Québec Budget 2017-2018 On March 28, 2017, Carlos J. Leitao, Québec Minister of Finance, filed his fourth budget titled, "A budget for today and tomorrow: Immediate benefits for all and investment in our future." This budget is balanced and includes major investments in education, health and public transit. Several measures put forward in this budget have fiscal implications for individual investors and companies. This summary is intended for advisors and clients alike. Here are the main features: Measures concerning individuals 1. Elimination of the health contribution for low- and middle-income taxpayers as of 2016 The budget proposes the elimination of the health contribution for all taxpayers with an income of $134,095 or less, as of 2016. Individuals earning more than $134,095 will be subject to a tax in accordance with the following table. A refund will be provided for taxpayers who have already paid the tax amount for 2016. A new notice of assessment will be sent to them. Cf. The Quebec Economic Plan, Additional Information 2017-2018, page A.3.
2. General tax reduction and simplification of the calculation of personal tax credits The budget proposes to improve the non-refundable basic tax credit available to all individuals other than trusts beginning in 2017. The tax reduction will increase from $2,327 to $2,382. The budget proposes to amend the amounts granted for the purpose of calculating the personal tax credits for the 2017 taxation year in accordance with the following table. Amounts awarded will be indexed as of 2018. Cf. The Quebec Economic Plan, Additional Information 2017-2018, page A.6. Extension of the eligibility period under the RénoVert tax credit to March 31, 2018 The budget proposes to extend the eligibility period under the RénoVert tax credit to agreements contracted before April 1, 2018. Work related to the rehabilitation of residential septic tank systems will not be included in the extension to the RénoVert refundable tax credit.
3. Introduction of a temporary refundable tax credit for the upgrading of residential waste water treatment systems The budget proposes a maximum credit of $5,500 per eligible home. This credit corresponds to a 20% portion, in excess of $2,500, of qualified expenditures. The work must be carried out between March 31, 2017 and April 1, 2022 by a contractor licensed under the Régie du bâtiment du Québec. 4. Greater recognition of the special needs of inhabitants of the Communauté maritime des Îles-de-la- Madeleine The budget proposes to amend tax regulations to include Îles-de-la-Madeleine in the northern regions of Québec, as of 2017. This inclusion will allow eligible residents to benefit from an increased deduction for residents from a remote area. Measures concerning businesses 1. Adjustment to the refocusing of the SBD Replacement of the hours worked criterion The budget proposes that the qualification criterion concerning the minimum number of hours worked, which has to be respected by a company to be eligible for the small business deduction (SBD), be replaced by a qualification criterion concerning the minimum number of hours paid. This measure shall apply to taxation years starting after December 31, 2016. 2. Increase in the additional deduction for transportation costs of certain remote manufacturing SMEs The budget proposes to increase the rate of the additional deduction for manufacturing small and medium-sized enterprises (SMEs) operating in the "special remote area" from 7% to 10%. No changes are made regarding the other areas. This measure shall apply to taxation years starting after March 28, 2017. 3. Introduction of an additional deduction for transportation costs of all SMEs located in the special remote area The budget proposes an additional deduction for transportation costs of SMEs located in the "special remote area." The "special remote area" consists of: the municipality of L Île-d Anticosti, the Communauté maritime des Îles-de-la-Madeleine, the Golfe-du-Saint-Laurent RCM (Côte-Nord), and the Kativik Regional Government (Nord-du-Québec). The amount of this additional deduction that may be claimed by an eligible corporation for a taxation year will depend on the scale of its activities in the special remote area and its size. Under certain conditions, the amount of this additional deduction for a taxation year may reach 10% of an eligible corporation s gross income. This measure shall apply to taxation years after March 28, 2017.
4. Improvements to the tax holiday for large investment projects Under certain conditions, a corporation that carries out a large investment project in Québec may claim a tax holiday from the income of its eligible activities related to the project and a holiday from employer contributions to the Health Services Fund (HSF) regarding the portion of wages paid to its employees that is attributable to the time they devote to such activities. Similar rules apply to partnerships and their member companies. The budget proposes two modifications: To extend the period to apply for an initial tax holiday certificate. This measure shall apply to a large investment project that will be the subject of an application for an initial certificate after March 28, 2017. To establish a choice so that two large investment projects carried out by the same company can be considered in a comprehensive manner. This measure shall apply as of March 29, 2017. 5. Introduction of an additional capital cost allowance of 35% The budget proposes to modify tax legislation and regulations in order to introduce an additional capital cost allowance of 35% when a company acquires manufacturing or processing equipment and computer equipment between March 29, 2017 and March 31, 2019, inclusively. If a company claims an additional capital cost allowance on eligible property that is not used mainly in the course of carrying on a business during a period of 730 consecutive days following the day it is first put to use, or does not use it mainly in Québec throughout the 730-day period, the company will be subject to a special tax. 6. Higher increases respecting the refundable tax credit for Québec film or television production In general, a refundable tax credit is granted for labour expenditure incurred by a qualified corporation that produces a Québec film that is certified by the Société de développement des entreprises culturelles (SODEC). Currently, some of these expenditures may give entitlement to three specific increases: Special effects and computer animation: rate of 8%. Regional productions: rate of 8% or 16%. No public financial assistance: rate of 8%. The budget proposes to improve these increases under certain conditions. The measures shall apply to productions for which an application for an advance ruling, or an application for a certificate if no application for an advance ruling was previously filed for the production, is submitted to SODEC after March 28, 2017. 7. Changes to the refundable tax credit for film production services The budget proposes to make it easier to obtain the 20% refundable tax credit (basic credit) in connection with film production services by: Eliminating the eligible small-budget production category, and; Lowering the eligibility criteria for eligible productions based on production costs. The minimum production costs shall be set at $250,000 for the whole series or for a single production. These measures shall apply to productions whose first public performance, and for which the relevant application for an approval certificate to SODEC, occur after March 28, 2017.
