another particular contract, to another person or partnership with whom the taxpayer was not dealing at arm’s length at the time the other particular contract was entered into and who has undertaken all or part of the work, that may reasonably be attributed to wages paid to employees of an establishment of that other person or partnership situated in Québec, or that could be so attributed if the other person or partnership had such employees; and

(i)  one-half of that portion of the consideration paid by the taxpayer under a particular contract, other than a contract by which the taxpayer causes scientific research and experimental development to be undertaken on the taxpayer’s behalf, for work relating to such research and development undertaken in any taxation year, to a person or partnership with whom the taxpayer was not dealing at arm’s length at the time the particular contract was entered into, and paid again by that person or partnership, under another particular contract, to another person or partnership who has an establishment situated in Québec and with whom the taxpayer was dealing at arm’s length at the time the other particular contract was entered into,

i.  that may reasonably be attributed to the work undertaken in the year by the employees of an establishment of that other person or partnership situated in Québec or that could be so attributed if that other person or partnership had such employees, or

ii.  that may reasonably be attributed to the work undertaken in Québec in the year by an individual, other than a trust, who is, if that other person is a corporation, a shareholder of that other person or who is a member of that other partnership.

For the purpose of computing the payments that a taxpayer is required to make under section 1025 or 1026, subparagraph a of the first paragraph of section 1027, or any of sections 1145, 1159.7, 1175 and 1175.19 where they refer to that subparagraph a, the taxpayer is deemed to have paid to the Minister, on account of the aggregate of the taxpayer’s tax payable for the year under this Part and of the taxpayer’s tax payable for the year under Parts IV, IV.1, VI and VI.1, on the date on or before which each payment is required to be made, an amount equal to the lesser of

(a)  the amount by which the amount determined under the first paragraph for the year exceeds the aggregate of all amounts each of which is the portion of that amount that may reasonably be considered to be deemed to have been paid to the Minister under this paragraph in the year but before that date; and

(b)  the amount by which the amount of that payment, determined without reference to this chapter, exceeds the aggregate of all amounts each of which is an amount that is deemed, under this chapter but otherwise than under the first paragraph, to have been paid to the Minister on that date, for the purpose of computing that payment.

For the purposes of the first paragraph, the wages and consideration paid by the taxpayer referred to therein include only the wages and consideration that

(a)  constitute, for the taxpayer, an expenditure referred to in subsection 1 of section 222, determined, in the case of subparagraphs c, e, g and i of that first paragraph, without reference to section 230.0.0.5.1; and

(b)  do not constitute

i.  all or part of an amount that can reasonably be considered to be an expenditure in respect of scientific research and experimental development made in Québec by virtue of a university research contract within the meaning of paragraph b of section 1029.8.1 or of an eligible research contract within the meaning of paragraph a.2 of the said section, in respect of which section 1029.8.6 applies,

ii.  all or part of an amount that can reasonably be considered to be an expenditure in respect of scientific research and experimental development made in Québec by virtue of an agreement in respect of which section 1029.8.16.1.4 applies,

iii.  (subparagraph repealed),

iv.  (subparagraph repealed),

v.  an expenditure described in section 230.0.0.2;

vi.  an expenditure specified by the taxpayer for the purposes of clause A of subparagraph ii of paragraph a of subsection 2 of section 194 of the Income Tax Act (R.S.C. 1985, c. 1 (5th Suppl.)), where the taxpayer is a corporation;

vii.  an expenditure of a current nature incurred by or on behalf of a taxpayer in respect of the general administration or management of a business, including

(1)  the administrative salary or wages, including related benefits, of a person none or substantially none of whose duties are oriented toward the prosecution of scientific research and experimental development, except to the extent that such expenditure is a prescribed expenditure,

(2)  a legal or accounting fee,

(3)  an amount referred to in any of sections 147, 148, 160, 161, 163, 176, 176.4 and 179,

(4)  an entertainment expense,

(5)  an advertising or selling expense,

(6)  a conference or convention expense,

(7)  a due or fee in respect of membership in a scientific or technical organization, and

(8)  a fine or penalty;

viii.  an expenditure of a current nature incurred by or on behalf of a taxpayer for the maintenance and upkeep of premises, facilities or equipment to the extent that the expenditure is not attributable to the prosecution of scientific research and experimental development;

ix.  (subparagraph repealed);

x.  (subparagraph repealed);

xi.  an expenditure made to acquire rights in, or arising out of, scientific research and experimental development;

xii.  an expenditure related to scientific research and experimental development in respect of which an amount is deductible under sections 710 to 716.0.11 or 752.0.10.1 to 752.0.10.26 in computing taxable income or tax payable under this Part, as the case may be;

xiii.  an expenditure, to the extent that the taxpayer having incurred it or, where applicable, the person or partnership having incurred it on the taxpayer’s behalf has received or is entitled to receive a reimbursement in respect of the expenditure from a person resident in Canada, other than

(1)  the State or Her Majesty in right of Canada or a province, other than Québec,

(2)  a mandatary of the State or of Her Majesty in right of Canada or a province, other than Québec,

(3)  a corporation, commission or association that is controlled, directly or indirectly in any manner whatever, by the State or Her Majesty in right of Canada or a province, other than Québec, or by a mandatary of the State or of Her Majesty in right of Canada or a province, other than Québec, or

(4)  a municipality in Canada or a municipal or public body performing a function of government in Canada; and

xiv.  an expenditure, to the extent that the taxpayer having incurred it or, where applicable, the person or partnership having incurred it on the taxpayer’s behalf has received or is entitled to receive a reimbursement in respect of the expenditure from a person not resident in Canada and to the extent that the reimbursement is deductible in computing the person’s taxable income earned in Canada for a taxation year.

For the purposes of the first paragraph, that portion of the consideration paid by the taxpayer under a particular contract referred to in any of subparagraphs d, e, h and i of that paragraph shall be reduced by the amount of the consideration for the disposition of property to the taxpayer, other than a property resulting from scientific research and experimental development.

Where a taxpayer paid a consideration under a particular contract referred to in any of subparagraphs d, d.1, e, h, h.1 and i of the first paragraph for work undertaken in a taxation year, the portion of that paragraph before subparagraph a is to be read, for the purposes of any of those subparagraphs for the year, as if “for the taxation year in which the research and development was undertaken” were replaced by “for the taxation year in which work relating to such research and development was undertaken”.

In this section, “wages” means the income computed under Chapters I and II of Title II of Book III.

1983, c. 44, s. 43; 1987, c. 67, s. 183; 1988, c. 4, s. 123; 1988, c. 18, s. 113; 1989, c. 5, s. 200; 1990, c. 7, s. 148; 1991, c. 8, s. 76; 1992, c. 1, s. 162; 1993, c. 19, s. 92; 1993, c. 64, s. 138; 1995, c. 1, s. 119; 1995, c. 63, s. 120; 1997, c. 3, s. 71; 1997, c. 14, s. 184; 1997, c. 31, s. 143; 1999, c. 83, s. 168; 2000, c. 39, s. 123; 2001, c. 53, s. 217; 2002, c. 40, s. 103; 2003, c. 9, s. 176; 2004, c. 21, s. 259; 2005, c. 1, s. 217; 2006, c. 13, s. 94; 2007, c. 12, s. 111; 2009, c. 5, s. 430; 2011, c. 1, s. 56; 2012, c. 8, s. 183; 2015, c. 21, s. 372; 2017, c. 1, s. 270; 2021, c. 18, s. 102.

2017-02-08

1029.7. A taxpayer, other than a tax-exempt taxpayer, who carries on a business in Canada, who undertakes scientific research and experimental development related to a business of the taxpayer, in Québec, or causes such research and development to be undertaken in Québec on the taxpayer’s behalf as part of a contract, and who encloses the prescribed form containing the prescribed information with the fiscal return the taxpayer is required to file under section 1000, or would be required to file if tax were payable under this Part by the taxpayer, for the taxation year in which the research and development was undertaken is deemed, subject to the second paragraph, to have paid to the Minister, on the taxpayer’s balance-due day for that year, on account of the taxpayer’s tax payable for that year under this Part, an amount equal to 14% of the aggregate of

(a)  the wages paid by the taxpayer in respect of the research and development undertaken in the year to his employees of an establishment situated in Québec;

(b)  where the taxpayer has not made an election under subparagraph c of the first paragraph of section 230 for the year, that portion of the consideration paid under the contract by the taxpayer in respect of the research and development undertaken on the taxpayer’s behalf in the year to a person or partnership with whom the taxpayer was not dealing at arm’s length at the time the contract was entered into and who has undertaken all or part of the research and development, that may reasonably be attributed to wages paid to employees of an establishment of that person or partnership situated in Québec, or that could be so attributed if that person or partnership had such employees;

(b.1)  where the taxpayer has made an election under subparagraph c of the first paragraph of section 230 for the year, that portion of the consideration paid under the contract by the taxpayer in respect of the research and development undertaken on the taxpayer’s behalf in the year to a person or partnership with whom the taxpayer was not dealing at arm’s length at the time the contract was entered into and who has undertaken all or part of the research and development, that may reasonably be attributed to that portion of an expenditure incurred for salary or wages of employees of an establishment of that person or partnership situated in Québec who are directly engaged in scientific research and experimental development in Canada that can reasonably be considered to relate to such work having regard to the time spent by the employees thereon, and, for this purpose, where the employees spend all or substantially all of their working time on such scientific research and experimental development, that portion of the expenditure is deemed to be equal to the amount of the expenditure, or that could be so attributed if that person or partnership had such employees;

(c)  one-half of that portion of the consideration paid under the contract by the taxpayer to a person or partnership who has an establishment situated in Québec and with whom the taxpayer was dealing at arm’s length at the time the contract was entered into,

i.  that may reasonably be attributed to such research and development undertaken on the taxpayer’s behalf in the year by the employees of an establishment of that person or partnership situated in Québec or that could be so attributed if that person or partnership had such employees, or

ii.  that may reasonably be attributed to such research and development undertaken on the taxpayer’s behalf in Québec in the year by an individual, other than a trust, who is, if that person is a corporation, a shareholder of that person or who is a member of that partnership;

(d)  where the taxpayer has not made an election under subparagraph c of the first paragraph of section 230 for the year, that portion of the consideration paid by the taxpayer under a particular contract, other than a contract by which the taxpayer causes scientific research and experimental development to be undertaken on the taxpayer’s behalf, for work undertaken in the year, relating to the research and development undertaken in any taxation year, to a person or partnership with whom the taxpayer was not dealing at arm’s length at the time the particular contract was entered into and who has undertaken all or part of the work, that may reasonably be attributed to wages paid to employees of an establishment of that person or partnership situated in Québec, or that could be so attributed if that person or partnership had such employees;

(d.1)  where the taxpayer has made an election under subparagraph c of the first paragraph of section 230 for the year, that portion of the consideration paid by the taxpayer under a particular contract, other than a contract by which the taxpayer causes scientific research and experimental development to be undertaken on the taxpayer’s behalf, for work undertaken in the year, relating to the research and development undertaken in any taxation year, to a person or partnership with whom the taxpayer was not dealing at arm’s length at the time the particular contract was entered into and who has undertaken all or part of the work, that may reasonably be attributed to wages paid to employees of an establishment of that person or partnership situated in Québec, or that could be so attributed if that person or partnership had such employees;

(e)  one-half of that portion of the consideration paid by the taxpayer under a particular contract, other than a contract by which the taxpayer causes scientific research and experimental development to be undertaken on the taxpayer’s behalf, for work relating to such research and development undertaken in any taxation year, to a person or partnership who has an establishment situated in Québec and with whom the taxpayer was dealing at arm’s length at the time the particular contract was entered into,

i.  that may reasonably be attributed to work undertaken in the year by the employees of an establishment of that person or partnership situated in Québec or that could be so attributed if that person or partnership had such employees, or

ii.  that may reasonably be attributed to work undertaken in Québec in the year by an individual, other than a trust, who is, if that person is a corporation, a shareholder of that person or who is a member of that partnership;

(f)  where the taxpayer has not made an election under subparagraph c of the first paragraph of section 230 for the year, that portion of the consideration paid under the contract by the taxpayer in respect of the research and development undertaken on the taxpayer’s behalf in the year to a person or partnership with whom the taxpayer was not dealing at arm’s length at the time the contract was entered into, and paid again by that person or partnership, under a particular contract, in respect of that research and development, to another person or partnership with whom the taxpayer was not dealing at arm’s length at the time the particular contract was entered into and who has undertaken all or part of the research and development, that may reasonably be attributed to wages paid to employees of an establishment of that other person or partnership situated in Québec, or that could be so attributed if the other person or partnership had such employees;

(f.1)  where the taxpayer has made an election under subparagraph c of the first paragraph of section 230 for the year, that portion of the consideration paid under the contract by the taxpayer in respect of the research and development undertaken on the taxpayer’s behalf in the year to a person or partnership with whom the taxpayer was not dealing at arm’s length at the time the contract was entered into, and paid again by that person or partnership, under a particular contract, in respect of that research and development, to another person or partnership with whom the taxpayer was not dealing at arm’s length at the time the particular contract was entered into and who has undertaken all or part of the research and development, that may reasonably be attributed to that portion of an expenditure incurred for salary or wages of employees of an establishment of that other person or partnership situated in Québec who are directly engaged in scientific research and experimental development in Canada that can reasonably be considered to relate to such work having regard to the time spent by the employees thereon, and, for this purpose, where the employees spend all or substantially all their working time on such scientific research and experimental development, that portion of the expenditure is deemed to be equal to the amount of the expenditure, or that could be so attributed if the other person or partnership had such employees;

(g)  one-half of that portion of the consideration paid under the contract by the taxpayer to a person or partnership with whom the taxpayer was not dealing at arm’s length at the time the contract was entered into, and paid again by that person or partnership, under a particular contract, to another person or partnership who has an establishment situated in Québec and with whom the taxpayer was dealing at arm’s length at the time the particular contract was entered into,

i.  that may reasonably be attributed to such research and development undertaken on the taxpayer’s behalf in the year by the employees of an establishment of that other person or partnership situated in Québec or that could be so attributed if that other person or partnership had such employees, or

ii.  that may reasonably be attributed to such research and development undertaken on the taxpayer’s behalf in Québec in the year by an individual, other than a trust, who is, if that other person is a corporation, a shareholder of that other person or who is a member of that other partnership;

(h)  where the taxpayer has not made an election under subparagraph c of the first paragraph of section 230 for the year, that portion of the consideration paid by the taxpayer under a particular contract, other than a contract by which the taxpayer causes scientific research and experimental development to be undertaken on the taxpayer’s behalf, for work undertaken in the year, relating to the research and development undertaken in any taxation year, to a person or partnership with whom the taxpayer was not dealing at arm’s length at the time the particular contract was entered into, and paid again by that person or partnership, under another particular contract, to another person or partnership with whom the taxpayer was not dealing at arm’s length at the time the other particular contract was entered into and who has undertaken all or part of the work, that may reasonably be attributed to wages paid to employees of an establishment of that other person or partnership situated in Québec, or that could be so attributed if the other person or partnership had such employees;

(h.1)  where the taxpayer has made an election under subparagraph c of the first paragraph of section 230 for the year, that portion of the consideration paid by the taxpayer under a particular contract, other than a contract by which the taxpayer causes scientific research and experimental development to be undertaken on the taxpayer’s behalf, for work undertaken in the year, relating to the research and development undertaken in any taxation year, to a person or partnership with whom the taxpayer was not dealing at arm’s length at the time the particular contract was entered into, and paid again by that person or partnership, under another particular contract, to another person or partnership with whom the taxpayer was not dealing at arm’s length at the time the other particular contract was entered into and who has undertaken all or part of the work, that may reasonably be attributed to wages paid to employees of an establishment of that other person or partnership situated in Québec, or that could be so attributed if the other person or partnership had such employees; and

(i)  one-half of that portion of the consideration paid by the taxpayer under a particular contract, other than a contract by which the taxpayer causes scientific research and experimental development to be undertaken on the taxpayer’s behalf, for work relating to such research and development undertaken in any taxation year, to a person or partnership with whom the taxpayer was not dealing at arm’s length at the time the particular contract was entered into, and paid again by that person or partnership, under another particular contract, to another person or partnership who has an establishment situated in Québec and with whom the taxpayer was dealing at arm’s length at the time the other particular contract was entered into,

i.  that may reasonably be attributed to the work undertaken in the year by the employees of an establishment of that other person or partnership situated in Québec or that could be so attributed if that other person or partnership had such employees, or

ii.  that may reasonably be attributed to the work undertaken in Québec in the year by an individual, other than a trust, who is, if that other person is a corporation, a shareholder of that other person or who is a member of that other partnership.

