MEASURES RELATING TO THE TAX CREDITS FOR TUITION AND EXAMINATION FEES AND THE LODGING TAX

Transcription

1 MEASURES RELATING TO THE TAX CREDITS FOR TUITION AND EXAMINATION FEES AND THE LODGING TAX This information bulletin provides a detailed description of the application details of the reduction of rate of conversion of tuition and examination fees into a tax credit. It also makes public an increase in the lodging tax in the Manicouagan tourist region as of May 1, 2013, following a request in this sense by the region s tourist association. For information concerning the matters dealt with in this information bulletin, contact the Direction des communications at The French and English versions of this bulletin are available on the ministère des Finances et de l Économie website at:

2 1. REDUCTION OF RATE OF CONVERSION OF TUITION AND EXAMINATION FEES INTO A TAX CREDIT Subject to certain conditions, tuition and examination fees paid so that an individual can obtain a diploma or acquire the skills needed for a profession or trade can give rise to tax relief. The tuition fees in question are essentially those paid to a university, college or any other institution offering post-secondary education provided such fees relate to an institutional program at the post-secondary school level. They encompass not only the amounts paid for the course, but also a series of ancillary fees paid to the institution offering post-secondary education, such as admission fees, fees for the use of laboratory facilities and compulsory computer services fees. Also included are tuition fees paid to enable a student at least 16 years of age at the end of a year to acquire or increase the skills needed for a profession or trade if such fees are paid to an educational institution recognized by the Minister of Revenue. Examination fees may give rise to tax assistance if, generally speaking, they relate to an examination that is needed to obtain a professional status recognized under federal or provincial law or to obtain a licence or certification to practice a trade, in the case where such status, licence or certification authorizes the practice of the profession or trade in Canada. Under Québec s tax system, an individual has many options regarding tuition fees and examination fees he paid or that were paid for him for a given year, provided the total of such fees exceeds $100. The individual may elect to convert, in whole or in part, the fees paid for the year into a non-refundable tax credit using the rate applicable to the conversion of essential needs into a tax credit, i.e. a rate of 20%. 1 The tax credit claimed by the individual will, if applicable, help reduce his tax payable for the year and, thanks to the transfer between spouses of the unused portion of non-refundable tax credits, that of his eligible spouse for the year. The individual may also elect to transfer to his father, mother, grandfather, grandmother or their respective spouse any portion of his tax credit that cannot be applied to reduce his tax payable for the year. The portion of tuition and examination fees paid for a year that is not converted into a non-refundable tax credit may be carried forward indefinitely for subsequent conversion. Following the Sommet sur l enseignement supérieur, the government made several decisions to foster access to higher education and ensure stability and sustainability of the college and university systems. Accordingly, to secure the necessary funding to implement some of these decisions, in particular the one on the rise in the parental contribution threshold to $ for the purposes of calculating student financial assistance, it was decided that the rate applicable to the conversion of tuition fees and examination fees into a tax credit would be set at 8% following the winter 2013 session. 1 In the interests of readability, subsequent references to the 20% rate must be understood as a reference to the percentage determined in section of the Taxation Act (CQLR, chapter I-3) for the year for which tuition fees or examination fees are converted into a non-refundable tax credit. 2

