2020-2021 Quebec government budget: measures to stimulate investment and digital innovation among SMEs and to improve corporate transparency

On March 10, 2020, Quebec Finance Minister Eric Girard tabled his second budget, which includes a number of measures to encourage investment in technology and support digital transformation. 

An amendment to the enterprise register to promote greater corporate transparency was also announced. 

Measures to stimulate investment and digital innovation by SMEs 

In economic matters, the government’s objective is to contribute to improving the productivity and competitiveness of businesses. The 2020-2021 budget provides more than $1 billion over six years to: 

• encourage business investment, with $556 million earmarked for this;
• accelerate the digital transformation of more than 10,000 businesses;
• support innovation and its commercialization, with $334 million set aside for this. 

To encourage investment, the government is creating a new investment and innovation tax credit (C3i), representing $526 million over five years and aimed at accelerating the digital transformation of Quebec businesses. 

In concrete terms, more than 10,000 SMEs in the manufacturing and service sectors will be supported in their purchases made before January 1, 2025, in particular for software packages and computer hardware, for which the eligible expenditure threshold will be $5,000 per item. 

Measures to support innovation and its commercialization 

In support of innovation and its commercialization, the Government of Quebec included the following in its 2020-2021 budget: 

• the introduction of an incentive deduction for the commercialization of innovations (ICID) to encourage businesses to innovate by offering the most competitive tax rate in North America;
• the improvement of the three research and development (R&D) tax credits to promote cooperation among innovation actors by removing the eligible expenditure thresholds;
• simplification of administrative procedures for tax holidays for foreign researchers and experts to attract the best talent. 

Improved corporate transparency: coming soon, the ability to search for a company by name in the enterprise register 

To ensure tax fairness, the financing of public services and healthy competition in the economy, the government is seeking the full recovery of uncollected tax revenues. 

Among the measures recommended to achieve this, the government will invest $29.6 million over five years to: improve corporate transparency, strengthen the fight against tax evasion and tax avoidance, and intensify actions to combat fraud against the state. 

Nearly $4.9 million will be invested to improve corporate transparency from now until 2024-2025. 

As announced in the previous 2019-2020 budget, the Government of Quebec held a public consultation in the fall of 2019 regarding initiatives based on the recommendations of international organizations. These initiatives include: 

• the duty to declare information on ultimate beneficiaries to the Registraire des entreprises du Québec;
• enabling a search by name and address of a natural person in the enterprise register;
• the duty of all property owners to report information on ultimate beneficiaries. 

As a result of this work, the government is confirming its intention to make the necessary changes to allow searches by name of a natural person in the enterprise register. 

It should be noted that this measure is part of an international and national movement and several countries, including the United Kingdom and France, have introduced this requirement in recent years. 

The 2020-2021 budget plan specifies that investigative bodies already have access to this functionality and that the public will have access to it as well, subject to privacy and confidentiality constraints. 

In addition, Quebec will require companies to declare to the Registraire des entreprises information relating to ultimate beneficiaries and will prohibit the issuance of equity warrants or bearer stock options.