For the purpose of computing the payments that a taxpayer is required to make under section 1025 or 1026, subparagraph a of the first paragraph of section 1027, or any of sections 1145, 1159.7, 1175 and 1175.19 where they refer to that subparagraph a, the taxpayer is deemed to have paid to the Minister, on account of the aggregate of the taxpayer’s tax payable for the year under this Part and of the taxpayer’s tax payable for the year under Parts IV, IV.1, VI and VI.1, on the date on or before which each payment is required to be made, an amount equal to the lesser of

(a)  the amount by which the amount determined under the first paragraph for the year exceeds the aggregate of all amounts each of which is the portion of that amount that may reasonably be considered to be deemed to have been paid to the Minister under this paragraph in the year but before that date; and

(b)  the amount by which the amount of that payment, determined without reference to this chapter, exceeds the aggregate of all amounts each of which is an amount that is deemed, under this chapter but otherwise than under the first paragraph, to have been paid to the Minister on that date, for the purpose of computing that payment.

For the purposes of the first paragraph, the wages and consideration paid by the taxpayer referred to therein include only the wages and consideration that

(a)  constitute, for the taxpayer, an expenditure referred to in subsection 1 of section 222, determined, in the case of subparagraphs c, e, g and i of that first paragraph, without reference to section 230.0.0.5.1; and

(b)  do not constitute

i.  all or part of an amount that can reasonably be considered to be an expenditure in respect of scientific research and experimental development made in Québec by virtue of a university research contract within the meaning of paragraph b of section 1029.8.1 or of an eligible research contract within the meaning of paragraph a.2 of the said section, in respect of which section 1029.8.6 applies,

ii.  all or part of an amount that can reasonably be considered to be an expenditure in respect of scientific research and experimental development made in Québec by virtue of an agreement in respect of which section 1029.8.10 or 1029.8.16.1.4 applies,

iii.  (subparagraph repealed),

iv.  (subparagraph repealed),

v.  an expenditure described in section 230.0.0.2;

vi.  an expenditure specified by the taxpayer for the purposes of clause A of subparagraph ii of paragraph a of subsection 2 of section 194 of the Income Tax Act (R.S.C. 1985, c. 1 (5th Suppl.)), where the taxpayer is a corporation;

vii.  an expenditure of a current nature incurred by or on behalf of a taxpayer in respect of the general administration or management of a business, including

(1)  the administrative salary or wages, including related benefits, of a person none or substantially none of whose duties are oriented toward the prosecution of scientific research and experimental development, except to the extent that such expenditure is a prescribed expenditure,

(2)  a legal or accounting fee,

(3)  an amount referred to in any of sections 147, 148, 160, 161, 163, 176, 176.4 and 179,

(4)  an entertainment expense,

(5)  an advertising or selling expense,

(6)  a conference or convention expense,

(7)  a due or fee in respect of membership in a scientific or technical organization, and

(8)  a fine or penalty;

viii.  an expenditure of a current nature incurred by or on behalf of a taxpayer for the maintenance and upkeep of premises, facilities or equipment to the extent that the expenditure is not attributable to the prosecution of scientific research and experimental development;

ix.  (subparagraph repealed);

x.  (subparagraph repealed);

xi.  an expenditure made to acquire rights in, or arising out of, scientific research and experimental development;

xii.  an expenditure related to scientific research and experimental development in respect of which an amount is deductible under sections 710 to 716.0.11 or 752.0.10.1 to 752.0.10.26 in computing taxable income or tax payable under this Part, as the case may be;

xiii.  an expenditure, to the extent that the taxpayer having incurred it or, where applicable, the person or partnership having incurred it on the taxpayer’s behalf has received or is entitled to receive a reimbursement in respect of the expenditure from a person resident in Canada, other than

(1)  the State or Her Majesty in right of Canada or a province, other than Québec,

(2)  a mandatary of the State or of Her Majesty in right of Canada or a province, other than Québec,

(3)  a corporation, commission or association that is controlled, directly or indirectly in any manner whatever, by the State or Her Majesty in right of Canada or a province, other than Québec, or by a mandatary of the State or of Her Majesty in right of Canada or a province, other than Québec, or

(4)  a municipality in Canada or a municipal or public body performing a function of government in Canada; and

xiv.  an expenditure, to the extent that the taxpayer having incurred it or, where applicable, the person or partnership having incurred it on the taxpayer’s behalf has received or is entitled to receive a reimbursement in respect of the expenditure from a person not resident in Canada and to the extent that the reimbursement is deductible in computing the person’s taxable income earned in Canada for a taxation year.

For the purposes of the first paragraph, that portion of the consideration paid by the taxpayer under a particular contract referred to in any of subparagraphs d, e, h and i of that paragraph shall be reduced by the amount of the consideration for the disposition of property to the taxpayer, other than a property resulting from scientific research and experimental development.

Where a taxpayer paid a consideration under a particular contract referred to in any of subparagraphs d, d.1, e, h, h.1 and i of the first paragraph for work undertaken in a taxation year, the portion of that paragraph before subparagraph a is to be read, for the purposes of any of those subparagraphs for the year, as if “for the taxation year in which the research and development was undertaken” were replaced by “for the taxation year in which work relating to such research and development was undertaken”.

In this section, “wages” means the income computed under Chapters I and II of Title II of Book III.

1983, c. 44, s. 43; 1987, c. 67, s. 183; 1988, c. 4, s. 123; 1988, c. 18, s. 113; 1989, c. 5, s. 200; 1990, c. 7, s. 148; 1991, c. 8, s. 76; 1992, c. 1, s. 162; 1993, c. 19, s. 92; 1993, c. 64, s. 138; 1995, c. 1, s. 119; 1995, c. 63, s. 120; 1997, c. 3, s. 71; 1997, c. 14, s. 184; 1997, c. 31, s. 143; 1999, c. 83, s. 168; 2000, c. 39, s. 123; 2001, c. 53, s. 217; 2002, c. 40, s. 103; 2003, c. 9, s. 176; 2004, c. 21, s. 259; 2005, c. 1, s. 217; 2006, c. 13, s. 94; 2007, c. 12, s. 111; 2009, c. 5, s. 430; 2011, c. 1, s. 56; 2012, c. 8, s. 183; 2015, c. 21, s. 372; 2017, c. 1, s. 270.

2015-10-21

1029.7. A taxpayer, other than a tax-exempt taxpayer, who carries on a business in Canada, who undertakes scientific research and experimental development related to a business of the taxpayer, in Québec, or causes such research and development to be undertaken in Québec on the taxpayer’s behalf as part of a contract, and who encloses the prescribed form containing the prescribed information with the fiscal return the taxpayer is required to file under section 1000, or would be required to file if tax were payable under this Part by the taxpayer, for the taxation year in which the research and development was undertaken is deemed, subject to the second paragraph, to have paid to the Minister, on the taxpayer’s balance-due day for that year, on account of the taxpayer’s tax payable for that year under this Part, an amount equal to 14% of the aggregate of

(a)  the wages paid by the taxpayer in respect of the research and development undertaken in the year to his employees of an establishment situated in Québec;

(b)  where the taxpayer has not made an election under subparagraph c of the first paragraph of section 230 for the year, that portion of the consideration paid under the contract by the taxpayer in respect of the research and development undertaken on the taxpayer’s behalf in the year to a person or partnership with whom the taxpayer was not dealing at arm’s length at the time the contract was entered into and who has undertaken all or part of the research and development, that may reasonably be attributed to wages paid to employees of an establishment of that person or partnership situated in Québec, or that could be so attributed if that person or partnership had such employees;

(b.1)  where the taxpayer has made an election under subparagraph c of the first paragraph of section 230 for the year, that portion of the consideration paid under the contract by the taxpayer in respect of the research and development undertaken on the taxpayer’s behalf in the year to a person or partnership with whom the taxpayer was not dealing at arm’s length at the time the contract was entered into and who has undertaken all or part of the research and development, that may reasonably be attributed to that portion of an expenditure incurred for salary or wages of employees of an establishment of that person or partnership situated in Québec who are directly engaged in scientific research and experimental development in Canada that can reasonably be considered to relate to such work having regard to the time spent by the employees thereon, and, for this purpose, where the employees spend all or substantially all of their working time on such scientific research and experimental development, that portion of the expenditure is deemed to be equal to the amount of the expenditure, or that could be so attributed if that person or partnership had such employees;

(c)  one-half of that portion of the consideration paid under the contract by the taxpayer to a person or partnership who has an establishment situated in Québec and with whom the taxpayer was dealing at arm’s length at the time the contract was entered into,

i.  that may reasonably be attributed to such research and development undertaken on the taxpayer’s behalf in the year by the employees of an establishment of that person or partnership situated in Québec or that could be so attributed if that person or partnership had such employees, or

ii.  that may reasonably be attributed to such research and development undertaken on the taxpayer’s behalf in Québec in the year by an individual, other than a trust, who is, if that person is a corporation, a shareholder of that person or who is a member of that partnership;

(d)  where the taxpayer has not made an election under subparagraph c of the first paragraph of section 230 for the year, that portion of the consideration paid by the taxpayer under a particular contract, other than a contract by which the taxpayer causes scientific research and experimental development to be undertaken on the taxpayer’s behalf, for work undertaken in the year, relating to the research and development undertaken in any taxation year, to a person or partnership with whom the taxpayer was not dealing at arm’s length at the time the particular contract was entered into and who has undertaken all or part of the work, that may reasonably be attributed to wages paid to employees of an establishment of that person or partnership situated in Québec, or that could be so attributed if that person or partnership had such employees;

(d.1)  where the taxpayer has made an election under subparagraph c of the first paragraph of section 230 for the year, that portion of the consideration paid by the taxpayer under a particular contract, other than a contract by which the taxpayer causes scientific research and experimental development to be undertaken on the taxpayer’s behalf, for work undertaken in the year, relating to the research and development undertaken in any taxation year, to a person or partnership with whom the taxpayer was not dealing at arm’s length at the time the particular contract was entered into and who has undertaken all or part of the work, that may reasonably be attributed to wages paid to employees of an establishment of that person or partnership situated in Québec, or that could be so attributed if that person or partnership had such employees;

(e)  one-half of that portion of the consideration paid by the taxpayer under a particular contract, other than a contract by which the taxpayer causes scientific research and experimental development to be undertaken on the taxpayer’s behalf, for work relating to such research and development undertaken in any taxation year, to a person or partnership who has an establishment situated in Québec and with whom the taxpayer was dealing at arm’s length at the time the particular contract was entered into,

i.  that may reasonably be attributed to work undertaken in the year by the employees of an establishment of that person or partnership situated in Québec or that could be so attributed if that person or partnership had such employees, or

ii.  that may reasonably be attributed to work undertaken in Québec in the year by an individual, other than a trust, who is, if that person is a corporation, a shareholder of that person or who is a member of that partnership;

(f)  where the taxpayer has not made an election under subparagraph c of the first paragraph of section 230 for the year, that portion of the consideration paid under the contract by the taxpayer in respect of the research and development undertaken on the taxpayer’s behalf in the year to a person or partnership with whom the taxpayer was not dealing at arm’s length at the time the contract was entered into, and paid again by that person or partnership, under a particular contract, in respect of that research and development, to another person or partnership with whom the taxpayer was not dealing at arm’s length at the time the particular contract was entered into and who has undertaken all or part of the research and development, that may reasonably be attributed to wages paid to employees of an establishment of that other person or partnership situated in Québec, or that could be so attributed if the other person or partnership had such employees;

(f.1)  where the taxpayer has made an election under subparagraph c of the first paragraph of section 230 for the year, that portion of the consideration paid under the contract by the taxpayer in respect of the research and development undertaken on the taxpayer’s behalf in the year to a person or partnership with whom the taxpayer was not dealing at arm’s length at the time the contract was entered into, and paid again by that person or partnership, under a particular contract, in respect of that research and development, to another person or partnership with whom the taxpayer was not dealing at arm’s length at the time the particular contract was entered into and who has undertaken all or part of the research and development, that may reasonably be attributed to that portion of an expenditure incurred for salary or wages of employees of an establishment of that other person or partnership situated in Québec who are directly engaged in scientific research and experimental development in Canada that can reasonably be considered to relate to such work having regard to the time spent by the employees thereon, and, for this purpose, where the employees spend all or substantially all their working time on such scientific research and experimental development, that portion of the expenditure is deemed to be equal to the amount of the expenditure, or that could be so attributed if the other person or partnership had such employees;

(g)  one-half of that portion of the consideration paid under the contract by the taxpayer to a person or partnership with whom the taxpayer was not dealing at arm’s length at the time the contract was entered into, and paid again by that person or partnership, under a particular contract, to another person or partnership who has an establishment situated in Québec and with whom the taxpayer was dealing at arm’s length at the time the particular contract was entered into,

i.  that may reasonably be attributed to such research and development undertaken on the taxpayer’s behalf in the year by the employees of an establishment of that other person or partnership situated in Québec or that could be so attributed if that other person or partnership had such employees, or

ii.  that may reasonably be attributed to such research and development undertaken on the taxpayer’s behalf in Québec in the year by an individual, other than a trust, who is, if that other person is a corporation, a shareholder of that other person or who is a member of that other partnership;

(h)  where the taxpayer has not made an election under subparagraph c of the first paragraph of section 230 for the year, that portion of the consideration paid by the taxpayer under a particular contract, other than a contract by which the taxpayer causes scientific research and experimental development to be undertaken on the taxpayer’s behalf, for work undertaken in the year, relating to the research and development undertaken in any taxation year, to a person or partnership with whom the taxpayer was not dealing at arm’s length at the time the particular contract was entered into, and paid again by that person or partnership, under another particular contract, to another person or partnership with whom the taxpayer was not dealing at arm’s length at the time the other particular contract was entered into and who has undertaken all or part of the work, that may reasonably be attributed to wages paid to employees of an establishment of that other person or partnership situated in Québec, or that could be so attributed if the other person or partnership had such employees;

(h.1)  where the taxpayer has made an election under subparagraph c of the first paragraph of section 230 for the year, that portion of the consideration paid by the taxpayer under a particular contract, other than a contract by which the taxpayer causes scientific research and experimental development to be undertaken on the taxpayer’s behalf, for work undertaken in the year, relating to the research and development undertaken in any taxation year, to a person or partnership with whom the taxpayer was not dealing at arm’s length at the time the particular contract was entered into, and paid again by that person or partnership, under another particular contract, to another person or partnership with whom the taxpayer was not dealing at arm’s length at the time the other particular contract was entered into and who has undertaken all or part of the work, that may reasonably be attributed to wages paid to employees of an establishment of that other person or partnership situated in Québec, or that could be so attributed if the other person or partnership had such employees; and

(i)  one-half of that portion of the consideration paid by the taxpayer under a particular contract, other than a contract by which the taxpayer causes scientific research and experimental development to be undertaken on the taxpayer’s behalf, for work relating to such research and development undertaken in any taxation year, to a person or partnership with whom the taxpayer was not dealing at arm’s length at the time the particular contract was entered into, and paid again by that person or partnership, under another particular contract, to another person or partnership who has an establishment situated in Québec and with whom the taxpayer was dealing at arm’s length at the time the other particular contract was entered into,

i.  that may reasonably be attributed to the work undertaken in the year by the employees of an establishment of that other person or partnership situated in Québec or that could be so attributed if that other person or partnership had such employees, or

ii.  that may reasonably be attributed to the work undertaken in Québec in the year by an individual, other than a trust, who is, if that other person is a corporation, a shareholder of that other person or who is a member of that other partnership.

