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Quebec Bill 13 Receives First Reading

Quebec Bill 13 Receives First Reading

Bill contains 2018 provincial budget measures, among other changes

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Quebec Bill 13 received first reading on February 26, 2019. This 468-page bill contains measures previously announced in Quebec's 2017 and 2018 budgets and in various information bulletins published between 2016 and 2018. It includes measures to gradually reduce the province's small business income tax rate to 4% in 2021, as proposed in the 2018 budget. Notably, this bill re-introduces a majority of the tax measures that were included in Bill 175, a previous budget bill that died on the order paper when the legislature was dissolved for the October 1, 2018 provincial general election.

However, Bill 13 does not include the accelerated CCA measures announced in the Quebec fall economic update or the additional CCA measures originally included in Bill 175.

The corporate income tax measures in Bill 175 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. The new corporate income tax measures introduced in Bill 13 that were not previously included in Bill 175 are considered substantively enacted on February 26, 2019, the date Bill 13 received first reading (as Quebec has a majority government).

Key measures from Bill 13 that were not included in Bill 175 are listed below.

Corporate tax measures
Bill 13 reduces the province's small business income tax rate to 7% (from 8%) effective March 28, 2018, with further reductions effective January 1 of each year—6% in 2019, 5% in 2020, and 4% in 2021 (as announced in the province's 2018 budget).

Bill 13 also:

  • Reduces the rate of the additional deduction available to certain small and medium-sized businesses in the primary and manufacturing sectors in Quebec to 3% (from 4%) effective March 28, 2018, with further reductions effective January 1 of each year to a rate of 2% in 2019, a rate of 1% in 2020 and nil in 2021
  • Introduces a new refundable training tax credit for workers employed by small and medium-sized businesses with payroll under $7 million
  • Reduces the compensation tax rates for financial institutions in Quebec, effective April 1, 2018
  • Allows investment projects for developing eligible digital platforms to benefit from the tax holiday for large investment projects
  • Eliminates additional deductions for gifts of medicine to charities
  • Gradually reduces the Health Service Fund contribution rate for small and medium-sized businesses by:
    • Gradually increasing the $5 million threshold applicable to a specified employer's total payroll to reach $7 million in 2022
    • Decreasing the contribution rate for specified employers in the primary and manufacturing sectors having a total payroll of $1 million or less, from 1.5% to 1.25% for wages paid after August 15, 2018
  • Removes the $350,000 expenditures limit of a qualified production for the purpose of the refundable tax credit for the production of multimedia events of environments presented outside of Quebec.

This bill also introduces, enhances, expands or modifies several corporate tax credits, including:

  • A refundable tax credit for on-the-job- training
  • A refundable tax credit for Quebec film or television production in order to permit certain online video service
  • A refundable tax credit to support the digital transformation of print media companies
  • A refundable tax credit for film dubbing of qualifying corporations
  • A refundable tax credit for the production of ethanol in Quebec, a refundable tax credit for cellulosic ethanol production in Quebec and a refundable tax credit for the production of biodiesel fuel in Quebec
    • These tax credits are extended to March 31, 2023 with certain modifications to the calculation of the credit and the monthly limit
  • A refundable tax credit for pyrolysis oil production in Quebec.

Personal tax measures
Bill 13 introduces, enhances, expands, or modifies several personal tax credits (see TaxNewsFlash-Canada No. 2018-15 "Highlights of the 2018-2019 Quebec Budget"), including:

  • The Rénovert tax credit (extends eligibility to March 31, 2019)
  • A new refundable tax credit for senior assistance
  • A tax credit for experienced workers - to further encourage experienced workers to remain in the labour market, the age of eligibility for the tax credit is lowered to 61 years of age
  • A refundable tax credit for informal adult caregivers
  • A refundable tax credit for volunteer respite provided to informal caregivers
  • A refundable tax credit for child care expenses
  • A new non-refundable tax credit for first-time home buyers
  • A non-refundable tax credit for the first major cultural gift made before January 1, 2023
  • A refundable tax credit for the acquisition of property intended to help seniors live independently longer
  • A non-refundable tax credit for persons living alone is extended to include grand-parents and great-grand parents.

Bill 13 also introduces the refundable "Tax Credit Granting an Allowance to Family" to replace the previous refundable "Tax Credit for Child Assistance". The new refundable tax credit will increase the allowance available to an eligible individual's second and third children by $500 (see TaxNewsFlash-Canada No. 2018-15 "Highlights of the 2018-2019 Quebec Budget").

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 for federal bills enacted in 2016, 2017 and 2018. Bill 13 mainly enacts harmonization measures that were announced in Information Bulletins published in 2016, 2017 and 2018, including:

  • A measure to expand the medical expense tax credit to include expenses for animals specially trained to assist individuals dealing with a medical condition
  • Replacement of rules relating to incorporeal capital property by the introduction of a new category of depreciable property (i.e. Class 14.1) effective January 1, 2017
  • A change to the effective date for measures concerning the sales of linked notes announced in the 2016 federal budget to January 1, 2017 (from October 1, 2016).

Other changes
The bill also introduces various changes to the Act constituting Capital régional et coopératif Desjardins, the Act to establish Fondaction, le Fonds de développement de la Confédération des syndicats nationaux pour la coopération et l'emploi and the Act to establish the Fonds de solidarité des travailleurs du Québec (F.T.Q.).

For more information, contact your KPMG adviser.

Information is current to March 12, 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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