Quebec Finance Minister, Carlos Leitão, tabled his fifth and final budget on March 27^th, 2018. The 2018-2019 budget proposes significant investment to support startups and SMEs in Quebec. The small business deduction (SBD) rate will be gradually raised so that the tax rate applicable to the portion of a corporation’s income qualifying for the SBD is lowered to 4% in 2021 and the health services fund contribution for employers will also be gradually reduced over the next five years. Industry-specific funding is also being proposed, which will most notably impact the artificial intelligence, construction, manufacturing, cleantech, culture and arts, life sciences, and financial sectors.

Measures to stimulate startup growth:

•         $10M over the next five years for the creation of Reseau200, a network of business mentors.
•         $2.4M over the next five years to build a Quebec-France startup exchange program.
•         $15M to Inno-Centre to enhance its service offering and grow its startup accelerator.
•         $8M to the "Mouvement des accélérateurs d’innovation du Québec", an association comprised of accelerators and incubators in Quebec that includes District 3, Centech, FounderFuel, and more.
•         $10M over the next five years to support two entrepreneurial programs at HEC Montreal: Creative Destruction Lab and NextAI.

Measures to increase funding for startups:

•        $61.5M to Teralys Capital, a fund-of-funds that invests in VC funds specializing in information technologies, life sciences, and cleantech.
•        $2M to Accélérateur de création d’entreprises technologiques (ACET) to invest in 20 startups over the next four years.

Promoting Artificial Intelligence in Quebec

•         $60M over the next three years to the SCALE.AI supercluster to support Ai-related supply chain projects.
•         $5M to create the World Artificial Intelligence Organization, operated by Montreal International.

Updates to current tax incentives

•         Broadening the Large Investment Project Tax Holiday for eligible corporations, the development of digital platform projects is now eligible.
•         Enhancement of on-the-job training tax credit to include additional employment situations.
•         Modification of the refundable tax credit for Quebec film or television production, which now requires at least 20 minutes of audiovisual content.
•         Reduction of duration of virtual reality documentaries to 20 minutes for the refundable film production services credit.
•         Removal of the expenditure limit for the production of multimedia events of environments presented outside of Quebec tax credit.
•         Extension and modification of rates for the following three refundable tax credits:

o   Production of ethanol in Quebec

o   Cellulosic ethanol production in Quebec

o   Production of biodiesel fuel in Quebec

New tax incentives

•         A refundable tax credit for training initiatives for SMBs of up to $5,460 a year per eligible employee.
•         A refundable tax credit, managed by Investissement Quebec, to aid in the digital transformation of print media companies (newspapers, magazines, etc.) - a refundable tax credit of 35% up to $7 million annually can be applied to eligible activities.
•        A non-permanent refundable tax credit for pyrolysis oil production in Quebec.

How Fundica Can Help

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