Principal Issues: [TaxInterpretations translation]
1. When is a taxpayer "entitled to receive" the Quebec Taxation Act (Q.T.A.) capital tax credit? 2. What is the amount that the taxpayer may deduct in computing income for the capital tax payable to the MRQ?
Position:
1. The taxpayer is entitled to receive the amount of the credit that does not exceed the capital tax otherwise payable for the year at the end of the taxpayer's taxation year. 2. The amount of capital tax otherwise payable, before the reduction of the credit, is the amount deductible in computing profit for the taxation year.
Reasons:
Interpretation based on analysis of relevant legislation and jurisprudence.
XXXXXXXXXX 2007-022724 Nancy Turgeon, CGA November 6, 2007
Dear Madam,
Subject: Quebec capital tax credit
This is in response to your email of February 27, 2007, in which you asked us to clarify certain points arising from our technical interpretation 2006-021264 with respect to the "Capital Tax Credit" as described in section 1135.1 of the Quebec Taxation Act ("QTA").
Unless otherwise indicated, all statutory references herein are to provisions of the Income Tax Act of Canada (the "Act").
As stated in our technical interpretation above, it is our view that the capital tax credit is government assistance in respect of the acquisition of depreciable property. The capital cost of the depreciable property, which gave rise to the credit, at a particular time must be reduced by virtue of paragraph 13(7.1)(f) by the amount of assistance that the taxpayer received or is entitled to receive before the particular time.
For the purposes of paragraph 13(7.1)(f), it must be determined whether at the end of the taxation year the taxpayer is entitled to receive the credit before that time, if not already received. The term "entitled to receive" is not defined in the Act. According to the jurisprudence, an amount is receivable when a taxpayer has an absolute entitlement to receive it, even though it is not necessarily due. In order to be "entitled to receive" an amount, it must be shown that the conditions on which the claim is based are satisfied. According to our understanding of the credit in section 1135.1 of the QTA, a taxpayer is entitled to receive the amount of the credit, not exceeding the capital tax otherwise payable for the year, at the end of its taxation year. However, the taxpayer will not be entitled to receive the portion of the credit that is carried forward to a subsequent taxation year.
Furthermore, it is our view that the amount of capital tax otherwise payable, before the credit reduction, is the amount deductible in computing income for the taxation year pursuant to section 9 and paragraph 18(1)(a).
These opinions are not advance decisions and, as stated in paragraph 22 of Information Circular 70-6R5 of 17 May 2002, are not binding.
Best regards,
Louise J. Roy, CGA
Interim Manager
Business and Partnerships Section
Business and Partnerships Division
Income Tax Rulings Directorate.