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Canada: Tax harmonization measures, Quebec and 2019 federal budget

Canada: Tax harmonization measures, Quebec

Quebec issued Information Bulletin 2019-7 that announces “harmonization measures” that align Quebec tax measures with certain of the 2019 federal budget tax measures.

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The information bulletin states that the changes to the Quebec tax system will only be adopted following assent to any federal statute (or adoption of any federal regulation) implementing the proposed federal measure being harmonized. The effective date of the changes in Quebec will apply on the same dates as the federal measures being harmonized.

Quebec measures harmonizing with the 2019 federal budget

Corporate income tax measures

Quebec will harmonize with various corporate tax measures proposed in the 2019 federal budget, including measures related to:

  • Enhanced first-year capital cost allowance of 100% for zero-emission vehicles (new Classes 54 and 55)
  • Calculation of "specified corporate income" for fishing and farming corporations
  • Character conversion transactions
  • Transfer pricing rules (ordering of rules and reassessment period)
  • Foreign affiliate dumping amendments
  • Modification of the allocation to redeemers methodology for mutual funds


Individual (personal) income tax measures

Quebec will harmonize with various personal tax measures proposed in the 2019 federal budget, including those that would:

  • Increase the home buyer's plan withdrawal limit to $35,000* (from $25,000) and other changes
  • Clarify that the portion of the tuition fees refunded through the Canada training credit will not qualify as eligible expenses under the tuition tax credit
  • Remove the requirement that property must be of "national importance" to qualify for enhanced tax incentives for donations of cultural property
  • Add cannabis as an eligible expense for the medical expense tax credit
  • Modify the change-in-use rules for multi-unit residential properties
  • Modify the tax-free savings account (TFSA) rules to extend the joint and several liability for tax owing on income from carrying on a business in a TFSA to the unit holder
  • Remove the time limitation on the period that a registered disability savings plan (RDSP) may remain open after a beneficiary becomes ineligible for the disability tax credit
  • Allow new types of annuities under certain registered plans
  • Clarify certain rules relating to the financial assistance payments received by care providers under a kinship care program
  • Modify the rules for specified multi-employer pension plans
  • Modify the rules applicable to pensionable service under an individual pension plan
  • Modify electronic delivery of requirements for information

*$=Canadian dollar


QST harmonization measures

Quebec will harmonize with various federal GST/HST measures proposed in draft legislation released in May 2019. These changes to the QST system will:

  • Expand the definition of a "freight transportation service"
  • Extend the application of drop-shipment rules
  • Treat virtual currency as a financial instrument

Quebec is studying the federal measure to extend the GST/HST holding corporation rules to holding partnerships and trusts, and will announce any harmonization decisions on this measure at a later date.

Other harmonization measures

Quebec will also amend its legislation regarding the rate used to calculate the taxable benefit relating to standby charges in connection with the personal use of an employer-provided automobile. Currently, the standby charge is computed as 2% of the cost of the vehicle each month. If the individual is employed principally in selling or leasing vehicles, then a reduced rate of 1.5% is available. Beginning in the 2020 tax year, the reduced rate of 1.5% will not be available to individuals who are also shareholders of the corporation.

Federal measures not adopted by Quebec

Quebec will not harmonize with certain 2019 budget measures, including measures related to:

  • The Canada training credit
  • Certain new tax measures and tax credits that support Canadian journalism
  • The repeal of the use of a CCPC's taxable income as a factor when determining its annual eligible expenditure limit under the enhanced SR&ED tax credit
  • Cross-border share lending arrangements

Finally, Quebec will announce on a later date whether it intends to harmonize with federal 2019 budget measures to:

  • Clarify that "kinship providers" are eligible for the Canada workers benefit amount, provided other eligibility requirements are met
  • Recognize eligible Canadian journalism organizations as qualified donees


Read a June 2019 report prepared by the KPMG member firm in Canada

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