Tax Insights: 2014 Quebec budget – Tax highlights

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In brief

Nicolas Marceau, Quebec Minister of Finance, delivered today, February 20, 2014, the 2014-2015 Budget of the Government of Quebec. Below are the highlights of the most important tax measures included in the budget.

The PwC Tax Insights analyzing the tax measures in the Budget will be posted shortly on our Website.

In detail

Measures concerning businesses

No changes to tax rates for businesses.

Change to the refundable tax credit fostering the modernization of the tourism accommodation offering

For the purpose of the tax credit granted to a qualified corporation that owns a hotel establishment, a tourist home, a resort, a bed and breakfast or youth hostel located in Quebec (outside the metropolitan Montréal and Québec City census regions) and that carries out renovation or improvement work on such an establishment before January 1, 2016, the annual threshold of $50,000 will be replaced with a single threshold of $50,000, applicable to qualified expenditures incurred by the qualified corporation, in the taxation year or a prior taxation year.

This change also applies to a corporation which is a member of a qualified partnership.

This change will apply to a taxation year of a corporation ending after February 20, 2014.

Harmonization with certain measures of the 2014 Federal Budget

Measures retained:

  • Change to the anti-avoidance rule concerning captive insurance corporations
  • Addition of new eligibility conditions to the exception relating to offshore regulated financial institutions
  • Change to the anti-avoidance rule currently contained in the thin capitalization rules
  • Increase in the thresholds determining how frequently employers must remit withholdings at source
  • Changes concerning the accelerated capital cost allowance for clean energy generation equipment to include water-current energy equipment and gasification equipment

Measures concerning individuals

No changes to tax rates for individuals.

Change to the tax credit rate applicable to the acquisition of shares of Capital régional et coopérative Desjardins (CRCD)

For shares of CRCD acquired after February 28, 2014, the tax credit rate will be reduced from 50% to 45%. Accordingly, the maximum threshold an individual may deduct from his or her taxes payable for the year of acquisition will be reduced from $2,500 to $2,250.


Changes to the computation of the special tax applicable on the redemption or purchase of shares by CRCD

To reflect the fact that the rate applicable for the purposes of calculating the tax credit will decline from 50% to 45%, the rate for the purpose of the computation of the special tax will change to:

  • 50% where the share was issued before March 24, 2006 or after November 9, 2007 and before March 1, 2014
  • 35% where the share was issued after March 23, 2006 and before November 10, 2007, and
  • 45% where the share is issued after February 28, 2014

Harmonization with certain measures of the 2014 Federal Budget

Measures retained:

  • Addition of certain expenses to the list of expenses eligible for the tax credit for medical expenses
  • Introduction of a tax credit for volunteers participating in search and rescue activities
  • Measures relating to the property used in the course of carrying on a farming business and a fishing business
  • Tax deferral granted to certain farmers located in regions hit by drought, flooding or excessive moisture
  • Inclusion of certain income attributed to a minor by a partnership or a trust for the purposes of calculating tax on split income
  • Elimination of graduated rate taxation for certain trusts and estates
  • Elimination of the 60-month exemption from the residency presumption rules that apply to non-resident trusts and from certain other related rules
  • Extension from five to ten years of the deferral period of gifts of ecosensitive land made by an individual
  • Donations in the context of death, and
  • Donations of cultural property acquired under a gifting arrangement that is a tax shelter

Other tax measures

Measures relating to the GST/HST

Incorporating the federal measures relating to the GST/HST election for closely related persons and those seeking to strengthen compliance with GST/HST registration.

Other measures

Measures to increase the investments of CRCD in territories facing economic difficulties

For investments made after February 20, 2014 and before January 18, 2018, certain regional county municipalities outside resource regions facing economic difficulties will be recognized as regions facing economic difficulties for the purpose of CRCD’s investment requirements.

Amendments to the Act constituting Capital régional et coopérative Desjardins (the “Act”) to increase the amounts of investments in eligible entities, directly or through a limited partnership, for the purpose of the computation of the investment requirement of CRCD:

  • After February 20, 2014 and before January 18, 2018, the following investments will be deemed grossed up by 100%, up to an amount not exceeding $500,000 per investment:
    • any investment (that includes no security bond or hypothec) made in an eligible entity located in a territory identified as facing economic difficulties made by CRCD; and
    • an interest in any investment (that includes no security bond or hypothec) in an eligible entity located in a territory identified as facing economic difficulties made through a limited partnership and in which CRCD holds an equity stake, directly or through another limited partnership.
  • After February 20, 2014 and before January 1, 2018, the amount of investments made by CRCD in an eligible limited partnership (as defined in the Act) will be increased by CRCD’s proportionate interest in the limited partnership where the latter invested (that includes no security bond or hypothec) in an eligible entity located in a territory identified as facing economic difficulties, up to $500,000 per investment.

For the purpose of the gross-up relating to an investment, the territories of the Kativik Regional Government, the Eeyou Istchee James Bay Regional Government, the urban agglomeration of La Tuque, the urban agglomeration of Îles-de-la-Madeleine, the Ville de Shawinigan as well as certain regional county municipalities will now be recognized as territories facing economic difficulties.

For a capital-raising period beginning after February 28, 2014, the applicable rate for the purposes of calculating the special tax relating to excessive capitalization will decline from 50% to 45% to reflect the reduction in the tax assistance for the acquisition of shares issued by CRCD.

Starting September 1, 2014, the rate for childcare services will be raised to $8 a day, then to $9 the following year and will be indexed in subsequent years.

New measures relating to tax evasion and unreported work in the construction industry

  • Installation of sales-recording modules in bars and resto-bars
  • Implementation of the mandatory attestation from Revenu Québec for employment agencies for employment agencies’ contracts of $2,500 or more, as of fall 2014

Expediting of case management in financial penal matters and other actions

Registration of organizations or associations that receive gifts from foreign states that support terrorism