8. Elimination of an applicability condition for the refundable tax credit for the production of multimedia events or environments staged outside Québec Currently, a qualified corporation may claim a tax credit equal to 35% of the eligible labour expenditure it incurs to make an eligible production. For a multimedia event or environment to be recognized as an eligible production, certain criteria must be met. The budget proposes to amend the Act respecting the sectorial parameters of certain fiscal measures in order to suppress the requirement related to the absence of an establishment located in Québec in connection with a co-contractor in the case of multimedia environment. 9. Streamlining of the refundable tax credit for corporations specialized in the production of multimedia titles Currently, a corporation that wishes to claim the tax credit for corporations specialized in the production of multimedia titles (tax credit-specialized component) has to ensure that at least 75% of the activities it carries on in Québec consist in producing eligible titles for itself or on behalf of another person or a partnership and, if applicable, in carrying out scientific research and experimental development relating to such titles. To be recognized as an eligible subcontractor of a component of an eligible title for the purpose of calculating the 75%, the eligible title has to be produced by a corporation that does not have an establishment in Québec. No French premiums are granted. The budget proposes a reduction in eligibility criteria for the tax credit-specialized component. As such, any portion of an eligible title produced by a subcontractor will be eligible for the 75% and for the French premium. The changes shall apply to an application for a specialized corporation certificate submitted to Investissement Québec after March 28, 2017. 10. Refundable tax credits aimed at encouraging the creation of new financial services corporations The tax credits already provided for in the March 20, 2012 budget relating to the hiring of eligible employees and the eligible expenses of a new qualified financial corporation are renewed. In addition, the deadline for applying for a certificate of qualification is extended to December 31, 2022. These measures shall apply to expenses incurred by a qualified corporation for a taxation year included, in whole or in part, in the period of validity of its corporation qualification certificate and after March 28, 2017. 11. Refundable tax credit for the production of ethanol in Québec The budget proposes to retain the date of March 31, 2018 to take advantage of the tax credit for the production of ethanol in Québec, but the maximum period of ten years to benefit from it is withdrawn. The measure also proposes to include biodiesel produced and sold between April 1, 2017, and March 31, 2018, in the same way as ethanol to be eligible for the credit. Goods used in the production of biodiesel will no longer qualify for the investment tax credit for manufacturing and processing equipment. This applies in respect of property acquired as of April 1, 2017.
12. Increased recognition of major investments by Fondaction in social economy enterprises The budget proposes to amend the constitutive act of Fondaction so as to allow it to calculate the maximum share of its net assets which it is authorized to devote to major investments without taking into account its major investments in social economy enterprises. This modification shall apply to any fiscal year of Fondaction beginning May 31, 2016. 13. Increase to eligible investments by Capital régional et coopératif Desjardins in the Société en commandite Essor et Coopération The budget proposes to amend the Act constituting Capital régional et coopératif Desjardins to allow it to raise its total investment in Essor and Coopération from $40 million to $85 million. Furthermore, the investment requirement calculation will be modified. Other measures 1. Extension of the compensation tax for financial institutions and maintenance of rates for an additional five-year period The budget proposes to extend by five years the current compensation tax rates for financial institutions (made in Information Bulletin 2014-11) on wages, insurance premiums and amounts established in respect of insurance funds. This measure will ensure that the rates originally planned to be reduced from April 1, 2017 and eliminated by March 31, 2019 will only be reduced from April 1, 2022 and eliminated on April 1, 2024. 2. Introduction of an allowance for community consultations in the Mining Tax Act The budget proposes an allowance for community consultations in the case of mining, oil and gas exploration projects, but for activities not provided for in the Mining Tax Act to date. This measure shall apply to fiscal years ending after March 28, 2018, in respect to expenses incurred after that day. 3. Use of the territorial designation of the Northern Plan in the various tax measures specific to the mining sector To ensure that the territorial designations assigned to the Northern Plan territory and those used in the Taxation Act and the Mining Tax Act are harmonized, the concept of Near North to which these two statutes refer will be modified to enlarge its territory southward, while the concept of Far North to which these two statutes also refer will remain unchanged. These changes shall apply to exploration expenses incurred after March 28, 2017. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. This should not be construed to be legal or tax advice, as each client s situation is different. Please consult your own legal and tax advisor. LBC Financial Services Inc. is a wholly owned subsidiary of Laurentian Bank of Canada and is a corporate entity separate from Laurentian Bank, LBC Trust, and from Mackenzie Investments. The registered LBCFS representative is also a Laurentian Bank employee.