For the purpose of computing the payments that a taxpayer is required to make under section 1025 or 1026, subparagraph a of the first paragraph of section 1027, or any of sections 1145, 1159.7, 1175 and 1175.19 where they refer to that subparagraph a, the taxpayer is deemed to have paid to the Minister, on account of the aggregate of the taxpayer’s tax payable for the year under this Part and of the taxpayer’s tax payable for the year under Parts IV, IV.1, VI and VI.1, on the date on or before which each payment is required to be made, an amount equal to the lesser of

(a)  the amount by which the amount determined under the first paragraph for the year exceeds the aggregate of all amounts each of which is the portion of that amount that may reasonably be considered to be deemed to have been paid to the Minister under this paragraph in the year but before that date; and

(b)  the amount by which the amount of that payment, determined without reference to this chapter, exceeds the aggregate of all amounts each of which is an amount that is deemed, under this chapter but otherwise than under the first paragraph, to have been paid to the Minister on that date, for the purpose of computing that payment.

For the purposes of the first paragraph, the wages and consideration paid by the taxpayer referred to therein include only the wages and consideration that

(a)  constitute, for the taxpayer, an expenditure referred to in subsection 1 of section 222, determined, in the case of subparagraphs c, e, g and i of that first paragraph, without reference to section 230.0.0.5.1; and

(b)  do not constitute

i.  all or part of an amount that can reasonably be considered to be an expenditure in respect of scientific research and experimental development made in Québec by virtue of a university research contract within the meaning of paragraph b of section 1029.8.1 or of an eligible research contract within the meaning of paragraph a.2 of the said section, in respect of which section 1029.8.6 applies,

ii.  all or part of an amount that can reasonably be considered to be an expenditure in respect of scientific research and experimental development made in Québec by virtue of an agreement in respect of which section 1029.8.10 or 1029.8.16.1.4 applies,

iii.  (subparagraph repealed),

iv.  (subparagraph repealed),

v.  an expenditure described in section 230.0.0.2;

vi.  an expenditure specified by the taxpayer for the purposes of clause A of subparagraph ii of paragraph a of subsection 2 of section 194 of the Income Tax Act (R.S.C. 1985, c. 1 (5th Suppl.)), where the taxpayer is a corporation;

vii.  an expenditure of a current nature incurred by or on behalf of a taxpayer in respect of the general administration or management of a business, including

(1)  the administrative salary or wages, including related benefits, of a person none or substantially none of whose duties are oriented toward the prosecution of scientific research and experimental development, except to the extent that such expenditure is a prescribed expenditure,

(2)  a legal or accounting fee,

(3)  an amount referred to in any of sections 147, 148, 160, 161, 163, 176, 176.4 and 179,

(4)  an entertainment expense,

(5)  an advertising or selling expense,

(6)  a conference or convention expense,

(7)  a due or fee in respect of membership in a scientific or technical organization, and

(8)  a fine or penalty;

viii.  an expenditure of a current nature incurred by or on behalf of a taxpayer for the maintenance and upkeep of premises, facilities or equipment to the extent that the expenditure is not attributable to the prosecution of scientific research and experimental development;

ix.  (subparagraph repealed);

x.  (subparagraph repealed);

xi.  an expenditure made to acquire rights in, or arising out of, scientific research and experimental development;

xii.  an expenditure related to scientific research and experimental development in respect of which an amount is deductible under sections 710 to 716.0.11 or 752.0.10.1 to 752.0.10.26 in computing taxable income or tax payable under this Part, as the case may be;

xiii.  an expenditure, to the extent that the taxpayer having incurred it or, where applicable, the person or partnership having incurred it on the taxpayer’s behalf has received or is entitled to receive a reimbursement in respect of the expenditure from a person resident in Canada, other than

(1)  the State or Her Majesty in right of Canada or a province, other than Québec,

(2)  a mandatary of the State or of Her Majesty in right of Canada or a province, other than Québec,

(3)  a corporation, commission or association that is controlled, directly or indirectly in any manner whatever, by the State or Her Majesty in right of Canada or a province, other than Québec, or by a mandatary of the State or of Her Majesty in right of Canada or a province, other than Québec, or

(4)  a municipality in Canada or a municipal or public body performing a function of government in Canada; and

xiv.  an expenditure, to the extent that the taxpayer having incurred it or, where applicable, the person or partnership having incurred it on the taxpayer’s behalf has received or is entitled to receive a reimbursement in respect of the expenditure from a person not resident in Canada and to the extent that the reimbursement is deductible in computing the person’s taxable income earned in Canada for a taxation year.

For the purposes of the first paragraph, that portion of the consideration paid by the taxpayer under a particular contract referred to in any of subparagraphs d, e, h and i of that paragraph shall be reduced by the amount of the consideration for the disposition of property to the taxpayer, other than a property resulting from scientific research and experimental development.

In this section, “wages” means the income computed under Chapters I and II of Title II of Book III.

1983, c. 44, s. 43; 1987, c. 67, s. 183; 1988, c. 4, s. 123; 1988, c. 18, s. 113; 1989, c. 5, s. 200; 1990, c. 7, s. 148; 1991, c. 8, s. 76; 1992, c. 1, s. 162; 1993, c. 19, s. 92; 1993, c. 64, s. 138; 1995, c. 1, s. 119; 1995, c. 63, s. 120; 1997, c. 3, s. 71; 1997, c. 14, s. 184; 1997, c. 31, s. 143; 1999, c. 83, s. 168; 2000, c. 39, s. 123; 2001, c. 53, s. 217; 2002, c. 40, s. 103; 2003, c. 9, s. 176; 2004, c. 21, s. 259; 2005, c. 1, s. 217; 2006, c. 13, s. 94; 2007, c. 12, s. 111; 2009, c. 5, s. 430; 2011, c. 1, s. 56; 2012, c. 8, s. 183; 2015, c. 21, s. 372.

2012-05-09

1029.7. A taxpayer, other than a tax-exempt taxpayer, who carries on a business in Canada, who undertakes scientific research and experimental development related to a business of the taxpayer, in Québec, or causes such research and development to be undertaken in Québec on the taxpayer’s behalf as part of a contract, and who encloses the prescribed form containing the prescribed information with the fiscal return the taxpayer is required to file under section 1000, or would be required to file if tax were payable under this Part by the taxpayer, for the taxation year in which the research and development was undertaken is deemed, subject to the second paragraph, to have paid to the Minister, on the taxpayer’s balance-due day for that year, on account of the taxpayer’s tax payable for that year under this Part, an amount equal to 17.5% of the aggregate of

(a)  the wages paid by the taxpayer in respect of the research and development undertaken in the year to his employees of an establishment situated in Québec;

(b)  where the taxpayer has not made an election under subparagraph c of the first paragraph of section 230 for the year, that portion of the consideration paid under the contract by the taxpayer in respect of the research and development undertaken on the taxpayer’s behalf in the year to a person or partnership with whom the taxpayer was not dealing at arm’s length at the time the contract was entered into and who has undertaken all or part of the research and development, that may reasonably be attributed to wages paid to employees of an establishment of that person or partnership situated in Québec, or that could be so attributed if that person or partnership had such employees;

(b.1)  where the taxpayer has made an election under subparagraph c of the first paragraph of section 230 for the year, that portion of the consideration paid under the contract by the taxpayer in respect of the research and development undertaken on the taxpayer’s behalf in the year to a person or partnership with whom the taxpayer was not dealing at arm’s length at the time the contract was entered into and who has undertaken all or part of the research and development, that may reasonably be attributed to that portion of an expenditure incurred for salary or wages of employees of an establishment of that person or partnership situated in Québec who are directly engaged in scientific research and experimental development in Canada that can reasonably be considered to relate to such work having regard to the time spent by the employees thereon, and, for this purpose, where the employees spend all or substantially all of their working time on such scientific research and experimental development, that portion of the expenditure is deemed to be equal to the amount of the expenditure, or that could be so attributed if that person or partnership had such employees;

(c)  one-half of that portion of the consideration paid under the contract by the taxpayer to a person or partnership who has an establishment situated in Québec and with whom the taxpayer was dealing at arm’s length at the time the contract was entered into,

i.  that may reasonably be attributed to such research and development undertaken on the taxpayer’s behalf in the year by the employees of an establishment of that person or partnership situated in Québec or that could be so attributed if that person or partnership had such employees, or

ii.  that may reasonably be attributed to such research and development undertaken on the taxpayer’s behalf in Québec in the year by an individual, other than a trust, who is, if that person is a corporation, a shareholder of that person or who is a member of that partnership;

(d)  where the taxpayer has not made an election under subparagraph c of the first paragraph of section 230 for the year, that portion of the consideration paid by the taxpayer under a particular contract, other than a contract by which the taxpayer causes scientific research and experimental development to be undertaken on the taxpayer’s behalf, for work undertaken in the year, relating to the research and development undertaken in any taxation year, to a person or partnership with whom the taxpayer was not dealing at arm’s length at the time the particular contract was entered into and who has undertaken all or part of the work, that may reasonably be attributed to wages paid to employees of an establishment of that person or partnership situated in Québec, or that could be so attributed if that person or partnership had such employees;

(d.1)  where the taxpayer has made an election under subparagraph c of the first paragraph of section 230 for the year, that portion of the consideration paid by the taxpayer under a particular contract, other than a contract by which the taxpayer causes scientific research and experimental development to be undertaken on the taxpayer’s behalf, for work undertaken in the year, relating to the research and development undertaken in any taxation year, to a person or partnership with whom the taxpayer was not dealing at arm’s length at the time the particular contract was entered into and who has undertaken all or part of the work, that may reasonably be attributed to wages paid to employees of an establishment of that person or partnership situated in Québec, or that could be so attributed if that person or partnership had such employees;

(e)  one-half of that portion of the consideration paid by the taxpayer under a particular contract, other than a contract by which the taxpayer causes scientific research and experimental development to be undertaken on the taxpayer’s behalf, for work relating to such research and development undertaken in any taxation year, to a person or partnership who has an establishment situated in Québec and with whom the taxpayer was dealing at arm’s length at the time the particular contract was entered into,

i.  that may reasonably be attributed to work undertaken in the year by the employees of an establishment of that person or partnership situated in Québec or that could be so attributed if that person or partnership had such employees, or

ii.  that may reasonably be attributed to work undertaken in Québec in the year by an individual, other than a trust, who is, if that person is a corporation, a shareholder of that person or who is a member of that partnership;

(f)  where the taxpayer has not made an election under subparagraph c of the first paragraph of section 230 for the year, that portion of the consideration paid under the contract by the taxpayer in respect of the research and development undertaken on the taxpayer’s behalf in the year to a person or partnership with whom the taxpayer was not dealing at arm’s length at the time the contract was entered into, and paid again by that person or partnership, under a particular contract, in respect of that research and development, to another person or partnership with whom the taxpayer was not dealing at arm’s length at the time the particular contract was entered into and who has undertaken all or part of the research and development, that may reasonably be attributed to wages paid to employees of an establishment of that other person or partnership situated in Québec, or that could be so attributed if the other person or partnership had such employees;

(f.1)  where the taxpayer has made an election under subparagraph c of the first paragraph of section 230 for the year, that portion of the consideration paid under the contract by the taxpayer in respect of the research and development undertaken on the taxpayer’s behalf in the year to a person or partnership with whom the taxpayer was not dealing at arm’s length at the time the contract was entered into, and paid again by that person or partnership, under a particular contract, in respect of that research and development, to another person or partnership with whom the taxpayer was not dealing at arm’s length at the time the particular contract was entered into and who has undertaken all or part of the research and development, that may reasonably be attributed to that portion of an expenditure incurred for salary or wages of employees of an establishment of that other person or partnership situated in Québec who are directly engaged in scientific research and experimental development in Canada that can reasonably be considered to relate to such work having regard to the time spent by the employees thereon, and, for this purpose, where the employees spend all or substantially all their working time on such scientific research and experimental development, that portion of the expenditure is deemed to be equal to the amount of the expenditure, or that could be so attributed if the other person or partnership had such employees;

(g)  one-half of that portion of the consideration paid under the contract by the taxpayer to a person or partnership with whom the taxpayer was not dealing at arm’s length at the time the contract was entered into, and paid again by that person or partnership, under a particular contract, to another person or partnership who has an establishment situated in Québec and with whom the taxpayer was dealing at arm’s length at the time the particular contract was entered into,

i.  that may reasonably be attributed to such research and development undertaken on the taxpayer’s behalf in the year by the employees of an establishment of that other person or partnership situated in Québec or that could be so attributed if that other person or partnership had such employees, or

ii.  that may reasonably be attributed to such research and development undertaken on the taxpayer’s behalf in Québec in the year by an individual, other than a trust, who is, if that other person is a corporation, a shareholder of that other person or who is a member of that other partnership;

(h)  where the taxpayer has not made an election under subparagraph c of the first paragraph of section 230 for the year, that portion of the consideration paid by the taxpayer under a particular contract, other than a contract by which the taxpayer causes scientific research and experimental development to be undertaken on the taxpayer’s behalf, for work undertaken in the year, relating to the research and development undertaken in any taxation year, to a person or partnership with whom the taxpayer was not dealing at arm’s length at the time the particular contract was entered into, and paid again by that person or partnership, under another particular contract, to another person or partnership with whom the taxpayer was not dealing at arm’s length at the time the other particular contract was entered into and who has undertaken all or part of the work, that may reasonably be attributed to wages paid to employees of an establishment of that other person or partnership situated in Québec, or that could be so attributed if the other person or partnership had such employees;

(h.1)  where the taxpayer has made an election under subparagraph c of the first paragraph of section 230 for the year, that portion of the consideration paid by the taxpayer under a particular contract, other than a contract by which the taxpayer causes scientific research and experimental development to be undertaken on the taxpayer’s behalf, for work undertaken in the year, relating to the research and development undertaken in any taxation year, to a person or partnership with whom the taxpayer was not dealing at arm’s length at the time the particular contract was entered into, and paid again by that person or partnership, under another particular contract, to another person or partnership with whom the taxpayer was not dealing at arm’s length at the time the other particular contract was entered into and who has undertaken all or part of the work, that may reasonably be attributed to wages paid to employees of an establishment of that other person or partnership situated in Québec, or that could be so attributed if the other person or partnership had such employees; and

(i)  one-half of that portion of the consideration paid by the taxpayer under a particular contract, other than a contract by which the taxpayer causes scientific research and experimental development to be undertaken on the taxpayer’s behalf, for work relating to such research and development undertaken in any taxation year, to a person or partnership with whom the taxpayer was not dealing at arm’s length at the time the particular contract was entered into, and paid again by that person or partnership, under another particular contract, to another person or partnership who has an establishment situated in Québec and with whom the taxpayer was dealing at arm’s length at the time the other particular contract was entered into,

i.  that may reasonably be attributed to the work undertaken in the year by the employees of an establishment of that other person or partnership situated in Québec or that could be so attributed if that other person or partnership had such employees, or

ii.  that may reasonably be attributed to the work undertaken in Québec in the year by an individual, other than a trust, who is, if that other person is a corporation, a shareholder of that other person or who is a member of that other partnership.

