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First Reading for Quebec’s Bill 42

First Reading for Quebec’s Bill 42

The bill introduces changes related to additional CCA, Quebec’s mandatory disclosure of nominee agreements, and more...

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Quebec Bill 42 received first reading on November 7, 2019. It contains measures previously announced in Quebec's 2019 budget and in various information bulletins published in 2017, 2018 and 2019. The 196-page bill includes previously announced measures that provide for additional capital cost allowance (CCA) on eligible property at differing rates, depending on the property's acquisition date, among other measures.

The majority of the corporate income tax measures included in Bill 42 are considered substantively enacted for the purposes of IFRS and Accounting Standards for Private Enterprise as of November 7, 2019, the date Bill 42 received first reading (as Quebec has a majority government).

Notably, Bill 42 re-introduces additional CCA measures for certain eligible property acquired after March 28, 2017 or after March 27, 2018, which were originally included in Bill 175 and were already substantively enacted. Bill 175 died on the order paper ahead of Quebec's provincial general election on October 1, 2018, but these measures continue to be substantively enacted for purposes of IFRS and Accounting Standards for Private Enterprise (ASPE) as of May 9, 2018, the date Bill 175 received first reading.

Finally, Bill 42 does not harmonize with the federal accelerated investment incentive, nor with the measure to accelerate deductions for Canadian development expenses and Canadian oil and gas property expenses.

Key measures from Bill 42 are listed below.

CCA measures

The bill includes measures announced in the 2018 Quebec fall economic update to:

  • Introduce additional 30% CCA on certain depreciable property acquired after December 3, 2018
  • A separate class will be created for all property subject to the additional 30% CCA (i.e., Class 43.1, 43.2, 50, 53, 14, 14.1 and 44)

The bill also re-introduces previously announced measures to allow additional CCA of 35% or 60%, as follows:

  • A taxpayer may deduct an additional 35% CCA where certain property is acquired after March 28, 2017, but before March 28, 2018 (included in Bill 175)
  • A taxpayer may deduct an additional 60% CCA where certain property is acquired after March 27, 2018 (included in Bill 175, but further clarified in Bill 42 to only apply to property acquired before December 4, 2018 (or July 1, 2019, if the property was acquired pursuant to an obligation in writing entered into before 4 December 2018, or if the construction of the property, by or on behalf of the taxpayer, began before 4 December 2018)).

Various tax credits

Bill 42 introduces and amends several tax credits, including:

  • A temporary enhancement of the refundable tax credit for investments relating to manufacturing and processing equipment
  • Enhancement of the refundable tax credit granting an allowance to families
  • A new refundable tax credit for small and medium-sized businesses to foster the retention of experienced workers
  • Amendments to the refundable tax credit for reporting of tips.

Harmonization with federal bills

The Taxation Act and the Act respecting the Québec Sales Tax are amended to harmonize with recent changes made to the Income Tax Act and the Excise Tax Act by federal bills enacted mainly in 2017 and 2018. Bill 42 essentially enacts harmonization measures that were announced in Information Bulletins published in 2017 and 2018, including those that:

  • Modify the Tax on split income (TOSI) to insert various definitions, such as "excluded business", "excluded shares" and "related business"
  • Reduce the small business limit for Canadian controlled private corporations with passive investment income
  • Deal with the tax consequences for holding certain non-qualified or prohibited investments, or of granting certain advantages by registered education savings plans (RESP) and registered disability savings plans (RDSP)
  • Introduce multiple tax measures to include or exclude income received by veterans
  • Allow switch fund corporations and segregated funds to reorganize on a tax-deferred basis, in certain circumstances.

Other tax measures

Bill 42 also includes measures to:

  • Reduce the capital investment threshold applicable to a large investment project carried out in a remote region, from $75,000,000 to $50,000,000, where the initial qualification certificate is filed after March 21, 2019
  • Introduce the sustainable development certification allowance under the Mining Tax Act
  • Fight aggressive tax planning and sham transactions (introduced in Information Bulletin 2019-5)
  • Define which "specified transactions" must be disclosed in prescribed form 1079.DI Mandatory or Preventive Disclosure of Tax Planning
  • Introduce new disclosure requirements for nominee agreements
  • Introduce deadlines for filing new prescribed form TP-1079.PN-V, Disclosure of a Nominee Agreement, which must be filed by the later of the 90th day following the conclusion of the nominee agreement, or the 90th day following the day Bill 42 receives assent.

For more information, contact your KPMG advisor.

Information is current to November 19, 2019. The information contained in this publication is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's National Tax Centre at 416.777.8500

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