2019-2020 Quebec budget – Tax highlights

Issue 2019-11

In brief

On March 21, 2019, the Minister of Finance, Mr. Eric Girard, delivered the 2019–2020 Budget of the Government of Quebec. Below are the highlights of the most important tax measures included in the budget.

In detail

Measures concerning businesses

Introduction of a refundable tax credit for SMBs to foster the retention of experienced workers

This refundable tax credit will be granted to qualified corporations that employ individuals aged 60 or over. The rate of the refundable tax credit will vary based, firstly, on the individual’s age and, secondly, on the corporation’s total payroll.

• For an employee aged at least 60 but no older than 64, the tax credit will be calculated up to a maximum rate of 50% and can total as much as $1,250 annually.
• For an employee aged at least 65, the tax credit will be calculated at a rate of 75% and can total as much as $1,875 annually.
• The tax credit will be based on the employer’s Quebec payroll taxes. The rate will be reduced linearly if the total payroll exceeds $1 million.
• This credit will be available to corporations whose paid-up capital for the year is less than $15 million and, except where the corporation is a primary and manufacturing sectors corporation for the year, whose total remunerated hours, for the year, exceeds 5,000 hours.

These amendments will be applicable in respect of a taxation year that ends after December 31, 2018.

Reduction of the capital investment threshold applicable to a large investment project in a designated region

A corporation that carries out a large investment project in Quebec may, under certain conditions, claim a tax holiday in respect of the income from its eligible activities relating to the project and a holiday from employer contributions to the Health Services Fund (HSF).

The Taxation Act will be amended so that an investment project that is carried out in a designated region can qualify as a large investment project, for the purposes of a tax holiday, if the total capital investment attributable to the carrying out of the project reaches at least $50 million. The previous threshold was $75 million.

Measures concerning individuals

Enhancement of the tax credit for experienced workers to bank on career extension

As of the 2019 taxation year, the Tax Credit for Experienced Workers will be renamed the Tax Credit for Career Extension and will be partly amended as follows:

• The age of eligibility for the tax credit will be lowered from 61 to 60.
• For workers aged 60 to 64, the maximum amount of eligible work income on which the tax credit is calculated (eligible work income that exceeds the first $5,000) will be raised to $10,000.

For workers aged 65 or over, the maximum amount of eligible work income on which the tax credit is calculated will remain $11,000. The tax credit is reduced when the eligible work income exceeds $34,610.

Measures that require legislative and regulatory amendments

• Gradual elimination of the additional contribution for childcare:

–  The government announced that the additional contribution for childcare will be completely eliminated on a gradual basis over four years.

• Gradual standardization of school tax rates:

–  The government announced that the school tax system would be reformed for the purpose of gradually establishing a single tax rate applicable across Quebec. This single rate will be based on the lowest effective rate in 2018–2019. The government’s intention is to standardize over a 3-year period.

Other tax measures

Application of the tax on lodging to the activities of persons operating a digital platform offering accommodation units

Changes will be made to the tax on lodging systems so that a person operating a digital accommodation platform will henceforth be required to register with Revenue Québec for the purposes of collecting and remitting the 3.5% tax on lodging on the price of every overnight stay.

Introduction of a sustainable development certification allowance in the Mining Tax Act

The Mining Tax Act will be amended so that an operator can deduct, in the calculation of its annual profit, an amount on account of the sustainable development certification allowance, which may not exceed the amount corresponding to the operator’s cumulative sustainable development certification expenses at the end of the fiscal year.

Changes will be made to the refundable duties credit for losses of an operator, to take into account the introduction of the sustainable development certification allowance.

These changes will apply to an operator’s fiscal year that ends after March 21, 2019, in respect of sustainable development certification expenses incurred after that date.

Changes to certain measures respecting tips

To take into account the new indemnities provided for in the Act respecting labour standards, the eligible expenses for the refundable tax credit for the reporting of tips will include the portion of the indemnities for days of leave to fulfill family obligations or days of leave for health reasons that is attributable to tips and that was paid in the taxation year or fiscal period, as applicable. These amendments will apply after December 31, 2018.

To standardize the specific penalty for the allocation of tips with other existing penalties, an amendment will be made so that this specific penalty is calculated based on the amounts payable or remittable under a tax law, and not based on the amount of unallocated tips.

Harmonization with certain measures announced in the Fall Economic Statement 2018 of the Department of Finance Canada

The Quebec tax legislation will be amended, with adaptations on the basis of its general principles, to incorporate the proposed amendments to the Income Tax Act allowing a taxpayer to deduct, in calculating the taxpayer’s income, for the year in which the expenses are incurred, up to one-and-a-half times the amount the taxpayer would otherwise have been able to deduct in respect of the taxpayer’s Canadian development expenses and Canadian oil and gas property expenses, where the taxation year ends before 2024, with a gradual reduction thereafter. Furthermore, the measure respecting the extension of the Mineral Exploration Tax Credit will not be retained because the Quebec tax system does not have any comparable provisions.

Initiatives to ensure tax fairness

Budget 2019–2020 announced new measures to foster tax fairness and protect the integrity of the tax system:

• Strengthening the mandatory disclosure mechanism and improving the rules governing the use of nominees.
• Blocking access to public contracts for businesses and promoters that have used abusive tax avoidance strategies (businesses on which a penalty has been imposed further to a final assessment for abusive tax avoidance).
• Increasing tax compliance in respect of transactions on financial markets by establishing a new tax slip that will make it easier to report transactions in this market.