For the purpose of computing the payments that a taxpayer is required to make under section 1025 or 1026, subparagraph a of the first paragraph of section 1027, or any of sections 1145, 1159.7, 1175 and 1175.19 where they refer to that subparagraph a, the taxpayer is deemed to have paid to the Minister, on account of the aggregate of the taxpayer’s tax payable for the year under this Part and of the taxpayer’s tax payable for the year under Parts IV, IV.1, VI and VI.1, on the date on or before which each payment is required to be made, an amount equal to the lesser of

(a)  the amount by which the amount determined under the first paragraph for the year exceeds the aggregate of all amounts each of which is the portion of that amount that may reasonably be considered to be deemed to have been paid to the Minister under this paragraph in the year but before that date; and

(b)  the amount by which the amount of that payment, determined without reference to this chapter, exceeds the aggregate of all amounts each of which is an amount that is deemed, under this chapter but otherwise than under the first paragraph, to have been paid to the Minister on that date, for the purpose of computing that payment.

For the purposes of the first paragraph, the wages and consideration paid by the taxpayer referred to therein include only the wages and consideration that

(a)  constitute, for the taxpayer, an expenditure referred to in subsection 1 of section 222 or in paragraph a of section 223;

(b)  do not constitute

i.  all or part of an amount that can reasonably be considered to be an expenditure in respect of scientific research and experimental development made in Québec by virtue of a university research contract within the meaning of paragraph b of section 1029.8.1 or of an eligible research contract within the meaning of paragraph a.2 of the said section, in respect of which section 1029.8.6 applies,

ii.  all or part of an amount that can reasonably be considered to be an expenditure in respect of scientific research and experimental development made in Québec by virtue of an agreement in respect of which section 1029.8.10 or 1029.8.16.1.4 applies,

iii.  (subparagraph repealed),

iv.  (subparagraph repealed),

v.  an expenditure described in section 230.0.0.2;

vi.  an expenditure specified by the taxpayer for the purposes of clause A of subparagraph ii of paragraph a of subsection 2 of section 194 of the Income Tax Act (R.S.C. 1985, c. 1 (5th Suppl.)), where the taxpayer is a corporation;

vii.  an expenditure of a current nature incurred by or on behalf of a taxpayer in respect of the general administration or management of a business, including

(1)  the administrative salary or wages, including related benefits, of a person none or substantially none of whose duties are oriented toward the prosecution of scientific research and experimental development, except to the extent that such expenditure is a prescribed expenditure,

(2)  a legal or accounting fee,

(3)  an amount referred to in any of sections 147, 148, 160, 161, 163, 176, 176.4 and 179,

(4)  an entertainment expense,

(5)  an advertising or selling expense,

(6)  a conference or convention expense,

(7)  a due or fee in respect of membership in a scientific or technical organization, and

(8)  a fine or penalty;

viii.  an expenditure of a current nature incurred by or on behalf of a taxpayer for the maintenance and upkeep of premises, facilities or equipment to the extent that the expenditure is not attributable to the prosecution of scientific research and experimental development;

ix.  an expenditure of a capital nature incurred by or on behalf of a taxpayer to acquire property, except any such expenditure that, at the time it was incurred, was for the provision of premises, facilities or equipment if, at the time of the acquisition of the premises, facilities or equipment, it was intended

(1)  that the premises, facilities or equipment would be used during all or substantially all of their operating time in their expected useful life for the prosecution of scientific research and experimental development undertaken in Canada, and

(2)  that all or substantially all of the value of the premises, facilities or equipment would be consumed in the prosecution of scientific research and experimental development undertaken in Canada;

x.  an expenditure of a capital nature incurred by or on behalf of a taxpayer to acquire property if the property has been used or acquired for use or lease, for any purpose whatever, before it was acquired;

xi.  an expenditure made to acquire rights in, or arising out of, scientific research and experimental development;

xii.  an expenditure related to scientific research and experimental development in respect of which an amount is deductible under sections 710 to 716.0.11 or 752.0.10.1 to 752.0.10.26 in computing taxable income or tax payable under this Part, as the case may be;

xiii.  an expenditure of a current or capital nature, to the extent that the taxpayer having incurred it or, where applicable, the person or partnership having incurred it on the taxpayer’s behalf has received or is entitled to receive a reimbursement in respect of the expenditure from a person resident in Canada, other than

(1)  the State or Her Majesty in right of Canada or a province, other than Québec,

(2)  a mandatary of the State or of Her Majesty in right of Canada or a province, other than Québec,

(3)  a corporation, commission or association that is controlled, directly or indirectly in any manner whatever, by the State or Her Majesty in right of Canada or a province, other than Québec, or by a mandatary of the State or of Her Majesty in right of Canada or a province, other than Québec, or

(4)  a municipality in Canada or a municipal or public body performing a function of government in Canada; and

xiv.  an expenditure of a current or capital nature, to the extent that the taxpayer having incurred it or, where applicable, the person or partnership having incurred it on the taxpayer’s behalf has received or is entitled to receive a reimbursement in respect of the expenditure from a person not resident in Canada and to the extent that the reimbursement is deductible by the person in computing taxable income earned in Canada for a taxation year.

For the purposes of the first paragraph, that portion of the consideration paid by the taxpayer under a particular contract referred to in any of subparagraphs d, e, h and i of that paragraph shall be reduced by the amount of the consideration for the disposition of property to the taxpayer, other than a property resulting from scientific research and experimental development.

In this section, “wages” means the income computed under Chapters I and II of Title II of Book III.

1983, c. 44, s. 43; 1987, c. 67, s. 183; 1988, c. 4, s. 123; 1988, c. 18, s. 113; 1989, c. 5, s. 200; 1990, c. 7, s. 148; 1991, c. 8, s. 76; 1992, c. 1, s. 162; 1993, c. 19, s. 92; 1993, c. 64, s. 138; 1995, c. 1, s. 119; 1995, c. 63, s. 120; 1997, c. 3, s. 71; 1997, c. 14, s. 184; 1997, c. 31, s. 143; 1999, c. 83, s. 168; 2000, c. 39, s. 123; 2001, c. 53, s. 217; 2002, c. 40, s. 103; 2003, c. 9, s. 176; 2004, c. 21, s. 259; 2005, c. 1, s. 217; 2006, c. 13, s. 94; 2007, c. 12, s. 111; 2009, c. 5, s. 430; 2011, c. 1, s. 56; 2012, c. 8, s. 183.

2011-02-17

1029.7. A taxpayer, other than a tax-exempt taxpayer, who carries on a business in Canada, who undertakes scientific research and experimental development related to a business of the taxpayer, in Québec, or causes such research and development to be undertaken in Québec on the taxpayer’s behalf as part of a contract, and who encloses the prescribed form containing the prescribed information with the fiscal return the taxpayer is required to file under section 1000, or would be required to file if tax were payable under this Part by the taxpayer, for the taxation year in which the research and development was undertaken is deemed, subject to the second paragraph, to have paid to the Minister, on the taxpayer’s balance-due day for that year, on account of the taxpayer’s tax payable for that year under this Part, an amount equal to 17.5% of the aggregate of

(a)  the wages paid by the taxpayer in respect of the research and development undertaken in the year to his employees of an establishment situated in Québec;

(b)  where the taxpayer has not made an election under subparagraph c of the first paragraph of section 230 for the year, that portion of the consideration paid under the contract by the taxpayer in respect of the research and development undertaken on the taxpayer’s behalf in the year to a person or partnership with whom the taxpayer was not dealing at arm’s length at the time the contract was entered into and who has undertaken all or part of the research and development, that may reasonably be attributed to wages paid to employees of an establishment of that person or partnership situated in Québec, or that could be so attributed if that person or partnership had such employees;

(b.1)  where the taxpayer has made an election under subparagraph c of the first paragraph of section 230 for the year, that portion of the consideration paid under the contract by the taxpayer in respect of the research and development undertaken on the taxpayer’s behalf in the year to a person or partnership with whom the taxpayer was not dealing at arm’s length at the time the contract was entered into and who has undertaken all or part of the research and development, that may reasonably be attributed to that portion of an expenditure incurred for salary or wages of employees of an establishment of that person or partnership situated in Québec who are directly engaged in scientific research and experimental development in Canada that can reasonably be considered to relate to such work having regard to the time spent by the employees thereon, and, for this purpose, where the employees spend all or substantially all of their working time on such scientific research and experimental development, that portion of the expenditure is deemed to be equal to the amount of the expenditure, or that could be so attributed if that person or partnership had such employees;

(c)  one-half of that portion of the consideration paid under the contract by the taxpayer to a person or partnership who has an establishment situated in Québec and with whom the taxpayer was dealing at arm’s length at the time the contract was entered into,

i.  that may reasonably be attributed to such research and development undertaken on the taxpayer’s behalf in the year by the employees of an establishment of that person or partnership situated in Québec or that could be so attributed if that person or partnership had such employees, or

ii.  that may reasonably be attributed to such research and development undertaken on the taxpayer’s behalf in Québec in the year by an individual, other than a trust, who is, if that person is a corporation, a shareholder of that person or who is a member of that partnership;

(d)  where the taxpayer has not made an election under subparagraph c of the first paragraph of section 230 for the year, that portion of the consideration paid by the taxpayer under a particular contract, other than a contract by which the taxpayer causes scientific research and experimental development to be undertaken on the taxpayer’s behalf, for work undertaken in the year, relating to the research and development undertaken in any taxation year, to a person or partnership with whom the taxpayer was not dealing at arm’s length at the time the particular contract was entered into and who has undertaken all or part of the work, that may reasonably be attributed to wages paid to employees of an establishment of that person or partnership situated in Québec, or that could be so attributed if that person or partnership had such employees;

(d.1)  where the taxpayer has made an election under subparagraph c of the first paragraph of section 230 for the year, that portion of the consideration paid by the taxpayer under a particular contract, other than a contract by which the taxpayer causes scientific research and experimental development to be undertaken on the taxpayer’s behalf, for work undertaken in the year, relating to the research and development undertaken in any taxation year, to a person or partnership with whom the taxpayer was not dealing at arm’s length at the time the particular contract was entered into and who has undertaken all or part of the work, that may reasonably be attributed to wages paid to employees of an establishment of that person or partnership situated in Québec, or that could be so attributed if that person or partnership had such employees;

(e)  one-half of that portion of the consideration paid by the taxpayer under a particular contract, other than a contract by which the taxpayer causes scientific research and experimental development to be undertaken on the taxpayer’s behalf, for work relating to such research and development undertaken in any taxation year, to a person or partnership who has an establishment situated in Québec and with whom the taxpayer was dealing at arm’s length at the time the particular contract was entered into,

i.  that may reasonably be attributed to work undertaken in the year by the employees of an establishment of that person or partnership situated in Québec or that could be so attributed if that person or partnership had such employees, or

ii.  that may reasonably be attributed to work undertaken in Québec in the year by an individual, other than a trust, who is, if that person is a corporation, a shareholder of that person or who is a member of that partnership;

(f)  where the taxpayer has not made an election under subparagraph c of the first paragraph of section 230 for the year, that portion of the consideration paid under the contract by the taxpayer in respect of the research and development undertaken on the taxpayer’s behalf in the year to a person or partnership with whom the taxpayer was not dealing at arm’s length at the time the contract was entered into, and paid again by that person or partnership, under a particular contract, in respect of that research and development, to another person or partnership with whom the taxpayer was not dealing at arm’s length at the time the particular contract was entered into and who has undertaken all or part of the research and development, that may reasonably be attributed to wages paid to employees of an establishment of that other person or partnership situated in Québec, or that could be so attributed if the other person or partnership had such employees;

(f.1)  where the taxpayer has made an election under subparagraph c of the first paragraph of section 230 for the year, that portion of the consideration paid under the contract by the taxpayer in respect of the research and development undertaken on the taxpayer’s behalf in the year to a person or partnership with whom the taxpayer was not dealing at arm’s length at the time the contract was entered into, and paid again by that person or partnership, under a particular contract, in respect of that research and development, to another person or partnership with whom the taxpayer was not dealing at arm’s length at the time the particular contract was entered into and who has undertaken all or part of the research and development, that may reasonably be attributed to that portion of an expenditure incurred for salary or wages of employees of an establishment of that other person or partnership situated in Québec who are directly engaged in scientific research and experimental development in Canada that can reasonably be considered to relate to such work having regard to the time spent by the employees thereon, and, for this purpose, where the employees spend all or substantially all their working time on such scientific research and experimental development, that portion of the expenditure is deemed to be equal to the amount of the expenditure, or that could be so attributed if the other person or partnership had such employees;

(g)  one-half of that portion of the consideration paid under the contract by the taxpayer to a person or partnership with whom the taxpayer was not dealing at arm’s length at the time the contract was entered into, and paid again by that person or partnership, under a particular contract, to another person or partnership who has an establishment situated in Québec and with whom the taxpayer was dealing at arm’s length at the time the particular contract was entered into,

i.  that may reasonably be attributed to such research and development undertaken on the taxpayer’s behalf in the year by the employees of an establishment of that other person or partnership situated in Québec or that could be so attributed if that other person or partnership had such employees, or

ii.  that may reasonably be attributed to such research and development undertaken on the taxpayer’s behalf in Québec in the year by an individual, other than a trust, who is, if that other person is a corporation, a shareholder of that other person or who is a member of that other partnership;

(h)  where the taxpayer has not made an election under subparagraph c of the first paragraph of section 230 for the year, that portion of the consideration paid by the taxpayer under a particular contract, other than a contract by which the taxpayer causes scientific research and experimental development to be undertaken on the taxpayer’s behalf, for work undertaken in the year, relating to the research and development undertaken in any taxation year, to a person or partnership with whom the taxpayer was not dealing at arm’s length at the time the particular contract was entered into, and paid again by that person or partnership, under another particular contract, to another person or partnership with whom the taxpayer was not dealing at arm’s length at the time the other particular contract was entered into and who has undertaken all or part of the work, that may reasonably be attributed to wages paid to employees of an establishment of that other person or partnership situated in Québec, or that could be so attributed if the other person or partnership had such employees;

(h.1)  where the taxpayer has made an election under subparagraph c of the first paragraph of section 230 for the year, that portion of the consideration paid by the taxpayer under a particular contract, other than a contract by which the taxpayer causes scientific research and experimental development to be undertaken on the taxpayer’s behalf, for work undertaken in the year, relating to the research and development undertaken in any taxation year, to a person or partnership with whom the taxpayer was not dealing at arm’s length at the time the particular contract was entered into, and paid again by that person or partnership, under another particular contract, to another person or partnership with whom the taxpayer was not dealing at arm’s length at the time the other particular contract was entered into and who has undertaken all or part of the work, that may reasonably be attributed to wages paid to employees of an establishment of that other person or partnership situated in Québec, or that could be so attributed if the other person or partnership had such employees; and

(i)  one-half of that portion of the consideration paid by the taxpayer under a particular contract, other than a contract by which the taxpayer causes scientific research and experimental development to be undertaken on the taxpayer’s behalf, for work relating to such research and development undertaken in any taxation year, to a person or partnership with whom the taxpayer was not dealing at arm’s length at the time the particular contract was entered into, and paid again by that person or partnership, under another particular contract, to another person or partnership who has an establishment situated in Québec and with whom the taxpayer was dealing at arm’s length at the time the other particular contract was entered into,

i.  that may reasonably be attributed to the work undertaken in the year by the employees of an establishment of that other person or partnership situated in Québec or that could be so attributed if that other person or partnership had such employees, or

ii.  that may reasonably be attributed to the work undertaken in Québec in the year by an individual, other than a trust, who is, if that other person is a corporation, a shareholder of that other person or who is a member of that other partnership.

