1. QST Foreign corporations: Tax fairness

As of January 2019, foreign corporations without an establishment in Quebec, NETFLIX as an example, will be required to register and collect the 9.975% sales tax on taxable intangible goods and services to any consumers with a Quebec address.

Moreover, Canadian corporations without an establishment in Quebec must do the same on the sale of tangible goods into Quebec.  The Quebec government will make information available to consumers to validate the registration. Customers that provide these suppliers a false address outside of Quebec can be subject to penalties of 100$ or up to 50% of the QST payable.

  1. Gradual reduction of the Health Services Fund contribution rate for all small and medium-sized businesses (SMBs)

All small businesses with total payroll under $7M annually will be getting a reduction on their contribution rate to Quebec’s HSF.  Companies with total payroll of $1M or less will see their rate reduced from 2.3% to 1.65% by 2022. This further expands the reductions announced in the previous budgets. In addition, Quebec has increased the threshold of the total gross payroll at which point the highest rate of 4.26% of wages is charged from $5M to $7M.

A tax reduction of $ 1.2 billion by 2022-2023

The reductions are in effect for wages paid after the budget date, so employers should adjust their payroll withholding calculations immediately.

  1. Small Business tax rate

As rumoured, the Liberals have lowered the Quebec “Small Business Deduction” (SBD) from 8 percent to 4 percent to be more competitive with other Canadian provinces. The SBD reduces the percentage of tax that an eligible business would otherwise have to pay. There will be a gradual reduction of 1% starting as of the budget date and over the next four years, 7% for 2018, 6% 2019, 5% 2010 and finally 4% in 2021.

$ 1 billion tax cut by 2022-2023

 

2017 2018 2018 2019 2020 2021
Pre QC Budget Post QC Budget
Federal 15.00% 15.00% 15.00% 15.00% 15.00% 15.00%
Quebec 11.80% 11.70% 11.70% 11.60% 11.50% 11.50%
Combined 26.80% 26.70% 26.70% 26.60% 26.50% 26.50%
FED SBD 10.50% 10.00% 10.00% 9.00% 9.00% 9.00%
QC SBD 8.00% 8.00% 7.00% 6.00% 5.00% 4.00%
Combined SBD 18.50% 18.00% 17.00% 15.00% 14.00% 13.00%
FED M&P SBD 10.50% 10.00% 10.00% 9.00% 9.00% 9.00%
QC M&P SBD 4.00% 4.00% 4.00% 4.00% 4.00% 4.00%
QC MANUFACTURING SBD 14.50% 14.00% 14.00% 13.00% 13.00% 13.00%

 

The Quebec dividend tax credit for non-eligible dividends will be decreased in consequence over the next four years. The dividend tax credit for eligible dividends has also been reduced to adjust for the previous general corporate tax rate reductions announced previously by Quebec.  Here are the projected dividend tax rates over the next 4 years.

  2017 2018 2018 2019 2020 2021
  Pre Quebec Budget Post Quebec Budget
 
Eligible Dividends 39.83% 39.83% 39.89% 40.00% 40.11% 40.11%
Non-eligible Dividends 43.84% 43.94% 44.83% 46.25% 47.14% 48.02%
  1. Homeowners

Quebec introduced a new tax credit for first time home buyers mirroring the Federal non-refundable tax credit.  Individuals, other than trusts, will save up to $750 in income taxes if they purchased a qualifying home after December 31, 2017. This will bring the combined potential tax savings for a first-time home buyer to $1,376.

The Reno Vert tax credit has been extended a second time for one additional year, individuals have until March 31, 2019 to enter into an agreement with a recognized contractor for Eco-Friendly renovation work to a personal residence.

  1. Increased capital cost allowance (CCA) supporting the acquisition of manufacturing and computer equipment

The additional capital cost allowance to support the acquisition of manufacturing and processing equipment (Class 53) and computer equipment (Class 50) has been increased from 35% to 60% and extended to March 31, 2020.

 

Do not hesitate to contact our team for any specific questions relating to measures from the budget that impact you.