Tax Insights: Update on Québec’s Economic and Financial Situation

Issue 2021-29

In brief

On November 25, 2021, the Minister of Finance, Eric Girard, presented the Update on Québec’s Economic and Financial Situation (economic statement). The economic statement does not change corporate or personal tax rates, but does introduce and enhance the following incentives:

• changes to the refundable tax credit for child care expenses
• implementation of the refundable tax credit granting an exceptional allowance
• enhancement of the refundable tax credit for senior assistance
• adjustment of the exemptions allowed for the purpose of calculating the premium payable under the Public Prescription Drug Insurance Plan

This Tax Insights discusses these tax incentives of the economic statement.

In detail

Changes to the refundable tax credit for child care expenses

In general, families who pay child care expenses can benefit from a refundable tax credit that allows them to get compensation for a portion of these expenses. The amount of this refundable tax credit, which may be paid in advance, is calculated by applying to a taxpayer’s qualified child care expenses, for a taxation year, the rate corresponding to the taxpayer’s family income for the year.

The highest tax credit rate is 75% when an individual’s family income does not exceed $37,030, and gradually decreases to 26% when an individual’s family income exceeds $165,030. However, the expenses paid by a taxpayer for the care of their eligible child may be limited by the annual limit applicable to the child’s age and condition. This limit is currently $13,615 in the case of a child with a severe and prolonged impairment in mental or physical functions, $9,950 in the case of a child under 7 years of age, and $5,235 in other cases.

In order to reduce the gap between the net cost of child care borne by families not benefiting from the government’s reduced contribution program and other families, the rates of the tax credit for child care expenses will be increased.

The rate table for the refundable tax credit for child care expenses will be modified as follows:

Increase in the rates of the refundable tax credit for child care expenses – Current rates and enhanced rates for 2021
(dollars, unless otherwise indicated)

In addition, the limit applicable to child care expenses paid in respect of a child who is under 7 years of age at the end of a year, and the limit on such expenses paid in respect of a child with a severe and prolonged impairment in mental or physical functions are, effective for the 2021 taxation year, increased from $9,950 to $10,400 and from $13,615 to $14,230 respectively.

The impact of the increase in the rates and in the annual limits of the refundable tax credit for child care expenses will be reflected when filing the tax return for the 2021 taxation year.

Any individual, other than a trust, who provides child care services in Québec for remuneration will be required to file an RL-24 slip with the Minister of Revenue and to send a copy to the payers.

Implementation of the refundable tax credit granting an exceptional allowance to mitigate the cost of living increase

The increase in consumer prices over the past year has been more significant than anticipated, resulting in a decrease in Quebecers’ purchasing power, particularly those with modest incomes.

The government is therefore implementing the refundable tax credit granting an exceptional allowance to mitigate the cost of living increase. This one-time tax assistance will be paid at the beginning of 2022 to individuals eligible for the refundable solidarity tax credit at the end of the 2020 base year.

More specifically, an eligible individual may receive, for the 2021 taxation year, a one-time lump-sum financial assistance payment, consisting of an amount of $200 per adult and an additional amount of $75 for persons living alone, if the individual is entitled to receive the refundable solidarity tax credit for the period beginning July 1, 2021, and ending June 30, 2022. The refundable solidarity tax credit is granted to low- and middle-income households.

This refundable tax credit will be paid as of January 24, 2022.

Enhancement of the refundable tax credit for senior assistance

The refundable tax credit for senior assistance is intended to provide financial assistance to eligible individuals aged 70 or over with modest incomes.

As of the 2021 taxation year, the maximum amount per senior will be increased from $209 to $400. The maximum amount of senior assistance that may be paid to a couple, for the 2021 taxation year, will be $800, subject to the reduction based on family income.

Since the credit will be increased as of the 2021 taxation year, it can be paid in the spring of 2022 following the filing of the 2021 income tax return.

Adjustment of the exemptions allowed for the purpose of calculating the premium payable under the Public Prescription Drug Insurance Plan

The basic prescription drug insurance plan established by the Quebec government guarantees all Quebecers fair access to the medications required by their state of health. Adults registered with the RAMQ must make a contribution towards the payment of the cost of pharmaceutical services and drugs supplied to them whenever a prescription is filled and renewed.

Adults who are not covered throughout a year by a group insurance contract, an individual insurance contract concluded on the basis of one or more of the distinctive characteristics of group insurance or an employee benefit plan applicable to a determined group of persons must generally pay a premium for that year to finance the Public Prescription Drug Insurance Plan (PPDIP). For 2021, the maximum premium payable is $686 per adult.

The premium payable by an adult is determined on the basis of family income while taking into consideration exemption amounts based on the taxpayer’s situation. This calculation is determined when a taxpayer files their income tax return. The government will adjust, for 2021, the amount of each of the exemptions currently allowed.

Amount of the exemptions allowed for the purpose of calculating the premium payable under the PPDIP for 2021
(dollars)