For the purpose of computing the payments that a taxpayer is required to make under section 1025 or 1026, subparagraph a of the first paragraph of section 1027, or any of sections 1145, 1159.7, 1175 and 1175.19 where they refer to that subparagraph a, the taxpayer is deemed to have paid to the Minister, on account of the aggregate of the taxpayer’s tax payable for the year under this Part and of the taxpayer’s tax payable for the year under Parts IV, IV.1, VI and VI.1, on the date on or before which each payment is required to be made, an amount equal to the lesser of

(a)  the amount by which the amount determined under the first paragraph for the year exceeds the aggregate of all amounts each of which is the portion of that amount that may reasonably be considered to be deemed to have been paid to the Minister under this paragraph in the year but before that date; and

(b)  the amount by which the amount of that payment, determined without reference to this chapter, exceeds the aggregate of all amounts each of which is an amount that is deemed, under this chapter but otherwise than under the first paragraph, to have been paid to the Minister on that date, for the purpose of computing that payment.

For the purposes of the first paragraph, the wages and consideration paid by the taxpayer referred to therein include only the wages and consideration that

(a)  constitute, for the taxpayer, an expenditure referred to in subsection 1 of section 222 or in paragraph a of section 223;

(b)  do not constitute

i.  all or part of an amount that can reasonably be considered to be an expenditure in respect of scientific research and experimental development made in Québec by virtue of a university research contract within the meaning of paragraph b of section 1029.8.1 or of an eligible research contract within the meaning of paragraph a.2 of the said section, in respect of which section 1029.8.6 applies,

ii.  all or part of an amount that can reasonably be considered to be an expenditure in respect of scientific research and experimental development made in Québec by virtue of an agreement in respect of which section 1029.8.10 or 1029.8.16.1.4 applies,

iii.  (subparagraph repealed),

iv.  (subparagraph repealed),

v.  an expenditure described in section 230.0.0.2;

vi.  an expenditure specified by the taxpayer for the purposes of clause A of subparagraph ii of paragraph a of subsection 2 of section 194 of the Income Tax Act (R.S.C. 1985, c. 1 (5th Suppl.)), where the taxpayer is a corporation;

vii.  an expenditure of a current nature incurred by or on behalf of a taxpayer in respect of the general administration or management of a business, including

(1)  the administrative salary or wages, including related benefits, of a person none or substantially none of whose duties are oriented toward the prosecution of scientific research and experimental development, except to the extent that such expenditure is a prescribed expenditure,

(2)  a legal or accounting fee,

(3)  an amount referred to in any of sections 147, 148, 160, 161, 163, 176, 176.4 and 179,

(4)  an entertainment expense,

(5)  an advertising or selling expense,

(6)  a conference or convention expense,

(7)  a due or fee in respect of membership in a scientific or technical organization, and

(8)  a fine or penalty;

viii.  an expenditure of a current nature incurred by or on behalf of a taxpayer for the maintenance and upkeep of premises, facilities or equipment to the extent that the expenditure is not attributable to the prosecution of scientific research and experimental development;

ix.  an expenditure of a capital nature incurred by or on behalf of a taxpayer to acquire property, except any such expenditure that, at the time it was incurred, was for the provision of premises, facilities or equipment if, at the time of the acquisition of the premises, facilities or equipment, it was intended

(1)  that the premises, facilities or equipment would be used during all or substantially all of their operating time in their expected useful life for the prosecution of scientific research and experimental development undertaken in Canada, and

(2)  that all or substantially all of the value of the premises, facilities or equipment would be consumed in the prosecution of scientific research and experimental development undertaken in Canada;

x.  an expenditure of a capital nature incurred by or on behalf of a taxpayer to acquire property if the property has been used or acquired for use or lease, for any purpose whatever, before it was acquired;

xi.  an expenditure made to acquire rights in, or arising out of, scientific research and experimental development;

xii.  an expenditure related to scientific research and experimental development in respect of which an amount is deductible under sections 710 to 716.0.3 or 752.0.10.1 to 752.0.10.18 in computing taxable income or tax payable under this Part, as the case may be;

xiii.  an expenditure of a current or capital nature, to the extent that the taxpayer having incurred it or, where applicable, the person or partnership having incurred it on the taxpayer’s behalf has received or is entitled to receive a reimbursement in respect of the expenditure from a person resident in Canada, other than

(1)  the State or Her Majesty in right of Canada or a province, other than Québec,

(2)  a mandatary of the State or of Her Majesty in right of Canada or a province, other than Québec,

(3)  a corporation, commission or association that is controlled, directly or indirectly in any manner whatever, by the State or Her Majesty in right of Canada or a province, other than Québec, or by a mandatary of the State or of Her Majesty in right of Canada or a province, other than Québec, or

(4)  a municipality in Canada or a municipal or public body performing a function of government in Canada; and

xiv.  an expenditure of a current or capital nature, to the extent that the taxpayer having incurred it or, where applicable, the person or partnership having incurred it on the taxpayer’s behalf has received or is entitled to receive a reimbursement in respect of the expenditure from a person not resident in Canada and to the extent that the reimbursement is deductible by the person in computing taxable income earned in Canada for a taxation year.

For the purposes of the first paragraph, that portion of the consideration paid by the taxpayer under a particular contract referred to in any of subparagraphs d, e, h and i of that paragraph shall be reduced by the amount of the consideration for the disposition of property to the taxpayer, other than a property resulting from scientific research and experimental development.

In this section, “wages” means the income computed under Chapters I and II of Title II of Book III.

1983, c. 44, s. 43; 1987, c. 67, s. 183; 1988, c. 4, s. 123; 1988, c. 18, s. 113; 1989, c. 5, s. 200; 1990, c. 7, s. 148; 1991, c. 8, s. 76; 1992, c. 1, s. 162; 1993, c. 19, s. 92; 1993, c. 64, s. 138; 1995, c. 1, s. 119; 1995, c. 63, s. 120; 1997, c. 3, s. 71; 1997, c. 14, s. 184; 1997, c. 31, s. 143; 1999, c. 83, s. 168; 2000, c. 39, s. 123; 2001, c. 53, s. 217; 2002, c. 40, s. 103; 2003, c. 9, s. 176; 2004, c. 21, s. 259; 2005, c. 1, s. 217; 2006, c. 13, s. 94; 2007, c. 12, s. 111; 2009, c. 5, s. 430; 2011, c. 1, s. 56.

2009-05-15

1029.7. A taxpayer, other than a tax-exempt taxpayer, who carries on a business in Canada, who undertakes scientific research and experimental development related to a business of the taxpayer, in Québec, or causes such research and development to be undertaken in Québec on the taxpayer’s behalf as part of a contract, and who encloses the prescribed form containing the prescribed information with the fiscal return the taxpayer is required to file under section 1000, or would be required to file if tax were payable under this Part by the taxpayer, for the taxation year in which the research and development was undertaken is deemed, subject to the second paragraph, to have paid to the Minister, on the taxpayer’s balance-due day for that year, on account of the taxpayer’s tax payable for that year under this Part, an amount equal to 17.5% of the aggregate of

(a)  the wages paid by the taxpayer in respect of the research and development undertaken in the year to his employees of an establishment situated in Québec;

(b)  where the taxpayer has not made an election under subparagraph c of the first paragraph of section 230 for the year, that portion of the consideration paid under the contract by the taxpayer in respect of the research and development undertaken on the taxpayer’s behalf in the year to a person or partnership with whom or with which the taxpayer was not dealing at arm’s length at the time the contract was entered into and who or which has undertaken all or part of the research and development, that may reasonably be attributed to wages paid to employees of an establishment of that person or partnership situated in Québec, or that could be so attributed if that person or partnership had such employees;

(b.1)  where the taxpayer has made an election under subparagraph c of the first paragraph of section 230 for the year, that portion of the consideration paid under the contract by the taxpayer in respect of the research and development undertaken on the taxpayer’s behalf in the year to a person or partnership with whom or with which the taxpayer was not dealing at arm’s length at the time the contract was entered into and who or which has undertaken all or part of the research and development, that may reasonably be attributed to that portion of an expenditure incurred for salary or wages of employees of an establishment of that person or partnership situated in Québec who are directly engaged in scientific research and experimental development in Canada that can reasonably be considered to relate to such work having regard to the time spent by the employees thereon, and, for this purpose, where the employees spend all or substantially all of their working time on such scientific research and experimental development, that portion of the expenditure is deemed to be equal to the amount of the expenditure, or that could be so attributed if that person or partnership had such employees;

(c)  one-half of that portion of the consideration paid under the contract by the taxpayer to a person or partnership with whom or with which he was dealing at arm’s length at the time the contract was entered into, that may reasonably be attributed to such research and development undertaken on his behalf in the year by the employees of an establishment of that person or partnership situated in Québec or that could be so attributed if the person or partnership had such employees;

(d)  where the taxpayer has not made an election under subparagraph c of the first paragraph of section 230 for the year, that portion of the consideration paid by the taxpayer under a particular contract, other than a contract by which the taxpayer causes scientific research and experimental development to be undertaken on the taxpayer’s behalf, for work undertaken in the year, relating to the research and development undertaken in any taxation year, to a person or partnership with whom or with which the taxpayer was not dealing at arm’s length at the time the particular contract was entered into and who or which has undertaken all or part of the work, that may reasonably be attributed to wages paid to employees of an establishment of that person or partnership situated in Québec, or that could be so attributed if that person or partnership had such employees;

(d.1)  where the taxpayer has made an election under subparagraph c of the first paragraph of section 230 for the year, that portion of the consideration paid by the taxpayer under a particular contract, other than a contract by which the taxpayer causes scientific research and experimental development to be undertaken on the taxpayer’s behalf, for work undertaken in the year, relating to the research and development undertaken in any taxation year, to a person or partnership with whom or with which the taxpayer was not dealing at arm’s length at the time the particular contract was entered into and who or which has undertaken all or part of the work, that may reasonably be attributed to wages paid to employees of an establishment of that person or partnership situated in Québec, or that could be so attributed if that person or partnership had such employees;

(e)  one-half of that portion of the consideration paid by the taxpayer under a particular contract, other than a contract by which he causes scientific research and experimental development to be undertaken on his behalf, for work relating to such research and development undertaken in any taxation year, to a person or partnership with whom or with which he was dealing at arm’s length at the time the particular contract was entered into, that may reasonably be attributed to work undertaken in the year by the employees of an establishment of that person or partnership situated in Québec or that could be so attributed if the person or partnership had such employees;

(f)  where the taxpayer has not made an election under subparagraph c of the first paragraph of section 230 for the year, that portion of the consideration paid under the contract by the taxpayer in respect of the research and development undertaken on the taxpayer’s behalf in the year to a person or partnership with whom or with which the taxpayer was not dealing at arm’s length at the time the contract was entered into, and paid again by that person or partnership, under a particular contract, in respect of that research and development, to another person or partnership with whom or with which the taxpayer was not dealing at arm’s length at the time the particular contract was entered into and who or which has undertaken all or part of the research and development, that may reasonably be attributed to wages paid to employees of an establishment of that other person or partnership situated in Québec, or that could be so attributed if the other person or partnership had such employees;

(f.1)  where the taxpayer has made an election under subparagraph c of the first paragraph of section 230 for the year, that portion of the consideration paid under the contract by the taxpayer in respect of the research and development undertaken on the taxpayer’s behalf in the year to a person or partnership with whom or with which the taxpayer was not dealing at arm’s length at the time the contract was entered into, and paid again by that person or partnership, under a particular contract, in respect of that research and development, to another person or partnership with whom or with which the taxpayer was not dealing at arm’s length at the time the particular contract was entered into and who or which has undertaken all or part of the research and development, that may reasonably be attributed to that portion of an expenditure incurred for salary or wages of employees of an establishment of that other person or partnership situated in Québec who or which are directly engaged in scientific research and experimental development in Canada that can reasonably be considered to relate to such work having regard to the time spent by the employees thereon, and, for this purpose, where the employees spend all or substantially all their working time on such scientific research and experimental development, that portion of the expenditure is deemed to be equal to the amount of the expenditure, or that could be so attributed if the other person or partnership had such employees;

(g)  one-half of that portion of the consideration paid under the contract by the taxpayer to a person or partnership with whom or with which the taxpayer was not dealing at arm’s length at the time the contract was entered into, and paid again by that person or partnership, under a particular contract, to another person or partnership with whom or with which the taxpayer was dealing at arm’s length at the time the particular contract was entered into, that may reasonably be attributed to such research and development undertaken on the taxpayer’s behalf in the year by the employees of an establishment of that other person or partnership situated in Québec or that could be so attributed if that other person or partnership had such employees;

(h)  where the taxpayer has not made an election under subparagraph c of the first paragraph of section 230 for the year, that portion of the consideration paid by the taxpayer under a particular contract, other than a contract by which the taxpayer causes scientific research and experimental development to be undertaken on the taxpayer’s behalf, for work undertaken in the year, relating to the research and development undertaken in any taxation year, to a person or partnership with whom or with which the taxpayer was not dealing at arm’s length at the time the particular contract was entered into, and paid again by that person or partnership, under another particular contract, to another person or partnership with whom or with which the taxpayer was not dealing at arm’s length at the time the other particular contract was entered into and who or which has undertaken all or part of the work, that may reasonably be attributed to wages paid to employees of an establishment of that other person or partnership situated in Québec, or that could be so attributed if the other person or partnership had such employees;

(h.1)  where the taxpayer has made an election under subparagraph c of the first paragraph of section 230 for the year, that portion of the consideration paid by the taxpayer under a particular contract, other than a contract by which the taxpayer causes scientific research and experimental development to be undertaken on the taxpayer’s behalf, for work undertaken in the year, relating to the research and development undertaken in any taxation year, to a person or partnership with whom or with which the taxpayer was not dealing at arm’s length at the time the particular contract was entered into, and paid again by that person or partnership, under another particular contract, to another person or partnership with whom or with which the taxpayer was not dealing at arm’s length at the time the other particular contract was entered into and who or which has undertaken all or part of the work, that may reasonably be attributed to wages paid to employees of an establishment of that other person or partnership situated in Québec, or that could be so attributed if the other person or partnership had such employees; and

(i)  one-half of that portion of the consideration paid by the taxpayer under a particular contract, other than a contract by which the taxpayer causes scientific research and experimental development to be undertaken on the taxpayer’s behalf, for work relating to such research and development undertaken in any taxation year, to a person or partnership with whom or with which the taxpayer was not dealing at arm’s length at the time the particular contract was entered into, and paid again by that person or partnership, under another particular contract, to another person or partnership with whom or with which the taxpayer was dealing at arm’s length at the time the other particular contract was entered into, that may reasonably be attributed to the work undertaken in the year by the employees of an establishment of that other person or partnership situated in Québec or that could be so attributed if that other person or partnership had such employees.

