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Quebec Budget 2008
Saturday, February 7, 2009
Monique Jérome-Forget, Quebec Minister of Finance on March 13, 2008 delivered the 2008/2009 Budget of the Government of Quebec.
Measures concerning individuals
Simplification and improvement of the tax assistance granted for home support for elderly persons
Improvement of the basic parameters of the refundable tax credit for home support for elderly:
- Increase from 25% to 30% in the rate of the tax credit.
- Increase in the eligible expenses limit: from $15,000 to $15,600 for independent seniors and from $15,000 to $21,600 for dependent seniors.
- The tax credit will be reduced by 3% on every dollar of family income that exceeds an annual threshold of $50,000.
As of 2008, individuals who pay rent to live in a residence for elderly persons must determine the amount of their eligible expenses included in the rent using the table for determining expense that is applicable to them. Where seniors pay rent to live in an apartment building, the amount of eligible expenses included in the rent must be determined by applying a rate of 5% to the monthly rent, to a maximum monthly rent of $600.
Improvement of the tax assistance for retirees
On January 1, 2009, the amount with respect to age will be indexed automatically each year.
The individual maximum eligible retirement income used to calculate the tax credit will be raised from $1,500 to $1,750 for the 2009 taxation year, and from $1,750 to $2,000 as of the 2010 taxation year. On January 1, 2011, the amount will be indexed automatically each year.
Introduction of a refundable tax credit for respite expenses of informal caregivers of up to $1,560 a year, as of 2008.
On January 1, 2009, the following measures will be indexed automatically each year:
- Deduction for workers;
- Amount for emergency services volunteers;
- Refundable tax credit for holders of a taxi driver's or owner's permit.
The stock option deduction granted to employees of innovative SMEs will be raised from 25% to 50%. A corporation will be considered a SME carrying out innovative activities if it carries on a business, has an establishment in Quebec, meets certain conditions regarding the amount of its assets as shown in its financial statements and was granted an amount as a refundable R&D tax credit.
After March 13, 2008, the "12-hour rule" will not apply to business meals consumed by commission employees whose office or employment is connected with the selling of property or negotiating of contracts on behalf of their employer.
Contributions to both components of FICA – Social Security and Medicare – will be considered retroactively as of the 2004 taxation year eligible for the foreign tax credit.
The 2008-2009 Budget includes an improvement to the refundable tax credit for child care expenses up to a family income of $100,550. The rate of the tax credit for child care expenses will rise to 60% of those expenses for incomes ranging from $46,755 to $82,100. It will then decline to reach the minimum rate of 26% at $100,550 rather than $85,535. Modifications are also made to the rate table used to determine advance payments.
The rate of the refundable tax credits for the treatment of infertility and for adoption expenses will be raised from 30% to 50% of eligible expenses involved after 2007 and to qualifying certificates remitted or to qualifying judgments rendered after December 31, 2007 (maximum tax credit: $10,000).
Corporate Tax Measures
A manufacturing corporation whose proportion of activities attributable to manufacturing and processing activities, for a given taxation year, is 50% or more may claim a deduction in calculating its paid-up capital, for such taxation year, corresponding to the amount of such paid-up capital. Such corporation will thus completely eliminate the capital tax regarding such taxation year.
Moreover, where such proportion, for a given taxation year, is between 50% and 20%, the deduction a manufacturing corporation may claim in calculating its paid-up capital, regarding such taxation year, is reduced linearly.
Development of e-business
A corporation carrying on a business whose activities are part of the information technology sector may claim the refundable tax credit for the development of e business equal to 30% of the eligible salaries it incurs after March 13, 2008 and before January 1, 2016. However, the maximum amount of that credit will be limited to $20,000 per employee calculated on an annual basis.
Introduction of an investment tax credit (ITC) for manufacturing and processing equipment
An eligible corporation that acquires assets that qualify as manufacturing and processing equipment between March 14, 2008 and December 31, 2016, may claim the ITC at a rate ranging from 5% to 40% of the amount of the eligible investment. The rate of the ITC will depend on where the eligible investment is made and on the corporation's paid-up capital, calculated on a consolidated basis. The refund rate of the ITC will also depend on the corporation's paid-up capital. The non-refundable portion of the ITC will be carried back (3 preceding years or 20 following years).
The period of eligibility for the refundable tax credit for processing activities in the resource regions is extended to December 31, 2010, without possibility to cumulate with the ITC. This period is extended to December 31, 2015 for the tax credit for the Vallée de l'aluminium, the Gaspésie, certain maritime regions of Quebec (reduction of the rate) with possibility to cumulate with the ITC under specific conditions.
Tax credit for on-the-job training periods
A trainee, otherwise eligible for the tax credit under the existing rules, who is a handicapped person or an immigrant at any time during an eligible training period, may give rise to the improved tax credit: rising from 30% to 40% if the eligible employer is a corporation and from 15% to 20% in other cases. Moreover, the weekly cap on the eligible expenditure, currently set at $600, will be raised to $750.
To encourage the francization of immigrants whose knowledge of French is insufficient to communicate in everyday life or at work, while reducing the burden such expenditure represents for employers, a 30% refundable tax credit will be introduced that any eligible employer operating in Quebec may claim regarding training expenditures relating to francization of its employees. The tax credit will apply regarding an eligible training expenditure incurred after March 13, 2008 and before January 1, 2012.
In the context where the making of a separate Quebec election for the purpose of formulating schemes designed to avoid a provincial tax is contrary to the fiscal policy stated on December 20, 2006, the tax legislation will be amended to provide that the fiscal period-end date of a corporation must be synchronized with the one chosen for Federal purposes.
Research and development ("R&D")
The spending limit that applies to the increased rate of refundable tax credit for R&D salary will be raised from $2 million to $3 million. The increased rate of 37.5%, applicable to Canadian-controlled corporations, declines linearly where the assets of the corporation (on an associated basis) vary between $50 million and $75 million. Where the assets exceed $75 million, the rate is 17.5%.
Technical adjustments to various refundable tax credits for R&D expenses are announced, including:
- the refundable tax credit for private partnership pre-competitive research;
- the refundable tax credit for university R&D;
- the refundable tax credit for pre-competitive R&D.
Measures concerning culture
Changes will be made to the refundable tax credit for the production of shows:
Circus shows, aquatic shows and ice shows may henceforth give rise to the tax credit for the production of shows.
Clarification regarding the rule limiting to 50% the deductibility of entertainment expenses.
Measures relating to the February 26, 2008 Federal Budget
Quebec's tax legislation and regulations will be amended to incorporate the following measures announced in the February, 26, 2008 Federal budget:
Implementation of tax-free savings accounts (TFSA) respecting the rules of federal legislation (TFSA for provincial legislation means a TFSA approved for federal legislation).
Adjustments to the gross-up rates applicable to eligible dividends (45% for 2009, 44% for 2010, 41% for 2011 and 38% following 2011). The rate of the tax credit will continue to be 11.9%.
Amendments pertaining to capital cost allowance applicable to certain types of assets.
Measures regarding the disposition of taxable Canadian property (measures relating to withholding and production of tax return).
Other measures regarding registered education savings plans, gifts of publicly traded securities to registered charities, non-refundable medical expense tax credit, registered disability savings plan, deduction for inhabitants of northern regions and donation of medicines to developing countries.
Harmonization to December 20, 2007 federal announcement regarding specified investment flow-through trusts.