It is a little known fact that organizations can receive more advantageous tax credits of up to 35 per cent of all R&D expenses, including salaries and materials, if the research is conducted by a private partnership in Québec.
The main purpose is to encourage organizations to collaborate on common projects. Whether it’s finding the answer to a specific challenge or developing a technology that can be used by all parties. Rather than conducting their own separate research, organizations have incentive to work together, thereby sharing the benefits and creating government savings.
Let’s review some of main conditions required for a precompetitive research tax credit.
What is a precompetitive private partnership?
It is a contractual agreement between arm’s length parties to pursue a common scientific or technological research. Each party keeps its original intellectual property (IP) and must contribute either in kind, cash, knowledge or expertise. The contribution portions can vary, as long as each party agrees on how to share the new IP resulting from the partnership.
How does the precompetitive research tax credit work?
A minimum of two private partners must be involved, and any number of university and/or public research centres can join the project. At least one party must have a permanent establishment in Québec. A foreign company can be a partner, however they are not eligible for the tax credit. Before any amount is paid under the partnership contract, a favourable advance ruling must be obtained from the Ministère de l’Enseignement supérieur, de la Science, de la Recherche et de la Technologie (MESRST).
The Télébec-Thales success story
In collaboration with two Québec universities (Universite du Quebec en Abitbi-Temiscamingue and Laval University) and the Institut national de recherche scientific (INRS), Télébec and Thales worked on a research project to connect mobile phone users in remote locations to public safety networks. Every year the Canadian Forces Search and Rescue dispatches more than 1,100 military aircraft or ships. Sometimes, the search team is not able to locate the distressed parties because mobile service is not available. The prototype system developed enables a security network operator to link a mobile phone signal to a first responder during an emergency.
Who can help ?
The above example was provided by Prompt Inc, a non-profit agency whose mission is to stimulate R&D partnerships between universities and private enterprise. Since 2003, they have leveraged $22 million of investments from the Government of Québec into almost $70 million in projects.
In addition, the Réseau Conseil en Technologie et en innovation (RCTi) is a network of several hundred business and technology consultants. Their goal is to provide innovative SME’s with rapid access to resources to ensure their success.
You can also contact your local Centre de développement économique (CDEC) or Centre local de développement (CLD) for more information.