For the purpose of computing the payments that a taxpayer is required to make under section 1025 or 1026, subparagraph a of the first paragraph of section 1027, or any of sections 1145, 1159.7, 1175 and 1175.19 where they refer to that subparagraph a, the taxpayer is deemed to have paid to the Minister, on account of the aggregate of the taxpayer’s tax payable for the year under this Part and of the taxpayer’s tax payable for the year under Parts IV, IV.1, VI and VI.1, on the date on or before which each payment is required to be made, an amount equal to the lesser of

(a)  the amount by which the amount determined under the first paragraph for the year exceeds the aggregate of all amounts each of which is the portion of that amount that may reasonably be considered to be deemed to have been paid to the Minister under this paragraph in the year but before that date; and

(b)  the amount by which the amount of that payment, determined without reference to this chapter, exceeds the aggregate of all amounts each of which is an amount that is deemed, under this chapter but otherwise than under the first paragraph, to have been paid to the Minister on that date, for the purpose of computing that payment.

For the purposes of the first paragraph, the wages and consideration paid by the taxpayer referred to therein include only the wages and consideration that

(a)  constitute, for the taxpayer, an expenditure referred to in subsection 1 of section 222 or in paragraph a of section 223;

(b)  do not constitute

i.  all or part of an amount that can reasonably be considered to be an expenditure in respect of scientific research and experimental development made in Québec by virtue of a university research contract within the meaning of paragraph b of section 1029.8.1 or of an eligible research contract within the meaning of paragraph a.2 of the said section, in respect of which section 1029.8.6 applies,

ii.  all or part of an amount that can reasonably be considered to be an expenditure in respect of scientific research and experimental development made in Québec by virtue of an agreement in respect of which section 1029.8.10 or 1029.8.16.1.4 applies,

iii.  (subparagraph repealed),

iv.  (subparagraph repealed),

v.  an expenditure described in section 230.0.0.2;

vi.  an expenditure specified by the taxpayer for the purposes of clause A of subparagraph ii of paragraph a of subsection 2 of section 194 of the Income Tax Act (R.S.C. 1985, c. 1 (5th Suppl.)), where the taxpayer is a corporation;

vii.  an expenditure of a current nature incurred by or on behalf of a taxpayer in respect of the general administration or management of a business, including

(1)  the administrative salary or wages, including related benefits, of a person none or substantially none of whose duties are oriented toward the prosecution of scientific research and experimental development, except to the extent that such expenditure is a prescribed expenditure,

(2)  a legal or accounting fee,

(3)  an amount referred to in any of sections 147, 148, 160, 161, 163, 176, 176.4 and 179,

(4)  an entertainment expense,

(5)  an advertising or selling expense,

(6)  a conference or convention expense,

(7)  a due or fee in respect of membership in a scientific or technical organization, and

(8)  a fine or penalty;

viii.  an expenditure of a current nature incurred by or on behalf of a taxpayer for the maintenance and upkeep of premises, facilities or equipment to the extent that the expenditure is not attributable to the prosecution of scientific research and experimental development;

ix.  an expenditure of a capital nature incurred by or on behalf of a taxpayer to acquire property, except any such expenditure that, at the time it was incurred, was for the provision of premises, facilities or equipment if, at the time of the acquisition of the premises, facilities or equipment, it was intended

(1)  that the premises, facilities or equipment would be used during all or substantially all of their operating time in their expected useful life for the prosecution of scientific research and experimental development undertaken in Canada, and

(2)  that all or substantially all of the value of the premises, facilities or equipment would be consumed in the prosecution of scientific research and experimental development undertaken in Canada;

x.  an expenditure of a capital nature incurred by or on behalf of a taxpayer to acquire property if the property has been used or acquired for use or lease, for any purpose whatever, before it was acquired;

xi.  an expenditure made to acquire rights in, or arising out of, scientific research and experimental development;

xii.  an expenditure related to scientific research and experimental development in respect of which an amount is deductible under sections 710 to 716.0.3 or 752.0.10.1 to 752.0.10.18 in computing taxable income or tax payable under this Part, as the case may be;

xiii.  an expenditure of a current or capital nature, to the extent that the taxpayer having incurred it or, where applicable, the person or partnership having incurred it on the taxpayer’s behalf has received or is entitled to receive a reimbursement in respect of the expenditure from a person resident in Canada, other than

(1)  the State or Her Majesty in right of Canada or a province, other than Québec,

(2)  a mandatary of the State or of Her Majesty in right of Canada or a province, other than Québec,

(3)  a corporation, commission or association that is controlled, directly or indirectly in any manner whatever, by the State or Her Majesty in right of Canada or a province, other than Québec, or by a mandatary of the State or of Her Majesty in right of Canada or a province, other than Québec, or

(4)  a municipality in Canada or a municipal or public body performing a function of government in Canada; and

xiv.  an expenditure of a current or capital nature, to the extent that the taxpayer having incurred it or, where applicable, the person or partnership having incurred it on the taxpayer’s behalf has received or is entitled to receive a reimbursement in respect of the expenditure from a person not resident in Canada and to the extent that the reimbursement is deductible by the person in computing taxable income earned in Canada for a taxation year.

For the purposes of the first paragraph, that portion of the consideration paid by the taxpayer under a particular contract referred to in any of subparagraphs d, e, h and i of that paragraph shall be reduced by the amount of the consideration for the disposition of property to the taxpayer, other than a property resulting from scientific research and experimental development.

In this section, “wages” means the income computed under Chapters I and II of Title II of Book III.

1983, c. 44, s. 43; 1987, c. 67, s. 183; 1988, c. 4, s. 123; 1988, c. 18, s. 113; 1989, c. 5, s. 200; 1990, c. 7, s. 148; 1991, c. 8, s. 76; 1992, c. 1, s. 162; 1993, c. 19, s. 92; 1993, c. 64, s. 138; 1995, c. 1, s. 119; 1995, c. 63, s. 120; 1997, c. 3, s. 71; 1997, c. 14, s. 184; 1997, c. 31, s. 143; 1999, c. 83, s. 168; 2000, c. 39, s. 123; 2001, c. 53, s. 217; 2002, c. 40, s. 103; 2003, c. 9, s. 176; 2004, c. 21, s. 259; 2005, c. 1, s. 217; 2006, c. 13, s. 94; 2007, c. 12, s. 111; 2009, c. 5, s. 430.

2007-11-07

1029.7. A taxpayer, other than a tax-exempt taxpayer, who carries on a business in Québec, has an establishment in Québec and undertakes scientific research and experimental development related to a business of the taxpayer, in Québec, or causes such research and development to be undertaken in Québec on the taxpayer’s behalf as part of a contract, and who encloses the prescribed form containing the prescribed information with the fiscal return the taxpayer is required to file under section 1000, or would be required to file if tax were payable under this Part by the taxpayer, for the taxation year in which the research and development was undertaken is deemed, subject to the second paragraph and to the first paragraph of section 1029.8.21.3.2, to have paid to the Minister, on the taxpayer’s balance-due day for that year, on account of the taxpayer’s tax payable for that year under this Part, an amount equal to 17.5% of the aggregate of

(a)  the wages paid by the taxpayer in respect of the research and development undertaken in the year to his employees of an establishment situated in Québec;

(b)  where the taxpayer has not made an election under subparagraph c of the first paragraph of section 230 for the year, that portion of the consideration paid under the contract by the taxpayer in respect of the research and development undertaken on the taxpayer’s behalf in the year to a person or partnership with whom or with which the taxpayer was not dealing at arm’s length at the time the contract was entered into and who or which has undertaken all or part of the research and development, that may reasonably be attributed to wages paid to employees of an establishment of that person or partnership situated in Québec, or that could be so attributed if that person or partnership had such employees;

(b.1)  where the taxpayer has made an election under subparagraph c of the first paragraph of section 230 for the year, that portion of the consideration paid under the contract by the taxpayer in respect of the research and development undertaken on the taxpayer’s behalf in the year to a person or partnership with whom or with which the taxpayer was not dealing at arm’s length at the time the contract was entered into and who or which has undertaken all or part of the research and development, that may reasonably be attributed to that portion of an expenditure incurred for salary or wages of employees of an establishment of that person or partnership situated in Québec who are directly engaged in scientific research and experimental development in Canada that can reasonably be considered to relate to such work having regard to the time spent by the employees thereon, and, for this purpose, where the employees spend all or substantially all of their working time on such scientific research and experimental development, that portion of the expenditure is deemed to be equal to the amount of the expenditure, or that could be so attributed if that person or partnership had such employees;

(c)  one-half of that portion of the consideration paid under the contract by the taxpayer to a person or partnership with whom or with which he was dealing at arm’s length at the time the contract was entered into, that may reasonably be attributed to such research and development undertaken on his behalf in the year by the employees of an establishment of that person or partnership situated in Québec or that could be so attributed if the person or partnership had such employees;

(d)  where the taxpayer has not made an election under subparagraph c of the first paragraph of section 230 for the year, that portion of the consideration paid by the taxpayer under a particular contract, other than a contract by which the taxpayer causes scientific research and experimental development to be undertaken on the taxpayer’s behalf, for work undertaken in the year, relating to the research and development undertaken in any taxation year, to a person or partnership with whom or with which the taxpayer was not dealing at arm’s length at the time the particular contract was entered into and who or which has undertaken all or part of the work, that may reasonably be attributed to wages paid to employees of an establishment of that person or partnership situated in Québec, or that could be so attributed if that person or partnership had such employees;

(d.1)  where the taxpayer has made an election under subparagraph c of the first paragraph of section 230 for the year, that portion of the consideration paid by the taxpayer under a particular contract, other than a contract by which the taxpayer causes scientific research and experimental development to be undertaken on the taxpayer’s behalf, for work undertaken in the year, relating to the research and development undertaken in any taxation year, to a person or partnership with whom or with which the taxpayer was not dealing at arm’s length at the time the particular contract was entered into and who or which has undertaken all or part of the work, that may reasonably be attributed to wages paid to employees of an establishment of that person or partnership situated in Québec, or that could be so attributed if that person or partnership had such employees;

(e)  one-half of that portion of the consideration paid by the taxpayer under a particular contract, other than a contract by which he causes scientific research and experimental development to be undertaken on his behalf, for work relating to such research and development undertaken in any taxation year, to a person or partnership with whom or with which he was dealing at arm’s length at the time the particular contract was entered into, that may reasonably be attributed to work undertaken in the year by the employees of an establishment of that person or partnership situated in Québec or that could be so attributed if the person or partnership had such employees;

(f)  where the taxpayer has not made an election under subparagraph c of the first paragraph of section 230 for the year, that portion of the consideration paid under the contract by the taxpayer in respect of the research and development undertaken on the taxpayer’s behalf in the year to a person or partnership with whom or with which the taxpayer was not dealing at arm’s length at the time the contract was entered into, and paid again by that person or partnership, under a particular contract, in respect of that research and development, to another person or partnership with whom or with which the taxpayer was not dealing at arm’s length at the time the particular contract was entered into and who or which has undertaken all or part of the research and development, that may reasonably be attributed to wages paid to employees of an establishment of that other person or partnership situated in Québec, or that could be so attributed if the other person or partnership had such employees;

(f.1)  where the taxpayer has made an election under subparagraph c of the first paragraph of section 230 for the year, that portion of the consideration paid under the contract by the taxpayer in respect of the research and development undertaken on the taxpayer’s behalf in the year to a person or partnership with whom or with which the taxpayer was not dealing at arm’s length at the time the contract was entered into, and paid again by that person or partnership, under a particular contract, in respect of that research and development, to another person or partnership with whom or with which the taxpayer was not dealing at arm’s length at the time the particular contract was entered into and who or which has undertaken all or part of the research and development, that may reasonably be attributed to that portion of an expenditure incurred for salary or wages of employees of an establishment of that other person or partnership situated in Québec who or which are directly engaged in scientific research and experimental development in Canada that can reasonably be considered to relate to such work having regard to the time spent by the employees thereon, and, for this purpose, where the employees spend all or substantially all their working time on such scientific research and experimental development, that portion of the expenditure is deemed to be equal to the amount of the expenditure, or that could be so attributed if the other person or partnership had such employees;

(g)  one-half of that portion of the consideration paid under the contract by the taxpayer to a person or partnership with whom or with which the taxpayer was not dealing at arm’s length at the time the contract was entered into, and paid again by that person or partnership, under a particular contract, to another person or partnership with whom or with which the taxpayer was dealing at arm’s length at the time the particular contract was entered into, that may reasonably be attributed to such research and development undertaken on the taxpayer’s behalf in the year by the employees of an establishment of that other person or partnership situated in Québec or that could be so attributed if that other person or partnership had such employees;

(h)  where the taxpayer has not made an election under subparagraph c of the first paragraph of section 230 for the year, that portion of the consideration paid by the taxpayer under a particular contract, other than a contract by which the taxpayer causes scientific research and experimental development to be undertaken on the taxpayer’s behalf, for work undertaken in the year, relating to the research and development undertaken in any taxation year, to a person or partnership with whom or with which the taxpayer was not dealing at arm’s length at the time the particular contract was entered into, and paid again by that person or partnership, under another particular contract, to another person or partnership with whom or with which the taxpayer was not dealing at arm’s length at the time the other particular contract was entered into and who or which has undertaken all or part of the work, that may reasonably be attributed to wages paid to employees of an establishment of that other person or partnership situated in Québec, or that could be so attributed if the other person or partnership had such employees;

(h.1)  where the taxpayer has made an election under subparagraph c of the first paragraph of section 230 for the year, that portion of the consideration paid by the taxpayer under a particular contract, other than a contract by which the taxpayer causes scientific research and experimental development to be undertaken on the taxpayer’s behalf, for work undertaken in the year, relating to the research and development undertaken in any taxation year, to a person or partnership with whom or with which the taxpayer was not dealing at arm’s length at the time the particular contract was entered into, and paid again by that person or partnership, under another particular contract, to another person or partnership with whom or with which the taxpayer was not dealing at arm’s length at the time the other particular contract was entered into and who or which has undertaken all or part of the work, that may reasonably be attributed to wages paid to employees of an establishment of that other person or partnership situated in Québec, or that could be so attributed if the other person or partnership had such employees; and

(i)  one-half of that portion of the consideration paid by the taxpayer under a particular contract, other than a contract by which the taxpayer causes scientific research and experimental development to be undertaken on the taxpayer’s behalf, for work relating to such research and development undertaken in any taxation year, to a person or partnership with whom or with which the taxpayer was not dealing at arm’s length at the time the particular contract was entered into, and paid again by that person or partnership, under another particular contract, to another person or partnership with whom or with which the taxpayer was dealing at arm’s length at the time the other particular contract was entered into, that may reasonably be attributed to the work undertaken in the year by the employees of an establishment of that other person or partnership situated in Québec or that could be so attributed if that other person or partnership had such employees.