3 To follow up on this decision, the tax legislation will be amended to stipulate that the rate applicable to the conversion into a non-refundable tax credit of an individual s tuition fees and examination fees paid for a taxation year following 2012 will be changed from 20% to 8% unless such fees were paid for 2013 and are: either tuition fees paid to a university, college or any other institution offering post-secondary education in relation to an institutional program at the post-secondary school level, provided they are attributable to a study session the individual started before the date of publication of this information bulletin; or tuition fees paid to an educational institution recognized by the Minister of Revenue for training, other than training that is part of an institutional program at the post-secondary school level, in which the individual enrolled no later than the date of publication of this information bulletin; or examination fees paid for an examination the individual taken before May 1, For greater clarity, the tuition fees and examination fees to which the 8% rate will apply will be, when carried forward to a subsequent year, converted into a tax credit at the rate of 8%. The 20% rate will continue to apply to the conversion into a tax credit of tuition fees and examination fees carried forward to a subsequent taxation year provided such fees were paid for a taxation year prior to taxation year 2013 or, if they were paid for taxation year 2013, the 20% rate applies to such fees. To allow for the fact that the conversion into a non-refundable tax credit of an individual s tuition fees and examination fees paid for taxation year 2013 must, as the case may be, be at a rate of 8% or a rate of 20%, special calculation details will be stipulated to establish the amount corresponding to the portion of the individual s tax credit attributable to such fees that cannot be applied to reduce his tax payable for 2013 and that the individual may transfer, in whole or in part, for such year to one of his parents or grandparents. Accordingly, the tax legislation will be amended to stipulate that the maximum amount that an individual may transfer for taxation year 2013 to a single person from among his father, mother, grandfather, grandmother and their respective spouse will be equal to the excess, over the amount of tax otherwise payable for the year by the individual calculated without taking into account the non-refundable tax credits, except those which, according to the order of application of tax credits stipulated by the tax legislation, must be applied against tax otherwise payable for the year by the individual before the tax credit for tuition and examination fees comes into play, 2 of the total of the following amounts: the amount obtained after converting into a non-refundable tax credit, at the rate of 20%, the individual s tuition fees and examination fees paid for taxation year 2013 to which such rate applies; 2 These are the basic tax credit, the tax credit for minor children engaged in vocational training or post-secondary studies, the tax credit for other dependants, the tax credit relating to the transfer of the recognized parental contribution, the tax credit for a person living alone, for age and for retirement income, the tax credit for experienced workers, the tax credit for union and professional dues (relating to an office or employment), the tax credit for dues and contributions (relating to business income), the tax credit for new graduates working in the remote resource regions, the tax credit for volunteer firefighters, the tax credit for severe and prolonged impairment in physical or mental functions, the tax credit for medical expenses, the tax credits relating to medical care not provided in the region of residence and the tax credit for gifts. 3

4 the amount obtained after converting into a non-refundable tax credit, at the rate of 8%, the individual s tuition fees and examination fees paid for taxation year 2013 to which such rate applies. In addition, in the case where an individual has made a transfer to his parents or grandparents for taxation year 2013, the fees paid for the year to which the 20% rate applies and those to which the 8% rate applies will be deemed respectively, for the purposes of calculation of the tax credit for tuition and examination fees that the individual may claim for a given taxation year following taxation year 2012, to have been transferred in the proportion that exists between, on the one hand, the amount of the tax credit for tuition and examination fees transferred for the year and, on the other, the amount corresponding to the total of the following amounts: the amount obtained after converting into a non-refundable tax credit, at the rate of 20%, the individual s tuition fees and examination fees paid for taxation year 2013 to which such rate applies; the amount obtained after converting into a non-refundable tax credit, at the rate of 8%, the individual s tuition fees and examination fees paid for taxation year 2013 to which such rate applies. Moreover, to make matters easier for individuals who elect to carry forward to a subsequent year all or part of their tuition fees or examination fees paid for a given taxation year, Revenu Québec will indicate, on the notice of assessment or of reassessment sent to them for a taxation year following 2012, the unused portion of their tuition fees and examination fees that may subsequently be converted into a non-refundable tax credit at the rate of 20% and such portion that may be so converted at the rate of 8%. 4

5 2. INCREASE IN THE LODGING TAX IN THE MANICOUAGAN TOURIST REGION The government has set up a tourist partnership fund to strengthen and sustain tourist promotion and development in Québec. The fund is financed in part by a lodging tax applicable to each accommodation unit rented in a sleeping-accommodation establishment located in a tourist region of Québec that makes such a request to the government through its regional tourist association (RTA). The revenues generated by this tax, after deducting the costs of its administration, are remitted to the participating regions, and the amounts thus remitted are used in accordance with the terms and conditions agreed to in a memorandum of understanding between Tourisme Québec and the RTAs of these participating regions. RTAs that want the lodging tax to apply in their territory can choose between a specific tax of $2 or $3 per overnight stay or an ad valorem tax of 3% of the price of each overnight stay. The specific tax on lodging of $2 per overnight stay has applied in the Manicouagan tourist region since January 1, Following a request submitted by the RTA of this region, the specific tax of $2 per overnight stay will be replaced, as of May 1, 2013, with the specific tax of $3 per overnight stay. Accordingly, the operator of a sleeping-accommodation establishment located in the Manicouagan tourist region will have to collect or pre-collect the specific tax on lodging of $3, as the case may be, for any accommodation unit rented in its establishment that he invoices after April 30, 2013 for occupation after that date. However, the operator of a sleeping-accommodation establishment will not have to pre-collect the $3 tax for accommodation units billed to a travel intermediary, where the price of such units was set under an agreement reached before May 1, 2013 between the operator and the intermediary, and their occupation by tourist customers takes place between April 30, 2013 and February 1, In these circumstances, the operator will continue to be required to pre-collect the existing $2 tax. 5