Tech startup accountant in Quebec City

SR&ED is a bookkeeping project before it is a tax one

The scientific research and experimental development program is claimed on Form T661 with the corporate return. For a CCPC, the enhanced credit is refundable, which is why it matters so much to a company that is not yet profitable: the refund can arrive as cash. The claim is only as strong as the records behind it. Salaries have to be allocated to projects, contractor invoices tied to the work they paid for, and the technological uncertainty described as it was faced, not reconstructed a year later. A startup that tags time and costs by project from the first month produces a claim; one that does not produces an estimate. SR&ED expenditure limits covers the current federal ceiling.

Grants reduce the base

Quebec City startups often combine SR&ED with grants, subsidised loans and other public funding. Government assistance generally reduces the expenditures on which the SR&ED credit is calculated, so a salary partly paid by a grant does not qualify in full. The order of events matters: funding applications, SR&ED claims and the year-end statements all describe the same money, and each needs to agree with the others. A funding tracker kept alongside the ledger, showing what was received, for what, and which costs it covered, prevents the same dollar being claimed twice and makes a review far shorter.

Founders, salaries and the 5,500-hour condition

Early-stage founders often take little or no salary. That keeps cash in the company, but it has costs in Quebec. Salary is what qualifies as SR&ED labour; dividends do not. Salary brings QPP contributions and builds entitlement; dividends do neither. And Quebec’s small business deduction depends on the corporation having 5,500 paid hours in the year, a threshold a two-founder company with no staff will not reach. The pay decision is therefore a tax decision on three fronts at once, and it is worth making before the year closes. Salary versus dividends sets out the federal comparison.

Stock options from the first grant

Options are how a startup pays for talent it cannot yet afford. For a CCPC, an employee who exercises an option generally does not pay tax until the shares are sold, but the benefit still has to be calculated, recorded and reported on the right slips in the right year. That requires a clean option ledger: who was granted what, at what exercise price, when it vested and when it was exercised. Options granted informally in an email, or without a shareholders’ register that matches, become expensive to fix during a financing round when an investor’s lawyer asks for the capitalisation table. Shareholders’ agreements covers the related tax points.

A Quebec payroll for a technical team

Developers, artists and analysts are usually employees, and a Quebec City employer withholds QPP, QPIP premiums with EI at a reduced rate, and federal and Quebec income tax, remitting provincial source deductions to Revenu Québec. RL-1 slips go out alongside T4s by the end of February, and the employer pays the Health Services Fund contribution and CNESST premiums. Contractors are common too, especially for game art and specialised development, and each needs an honest look at whether the arrangement is really a contract. Payroll in Quebec City runs the detail.

GST and QST on software and subscriptions

A startup selling software, subscriptions or services in Quebec generally charges 5% GST and 9.975% QST, both administered by Revenu Québec for most Quebec businesses. Many Quebec City studios and software firms sell mostly outside Canada, and exports are often zero-rated, which leaves the company claiming back tax on its costs with little collected. Registering voluntarily before the $30,000 threshold is common for that reason. The place of supply decides the treatment of each sale, so the invoicing platform needs the rules built in. Sales tax on exports explains the federal side.

Founder money in and out

Most startups begin with the founders paying for things personally: a laptop, software subscriptions, a first contractor. Once the company is incorporated, those amounts belong in the books as money the corporation owes its founders, supported by receipts, so they can be repaid tax-free later. The reverse also happens. A founder who takes money out of the company before salary or dividends are decided creates an amount owing to the corporation. A shareholder loan not repaid within one year after the corporation’s year end is generally taxed as the founder’s income. Early funding from friends and family raises the same question: whether each amount is a loan or a share subscription, and whether the paperwork says so. Keeping those records for six years, alongside the minute book, saves a great deal of reconstruction when the first serious investor arrives. Shareholder loans sets out the rules.

Reporting that investors can read

Once a startup has raised money, the monthly reporting matters as much as the tax filings. Investors want burn rate, runway and the cost of each product line, prepared the same way every month. That is where a fractional controller, from $1,500 a month, or a fractional CFO, from $2,500 a month, earns its keep. Before that point, clean monthly books from bookkeeping in Quebec City are enough. Both corporate returns, the T2 and the CO-17, are prepared from the same year-end file by corporate tax in Quebec City.

Remote, and there is no Quebec City office

EverStone operates from one office, in Abbotsford, British Columbia, and has no Quebec City location. Startup engagements run entirely online: video meetings, e-signature and documents through a secure upload link, on top of the cloud accounting a startup already uses. EverStone works in English, which suits founding teams who work in English and investors who read in it. The CPA who builds the SR&ED file is the one who prepares the returns it is filed with.