For the purpose of computing the payments that a taxpayer is required to make under section 1025 or 1026, subparagraph a of the first paragraph of section 1027, or any of sections 1145, 1159.7, 1175 and 1175.19 where they refer to that subparagraph a, the taxpayer is deemed to have paid to the Minister, on account of the aggregate of the taxpayer’s tax payable for the year under this Part and of the taxpayer’s tax payable for the year under Parts IV, IV.1, VI and VI.1, on the date on or before which each payment is required to be made, an amount equal to the lesser of

(a)  the amount by which the amount determined under the first paragraph for the year exceeds the aggregate of all amounts each of which is the portion of that amount that may reasonably be considered to be deemed to have been paid to the Minister under this paragraph in the year but before that date; and

(b)  the amount by which the amount of that payment, determined without reference to this chapter, exceeds the aggregate of all amounts each of which is an amount that is deemed, under this chapter but otherwise than under the first paragraph, to have been paid to the Minister on that date, for the purpose of computing that payment.

For the purposes of the first paragraph, the wages and consideration paid by the taxpayer referred to therein include only the wages and consideration that

(a)  constitute, for the taxpayer, an expenditure referred to in subsection 1 of section 222 or in paragraph a of section 223;

(b)  do not constitute

i.  all or part of an amount that can reasonably be considered to be an expenditure in respect of scientific research and experimental development made in Québec by virtue of a university research contract within the meaning of paragraph b of section 1029.8.1 or of an eligible research contract within the meaning of paragraph a.2 of the said section, in respect of which section 1029.8.6 applies,

ii.  all or part of an amount that can reasonably be considered to be an expenditure in respect of scientific research and experimental development made in Québec by virtue of an agreement in respect of which section 1029.8.10 or 1029.8.16.1.4 applies,

iii.  (subparagraph repealed),

iv.  (subparagraph repealed),

v.  an expenditure described in section 230.0.0.2;

vi.  an expenditure specified by the taxpayer for the purposes of clause A of subparagraph ii of paragraph a of subsection 2 of section 194 of the Income Tax Act (Revised Statutes of Canada, 1985, chapter 1, 5th Supplement), where the taxpayer is a corporation;

vii.  an expenditure of a current nature incurred by or on behalf of a taxpayer in respect of the general administration or management of a business, including

(1)  the administrative salary or wages, including related benefits, of a person none or substantially none of whose duties are oriented toward the prosecution of scientific research and experimental development, except to the extent that such expenditure is a prescribed expenditure,

(2)  a legal or accounting fee,

(3)  an amount referred to in any of sections 147, 148, 160, 161, 163, 176, 176.4 and 179,

(4)  an entertainment expense,

(5)  an advertising or selling expense,

(6)  a conference or convention expense,

(7)  a due or fee in respect of membership in a scientific or technical organization, and

(8)  a fine or penalty;

viii.  an expenditure of a current nature incurred by or on behalf of a taxpayer for the maintenance and upkeep of premises, facilities or equipment to the extent that the expenditure is not attributable to the prosecution of scientific research and experimental development;

ix.  an expenditure of a capital nature incurred by or on behalf of a taxpayer to acquire property, except any such expenditure that, at the time it was incurred, was for the provision of premises, facilities or equipment if, at the time of the acquisition of the premises, facilities or equipment, it was intended

(1)  that the premises, facilities or equipment would be used during all or substantially all of their operating time in their expected useful life for the prosecution of scientific research and experimental development undertaken in Canada, and

(2)  that all or substantially all of the value of the premises, facilities or equipment would be consumed in the prosecution of scientific research and experimental development undertaken in Canada;

x.  an expenditure of a capital nature incurred by or on behalf of a taxpayer to acquire property if the property has been used or acquired for use or lease, for any purpose whatever, before it was acquired;

xi.  an expenditure made to acquire rights in, or arising out of, scientific research and experimental development;

xii.  an expenditure related to scientific research and experimental development in respect of which an amount is deductible under sections 710 to 716.0.3 or 752.0.10.1 to 752.0.10.18 in computing taxable income or tax payable under this Part, as the case may be;

xiii.  an expenditure of a current or capital nature, to the extent that the taxpayer having incurred it or, where applicable, the person or partnership having incurred it on the taxpayer’s behalf has received or is entitled to receive a reimbursement in respect of the expenditure from a person resident in Canada, other than

(1)  the State or Her Majesty in right of Canada or a province, other than Québec,

(2)  a mandatary of the State or of Her Majesty in right of Canada or a province, other than Québec,

(3)  a corporation, commission or association that is controlled, directly or indirectly in any manner whatever, by the State or Her Majesty in right of Canada or a province, other than Québec, or by a mandatary of the State or of Her Majesty in right of Canada or a province, other than Québec, or

(4)  a municipality in Canada or a municipal or public body performing a function of government in Canada; and

xiv.  an expenditure of a current or capital nature, to the extent that the taxpayer having incurred it or, where applicable, the person or partnership having incurred it on the taxpayer’s behalf has received or is entitled to receive a reimbursement in respect of the expenditure from a person not resident in Canada and to the extent that the reimbursement is deductible by the person in computing taxable income earned in Canada for a taxation year.

For the purposes of the first paragraph, that portion of the consideration paid by the taxpayer under a particular contract referred to in any of subparagraphs d, e, h and i of that paragraph shall be reduced by the amount of the consideration for the disposition of property to the taxpayer, other than a property resulting from scientific research and experimental development.

In this section, “wages” means the income computed under Chapters I and II of Title II of Book III.

1983, c. 44, s. 43; 1987, c. 67, s. 183; 1988, c. 4, s. 123; 1988, c. 18, s. 113; 1989, c. 5, s. 200; 1990, c. 7, s. 148; 1991, c. 8, s. 76; 1992, c. 1, s. 162; 1993, c. 19, s. 92; 1993, c. 64, s. 138; 1995, c. 1, s. 119; 1995, c. 63, s. 120; 1997, c. 3, s. 71; 1997, c. 14, s. 184; 1997, c. 31, s. 143; 1999, c. 83, s. 168; 2000, c. 39, s. 123; 2001, c. 53, s. 217; 2002, c. 40, s. 103; 2003, c. 9, s. 176; 2004, c. 21, s. 259; 2005, c. 1, s. 217; 2006, c. 13, s. 94; 2007, c. 12, s. 111.

2006-06-13

1029.7. A taxpayer, other than a tax-exempt taxpayer, who carries on a business in Québec, has an establishment in Québec and undertakes scientific research and experimental development in Québec or causes scientific research and experimental development to be undertaken in Québec on the taxpayer’s behalf as part of a contract, and who encloses the prescribed form containing the prescribed information with the fiscal return the taxpayer is required to file under section 1000, or would be required to file if tax were payable under this Part by the taxpayer, for the taxation year in which the research and development was undertaken is deemed, subject to the second paragraph and to the first paragraph of section 1029.8.21.3.2, to have paid to the Minister, on the taxpayer’s balance-due day for that year, on account of the taxpayer’s tax payable for that year under this Part, an amount equal to 17.5 % of the aggregate of

(a)  the wages paid by the taxpayer in respect of the research and development undertaken in the year to his employees of an establishment situated in Québec;

(b)  where the taxpayer has not made an election under subparagraph c of the first paragraph of section 230 for the year, that portion of the consideration paid under the contract by the taxpayer in respect of the research and development undertaken on the taxpayer’s behalf in the year to a person or partnership with whom or with which the taxpayer was not dealing at arm’s length at the time the contract was entered into and who or which has undertaken all or part of the research and development, that may reasonably be attributed to wages paid to employees of an establishment of that person or partnership situated in Québec, or that could be so attributed if that person or partnership had such employees;

(b.1)  where the taxpayer has made an election under subparagraph c of the first paragraph of section 230 for the year, that portion of the consideration paid under the contract by the taxpayer in respect of the research and development undertaken on the taxpayer’s behalf in the year to a person or partnership with whom or with which the taxpayer was not dealing at arm’s length at the time the contract was entered into and who or which has undertaken all or part of the research and development, that may reasonably be attributed to that portion of an expenditure incurred for salary or wages of employees of an establishment of that person or partnership situated in Québec who are directly engaged in scientific research and experimental development in Canada that can reasonably be considered to relate to such work having regard to the time spent by the employees thereon, and, for this purpose, where the employees spend all or substantially all of their working time on such scientific research and experimental development, that portion of the expenditure is deemed to be equal to the amount of the expenditure, or that could be so attributed if that person or partnership had such employees;

(c)  one-half of that portion of the consideration paid under the contract by the taxpayer to a person or partnership with whom or with which he was dealing at arm’s length at the time the contract was entered into, that may reasonably be attributed to such research and development undertaken on his behalf in the year by the employees of an establishment of that person or partnership situated in Québec or that could be so attributed if the person or partnership had such employees;

(d)  where the taxpayer has not made an election under subparagraph c of the first paragraph of section 230 for the year, that portion of the consideration paid by the taxpayer under a particular contract, other than a contract by which the taxpayer causes scientific research and experimental development to be undertaken on the taxpayer’s behalf, for work undertaken in the year relating to the research and development, to a person or partnership with whom or with which the taxpayer was not dealing at arm’s length at the time the particular contract was entered into and who or which has undertaken all or part of the work, that may reasonably be attributed to wages paid to employees of an establishment of that person or partnership situated in Québec, or that could be so attributed if that person or partnership had such employees;

(d.1)  where the taxpayer has made an election under subparagraph c of the first paragraph of section 230 for the year, that portion of the consideration paid by the taxpayer under a particular contract, other than a contract by which the taxpayer causes scientific research and experimental development to be undertaken on the taxpayer’s behalf, for work undertaken in the year relating to the research and development, to a person or partnership with whom or with which the taxpayer was not dealing at arm’s length at the time the particular contract was entered into and who or which has undertaken all or part of the work, that may reasonably be attributed to wages paid to employees of an establishment of that person or partnership situated in Québec, or that could be so attributed if that person or partnership had such employees;

(e)  one-half of that portion of the consideration paid by the taxpayer under a particular contract, other than a contract by which he causes scientific research and experimental development to be undertaken on his behalf, for work relating to such research and development, to a person or partnership with whom or with which he was dealing at arm’s length at the time the particular contract was entered into, that may reasonably be attributed to work undertaken in the year by the employees of an establishment of that person or partnership situated in Québec or that could be so attributed if the person or partnership had such employees;

(f)  where the taxpayer has not made an election under subparagraph c of the first paragraph of section 230 for the year, that portion of the consideration paid under the contract by the taxpayer in respect of the research and development undertaken on the taxpayer’s behalf in the year to a person or partnership with whom or with which the taxpayer was not dealing at arm’s length at the time the contract was entered into, and paid again by that person or partnership, under a particular contract, in respect of that research and development, to another person or partnership with whom or with which the taxpayer was not dealing at arm’s length at the time the particular contract was entered into and who or which has undertaken all or part of the research and development, that may reasonably be attributed to wages paid to employees of an establishment of that other person or partnership situated in Québec, or that could be so attributed if the other person or partnership had such employees;

(f.1)  where the taxpayer has made an election under subparagraph c of the first paragraph of section 230 for the year, that portion of the consideration paid under the contract by the taxpayer in respect of the research and development undertaken on the taxpayer’s behalf in the year to a person or partnership with whom or with which the taxpayer was not dealing at arm’s length at the time the contract was entered into, and paid again by that person or partnership, under a particular contract, in respect of that research and development, to another person or partnership with whom or with which the taxpayer was not dealing at arm’s length at the time the particular contract was entered into and who or which has undertaken all or part of the research and development, that may reasonably be attributed to that portion of an expenditure incurred for salary or wages of employees of an establishment of that other person or partnership situated in Québec who or which are directly engaged in scientific research and experimental development in Canada that can reasonably be considered to relate to such work having regard to the time spent by the employees thereon, and, for this purpose, where the employees spend all or substantially all their working time on such scientific research and experimental development, that portion of the expenditure is deemed to be equal to the amount of the expenditure, or that could be so attributed if the other person or partnership had such employees;

(g)  one-half of that portion of the consideration paid under the contract by the taxpayer to a person or partnership with whom or with which the taxpayer was not dealing at arm’s length at the time the contract was entered into, and paid again by that person or partnership, under a particular contract, to another person or partnership with whom or with which the taxpayer was dealing at arm’s length at the time the particular contract was entered into, that may reasonably be attributed to such research and development undertaken on the taxpayer’s behalf in the year by the employees of an establishment of that other person or partnership situated in Québec or that could be so attributed if that other person or partnership had such employees;

(h)  where the taxpayer has not made an election under subparagraph c of the first paragraph of section 230 for the year, that portion of the consideration paid by the taxpayer under a particular contract, other than a contract by which the taxpayer causes scientific research and experimental development to be undertaken on the taxpayer’s behalf, for work undertaken in the year relating to the research and development, to a person or partnership with whom or with which the taxpayer was not dealing at arm’s length at the time the particular contract was entered into, and paid again by that person or partnership, under another particular contract, to another person or partnership with whom or with which the taxpayer was not dealing at arm’s length at the time the other particular contract was entered into and who or which has undertaken all or part of the work, that may reasonably be attributed to wages paid to employees of an establishment of that other person or partnership situated in Québec, or that could be so attributed if the other person or partnership had such employees;

(h.1)  where the taxpayer has made an election under subparagraph c of the first paragraph of section 230 for the year, that portion of the consideration paid by the taxpayer under a particular contract, other than a contract by which the taxpayer causes scientific research and experimental development to be undertaken on the taxpayer’s behalf, for work undertaken in the year relating to the research and development, to a person or partnership with whom or with which the taxpayer was not dealing at arm’s length at the time the particular contract was entered into, and paid again by that person or partnership, under another particular contract, to another person or partnership with whom or with which the taxpayer was not dealing at arm’s length at the time the other particular contract was entered into and who or which has undertaken all or part of the work, that may reasonably be attributed to wages paid to employees of an establishment of that other person or partnership situated in Québec, or that could be so attributed if the other person or partnership had such employees; and

(i)  one-half of that portion of the consideration paid by the taxpayer under a particular contract, other than a contract by which the taxpayer causes scientific research and experimental development to be undertaken on the taxpayer’s behalf, for work relating to such research and development, to a person or partnership with whom or with which the taxpayer was not dealing at arm’s length at the time the particular contract was entered into, and paid again by that person or partnership, under another particular contract, to another person or partnership with whom or with which the taxpayer was dealing at arm’s length at the time the other particular contract was entered into, that may reasonably be attributed to the work undertaken in the year by the employees of an establishment of that other person or partnership situated in Québec or that could be so attributed if that other person or partnership had such employees.

