Eligible financial activities carried out under an outsourcing contract that qualify for the tax credit for international financial centres (IFC)

Certain activities carried out by a corporation under an outsourcing contract entered into with a foreign financial entity may be eligible for a refundable tax credit under certain conditions.

A qualifying outsourcing contract is a service agreement between a corporation and a foreign financial entity, that is, a natural person, a corporation or a partnership located outside Canada and which has signed an eligible contract with the corporation. This foreign financial entity represents one of the following entities or a group of these entities:

• bank;
• savings and credit union;
• trust company;
• securities broker;
• insurance company;
• other financial, insurance or services institutions similar to the previous entities;
• securities portfolio advisor or portfolio manager;
• damage or personal insurance broker;
• corporation whose entire issued share capital belongs to one or more of the above-mentioned entities.

The subcontracted activities must relate, wholly or substantially (at least 90%), to a business operated by the foreign financial entity outside Canada. This business must not have been previously operating in Canada.

The outsourcing contract must include, at all times, more than 50% of main activities. The proportion of main and related activities included in an outsourcing contract is measured by the number of eligible employees assigned to each activity.

The contract is valid for a maximum of 10 years. During these 10 years, new activities may be added to the contract: they will be valid for the remainder of the period covered by the contract.

For main activities to be eligible, they must:

• represent more than 50% of the activities carried out under an eligible outsourcing contract;
• be directly related to operations conducted by a foreign financial entity outside Canada;
• be carried out by a corporation that operates a business in the urban agglomeration of Montréal;
• consist in new activities that have never been carried out in Québec.

Know your Customer activities

Know Your Customer (KYC) services include all activities relating to the search and analysis of customer information according to perceived risk, such as fraud or money laundering: watch list, identity and risk profile identification, etc.

Examples of professions related to these activities:

• KYC analyst.
• KYC advisor.
• Onboarding specialist.

Data quality control activities

Data quality control is a set of activities aimed at ensuring that the information relayed in the systems is accurate and in compliance with standards and regulations, or usable for business development purposes. This control also includes understanding causes of non-compliance and implementing solutions to address them.

Data quality control – also known as data governance – is a set of tasks related to data verification and analysis.

Examples of professions related to this activity:

• Data manager.
• Data quality controller.
• Database manager.

Corporate finance and taxation activities

Corporate finance includes a range of activities related to financial disclosure, accounting and taxation.

Financial disclosure or financial communication

This includes all activities to collect information on the financial position and activities of a foreign financial entity in order to disclose it to the market, a regulator or the public. These activities require the production of the corporation’s financial statements (balance sheets, income statements, etc.), accounting and budgetary documents, performance monitoring, etc.

Accounting

This includes all accounting activities related to a foreign financial entity: recording of accounting transactions, validation of invoices and contracts, calculation of accrued expenses or amounts receivable, etc.

Corporate taxation

This includes all activities related to optimizing the corporation’s tax management and studying the tax impact of financial products offered to customers. 

Examples of professions related to these activities:

• Financial accounting analyst.
• Financial analyst.
• Financial disclosure advisor.
• Tax consultant.
• Financial controller.

Risk management activities

Risk management is a set of tasks designed to identify, assess, manage and monitor various risks, for example:

• credit risks (risk of loss) resulting from customers’ failure to meet their commitments;
• market risks related to interest rates, exchange rates, impairment of financial products, etc.;
• operational risks involving losses or penalties resulting from technological or human failures or external events.

Risk management refers to activities that aim to reduce or control the consequences of a risk to which a foreign financial entity is exposed, for example:

• risk identification and assessment;
• risk assessment tools implementation;
• studies to determine the relationship between risk and profitability;
• alert and incident management systems implementation.

Examples of professions related to this activity:

• Credit or market risk analyst.
• Operational analyst.
• Integrated risk management advisor.
• Risk management and control specialist.

Compliance services activities

Compliance services include a set of activities aimed at ensuring compliance with legal, regulatory and ethical frameworks as well as internal procedures relating to the execution of transaction or a financial activity.

Legal and regulatory compliance

This includes all activities enabling a corporation to fulfil its obligation to follow sound and prudential management practices: implementation, application and updating of internal strategies, policies and procedures with regard to applicable legal, regulatory and normative requirements.

Due diligence and customer due diligence

This includes all activities enabling the identification of the source and destination of funds, third parties with an interest, etc. 

Examples of professions related to these activities:

• Compliance agent.
• Compliance analyst.
• Compliance manager.
• Compliance officer.
• Compliance official.
• Professional ethicist.
• Specialist in the fight against money laundering.

For related activities to be eligible, they must:

• represent less than 50% of the activities carried out under an eligible outsourcing contract;
• be directly related to transactions carried out by a foreign financial entity outside Canada;
• be carried out by a corporation that operates a business in the urban agglomeration of Montréal;
• consist in new activities that have never been carried out in Québec.

Material resources management activities

These are support activities, involving, in particular, the acquisition, valuation, replacement and use of material resources, including movable and immovable property.

Examples of professions related to this activity:

• Material resources manager.
• Material resources technician.

Human resources management activities

This includes recruitment, mobilization, and development activities for employees and collaborators, including hiring, assignments, promotion, change management, payroll management, training, etc.

Examples of professions related to this activity:

• Human resources assistant.
• Human resources advisor.
• Human resources technician.

Promotion and marketing activities

This includes activities designed to study and analyze the needs and behaviours of customers in order to increase products and services sales through various tools and measures: newsletter, digital or traditional marketing, promotion of a new financial product, advertising, etc.

Examples of professions related to these activities:

• Digital marketing assistant.
• Product manager.
• Marketing and communication advisor.
• Sales and marketing manager.
• Digital marketing communication specialist.

Information technology activities

This includes activities related to the development of information technology (IT) systems, migration and modernization of technological platforms, computer support, business process automation, and digital security (cybersecurity).

Examples of professions related to these activities:

• Programmer analyst.
• IT manager.
• IT engineer.
• Web integrator.
• IT technician.

Activities that are not directly related to services rendered to a foreign financial entity outside Canada, but rather to the management and day-to-day administration of an IFC are not eligible for the tax measures. For example, activities related to the management of human resources for the IFC team in Montréal, or related to the local management of material resources, are not eligible activities.