For the purpose of computing the payments that a taxpayer is required to make under section 1025 or 1026, subparagraph a of the first paragraph of section 1027, or any of sections 1145, 1159.7, 1175 and 1175.19 where they refer to that subparagraph a, the taxpayer is deemed to have paid to the Minister, on account of the aggregate of the taxpayer’s tax payable for the year under this Part and of the taxpayer’s tax payable for the year under Parts IV, IV.1, VI and VI.1, on the date on or before which each payment is required to be made, an amount equal to the lesser of

(a)  the amount by which the amount determined under the first paragraph for the year exceeds the aggregate of all amounts each of which is the portion of that amount that may reasonably be considered to be deemed to have been paid to the Minister under this paragraph in the year but before that date; and

(b)  the amount by which the amount of that payment, determined without reference to this chapter, exceeds the aggregate of all amounts each of which is an amount that is deemed, under this chapter but otherwise than under the first paragraph, to have been paid to the Minister on that date, for the purpose of computing that payment.

For the purposes of the first paragraph, the wages and consideration paid by the taxpayer referred to therein include only the wages and consideration that

(a)  constitute, for the taxpayer, an expenditure referred to in subsection 1 of section 222 or in paragraph a of section 223;

(b)  do not constitute

i.  all or part of an amount that can reasonably be considered to be an expenditure in respect of scientific research and experimental development made in Québec by virtue of a university research contract within the meaning of paragraph b of section 1029.8.1 or of an eligible research contract within the meaning of paragraph a.2 of the said section, in respect of which section 1029.8.6 applies,

ii.  all or part of an amount that can reasonably be considered to be an expenditure in respect of scientific research and experimental development made in Québec by virtue of an agreement in respect of which section 1029.8.10 applies,

iii.  (subparagraph repealed),

iv.  (subparagraph repealed),

v.  an expenditure referred to in subparagraph a or c of the first paragraph of section 230.0.0.2, or

vi.  an expenditure specified by the taxpayer for the purposes of clause A of subparagraph ii of paragraph a of subsection 2 of section 194 of the Income Tax Act (Revised Statutes of Canada, 1985, chapter 1, 5th Supplement), where the taxpayer is a corporation.

For the purposes of the first paragraph, that portion of the consideration paid by the taxpayer under a particular contract referred to in any of subparagraphs d, e, h and i of that paragraph shall be reduced by the amount of the consideration for the disposition of property to the taxpayer, other than a property resulting from scientific research and experimental development.

In this section, “wages” means the income computed under Chapters I and II of Title II of Book III.

1983, c. 44, s. 43; 1987, c. 67, s. 183; 1988, c. 4, s. 123; 1988, c. 18, s. 113; 1989, c. 5, s. 200; 1990, c. 7, s. 148; 1991, c. 8, s. 76; 1992, c. 1, s. 162; 1993, c. 19, s. 92; 1993, c. 64, s. 138; 1995, c. 1, s. 119; 1995, c. 63, s. 120; 1997, c. 3, s. 71; 1997, c. 14, s. 184; 1997, c. 31, s. 143; 1999, c. 83, s. 168; 2000, c. 39, s. 123; 2001, c. 53, s. 217; 2002, c. 40, s. 103; 2003, c. 9, s. 176; 2004, c. 21, s. 259; 2005, c. 1, s. 217; 2006, c. 13, s. 94.

2006-03-01

1029.7. A taxpayer, other than a tax-exempt taxpayer, who carries on a business in Canada, undertakes or causes to be undertaken on the taxpayer’s behalf in Québec, as part of a contract, scientific research and experimental development and who encloses with the fiscal return the taxpayer is required to file under section 1000, or would be required to file if tax were payable under this Part by the taxpayer, for the taxation year in which the research and development was undertaken, the prescribed form containing the prescribed information, is deemed, subject to the second paragraph, to have paid to the Minister on the taxpayer’s balance-due day for that year, on account of the taxpayer’s tax payable for that year under this Part, an amount equal to 17.5% of the aggregate of

(a)  the wages paid by the taxpayer in respect of the research and development undertaken in the year to his employees of an establishment situated in Québec;

(b)  where the taxpayer has not made an election under subparagraph c of the first paragraph of section 230 for the year, that portion of the consideration paid under the contract by the taxpayer in respect of the research and development undertaken on the taxpayer’s behalf in the year to a person or partnership with whom or with which the taxpayer was not dealing at arm’s length at the time the contract was entered into and who or which has undertaken all or part of the research and development, that may reasonably be attributed to wages paid to employees of an establishment of that person or partnership situated in Québec, or that could be so attributed if that person or partnership had such employees;

(b.1)  where the taxpayer has made an election under subparagraph c of the first paragraph of section 230 for the year, that portion of the consideration paid under the contract by the taxpayer in respect of the research and development undertaken on the taxpayer’s behalf in the year to a person or partnership with whom or with which the taxpayer was not dealing at arm’s length at the time the contract was entered into and who or which has undertaken all or part of the research and development, that may reasonably be attributed to that portion of an expenditure incurred for salary or wages of employees of an establishment of that person or partnership situated in Québec who are directly engaged in scientific research and experimental development in Canada that can reasonably be considered to relate to such work having regard to the time spent by the employees thereon, and, for this purpose, where the employees spend all or substantially all of their working time on such scientific research and experimental development, that portion of the expenditure is deemed to be equal to the amount of the expenditure, or that could be so attributed if that person or partnership had such employees;

(c)  one-half of that portion of the consideration paid under the contract by the taxpayer to a person or partnership with whom or with which he was dealing at arm’s length at the time the contract was entered into, that may reasonably be attributed to such research and development undertaken on his behalf in the year by the employees of an establishment of that person or partnership situated in Québec or that could be so attributed if the person or partnership had such employees;

(d)  where the taxpayer has not made an election under subparagraph c of the first paragraph of section 230 for the year, that portion of the consideration paid by the taxpayer under a particular contract, other than a contract by which the taxpayer causes scientific research and experimental development to be undertaken on the taxpayer’s behalf, for work undertaken in the year relating to the research and development, to a person or partnership with whom or with which the taxpayer was not dealing at arm’s length at the time the particular contract was entered into and who or which has undertaken all or part of the work, that may reasonably be attributed to wages paid to employees of an establishment of that person or partnership situated in Québec, or that could be so attributed if that person or partnership had such employees;

(d.1)  where the taxpayer has made an election under subparagraph c of the first paragraph of section 230 for the year, that portion of the consideration paid by the taxpayer under a particular contract, other than a contract by which the taxpayer causes scientific research and experimental development to be undertaken on the taxpayer’s behalf, for work undertaken in the year relating to the research and development, to a person or partnership with whom or with which the taxpayer was not dealing at arm’s length at the time the particular contract was entered into and who or which has undertaken all or part of the work, that may reasonably be attributed to wages paid to employees of an establishment of that person or partnership situated in Québec, or that could be so attributed if that person or partnership had such employees;

(e)  one-half of that portion of the consideration paid by the taxpayer under a particular contract, other than a contract by which he causes scientific research and experimental development to be undertaken on his behalf, for work relating to such research and development, to a person or partnership with whom or with which he was dealing at arm’s length at the time the particular contract was entered into, that may reasonably be attributed to work undertaken in the year by the employees of an establishment of that person or partnership situated in Québec or that could be so attributed if the person or partnership had such employees;

(f)  where the taxpayer has not made an election under subparagraph c of the first paragraph of section 230 for the year, that portion of the consideration paid under the contract by the taxpayer in respect of the research and development undertaken on the taxpayer’s behalf in the year to a person or partnership with whom or with which the taxpayer was not dealing at arm’s length at the time the contract was entered into, and paid again by that person or partnership, under a particular contract, in respect of that research and development, to another person or partnership with whom or with which the taxpayer was not dealing at arm’s length at the time the particular contract was entered into and who or which has undertaken all or part of the research and development, that may reasonably be attributed to wages paid to employees of an establishment of that other person or partnership situated in Québec, or that could be so attributed if the other person or partnership had such employees;

(f.1)  where the taxpayer has made an election under subparagraph c of the first paragraph of section 230 for the year, that portion of the consideration paid under the contract by the taxpayer in respect of the research and development undertaken on the taxpayer’s behalf in the year to a person or partnership with whom or with which the taxpayer was not dealing at arm’s length at the time the contract was entered into, and paid again by that person or partnership, under a particular contract, in respect of that research and development, to another person or partnership with whom or with which the taxpayer was not dealing at arm’s length at the time the particular contract was entered into and who or which has undertaken all or part of the research and development, that may reasonably be attributed to that portion of an expenditure incurred for salary or wages of employees of an establishment of that other person or partnership situated in Québec who or which are directly engaged in scientific research and experimental development in Canada that can reasonably be considered to relate to such work having regard to the time spent by the employees thereon, and, for this purpose, where the employees spend all or substantially all their working time on such scientific research and experimental development, that portion of the expenditure is deemed to be equal to the amount of the expenditure, or that could be so attributed if the other person or partnership had such employees;

(g)  one-half of that portion of the consideration paid under the contract by the taxpayer to a person or partnership with whom or with which the taxpayer was not dealing at arm’s length at the time the contract was entered into, and paid again by that person or partnership, under a particular contract, to another person or partnership with whom or with which the taxpayer was dealing at arm’s length at the time the particular contract was entered into, that may reasonably be attributed to such research and development undertaken on the taxpayer’s behalf in the year by the employees of an establishment of that other person or partnership situated in Québec or that could be so attributed if that other person or partnership had such employees;

(h)  where the taxpayer has not made an election under subparagraph c of the first paragraph of section 230 for the year, that portion of the consideration paid by the taxpayer under a particular contract, other than a contract by which the taxpayer causes scientific research and experimental development to be undertaken on the taxpayer’s behalf, for work undertaken in the year relating to the research and development, to a person or partnership with whom or with which the taxpayer was not dealing at arm’s length at the time the particular contract was entered into, and paid again by that person or partnership, under another particular contract, to another person or partnership with whom or with which the taxpayer was not dealing at arm’s length at the time the other particular contract was entered into and who or which has undertaken all or part of the work, that may reasonably be attributed to wages paid to employees of an establishment of that other person or partnership situated in Québec, or that could be so attributed if the other person or partnership had such employees;

(h.1)  where the taxpayer has made an election under subparagraph c of the first paragraph of section 230 for the year, that portion of the consideration paid by the taxpayer under a particular contract, other than a contract by which the taxpayer causes scientific research and experimental development to be undertaken on the taxpayer’s behalf, for work undertaken in the year relating to the research and development, to a person or partnership with whom or with which the taxpayer was not dealing at arm’s length at the time the particular contract was entered into, and paid again by that person or partnership, under another particular contract, to another person or partnership with whom or with which the taxpayer was not dealing at arm’s length at the time the other particular contract was entered into and who or which has undertaken all or part of the work, that may reasonably be attributed to wages paid to employees of an establishment of that other person or partnership situated in Québec, or that could be so attributed if the other person or partnership had such employees; and

(i)  one-half of that portion of the consideration paid by the taxpayer under a particular contract, other than a contract by which the taxpayer causes scientific research and experimental development to be undertaken on the taxpayer’s behalf, for work relating to such research and development, to a person or partnership with whom or with which the taxpayer was not dealing at arm’s length at the time the particular contract was entered into, and paid again by that person or partnership, under another particular contract, to another person or partnership with whom or with which the taxpayer was dealing at arm’s length at the time the other particular contract was entered into, that may reasonably be attributed to the work undertaken in the year by the employees of an establishment of that other person or partnership situated in Québec or that could be so attributed if that other person or partnership had such employees.

For the purpose of computing the payments that a taxpayer is required to make under section 1025 or 1026, subparagraph a of the first paragraph of section 1027, or any of sections 1145, 1159.7, 1175 and 1175.19 where they refer to that subparagraph a, the taxpayer is deemed to have paid to the Minister, on account of the aggregate of the taxpayer’s tax payable for the year under this Part and of the taxpayer’s tax payable for the year under Parts IV, IV.1, VI and VI.1, on the date on or before which each payment is required to be made, an amount equal to the lesser of

(a)  the amount by which the amount determined under the first paragraph for the year exceeds the aggregate of all amounts each of which is the portion of that amount that may reasonably be considered to be deemed to have been paid to the Minister under this paragraph in the year but before that date; and

(b)  the amount by which the amount of that payment, determined without reference to this chapter, exceeds the aggregate of all amounts each of which is an amount that is deemed, under this chapter but otherwise than under the first paragraph, to have been paid to the Minister on that date, for the purpose of computing that payment.

For the purposes of the first paragraph, the wages and consideration paid by the taxpayer referred to therein include only the wages and consideration that

(a)  constitute, for the taxpayer, an expenditure referred to in subsection 1 of section 222 or in paragraph a of section 223;

(b)  do not constitute

i.  all or part of an amount that can reasonably be considered to be an expenditure in respect of scientific research and experimental development made in Québec by virtue of a university research contract within the meaning of paragraph b of section 1029.8.1 or of an eligible research contract within the meaning of paragraph a.2 of the said section, in respect of which section 1029.8.6 applies,

ii.  all or part of an amount that can reasonably be considered to be an expenditure in respect of scientific research and experimental development made in Québec by virtue of an agreement in respect of which section 1029.8.10 applies,

iii.  (subparagraph repealed),

iv.  (subparagraph repealed),

v.  an expenditure referred to in subparagraph a or c of the first paragraph of section 230.0.0.2, or

vi.  an expenditure specified by the taxpayer for the purposes of clause A of subparagraph ii of paragraph a of subsection 2 of section 194 of the Income Tax Act (Revised Statutes of Canada, 1985, chapter 1, 5th Supplement), where the taxpayer is a corporation.

For the purposes of the first paragraph, that portion of the consideration paid by the taxpayer under a particular contract referred to in any of subparagraphs d, e, h and i of that paragraph shall be reduced by the amount of the consideration for the disposition of property to the taxpayer, other than a property resulting from scientific research and experimental development.

In this section, "wages" means the income computed under Chapters I and II of Title II of Book III.

1983, c. 44, s. 43; 1987, c. 67, s. 183; 1988, c. 4, s. 123; 1988, c. 18, s. 113; 1989, c. 5, s. 200; 1990, c. 7, s. 148; 1991, c. 8, s. 76; 1992, c. 1, s. 162; 1993, c. 19, s. 92; 1993, c. 64, s. 138; 1995, c. 1, s. 119; 1995, c. 63, s. 120; 1997, c. 3, s. 71; 1997, c. 14, s. 184; 1997, c. 31, s. 143; 1999, c. 83, s. 168; 2000, c. 39, s. 123; 2001, c. 53, s. 217; 2002, c. 40, s. 103; 2003, c. 9, s. 176; 2004, c. 21, s. 259; 2005, c. 1, s. 217.