Budget of Quebec 2023

March 28, 2023

Prepared by Andersen in Canada, Montreal Partner Danny Guérin.

The following is a summary of the main tax measures proposed in the 2023-2024 Quebec budget

Corporate tax measures:

  1. Improvements and changes to the Major Investment Project Tax Holiday (a new version of the former vacation introduced in 2012) with the following main parameters:
    • Allows, under certain conditions (requesting and obtaining an initial certificate as well as annual attestations issued by the Minister of Finance, expenses incurred for eligible activities and whose total amount must be at least $100M within 48 months of the beginning of the project, etc.) to benefit from an income tax vacation and a vacation from FSS contributions for all of the activities of the beneficiary company (whereas under the former vacation, the latter applied only to taxes and FSS contributions for the activities resulting from the major investment project);
    • Tax assistance ceiling of 15% to 25% of eligible expenses (depending on the economic vitality index of the territory where the major investment project will be carried out, in order to further encourage businesses to invest in the region. The former vacation only allowed for 15% assistance regardless of the geographic area where the project was located);
    • Establishment of an annual tax assistance cap of 10% of total assistance (no annual cap under previous leave);
    • Establishment of a maximum eligible investment amount per project of $1 billion (no limit under the previous vacation);
    • Expansion of activities eligible for this leave to major sectors of economic activity (under the old leave, only Manufacturing, wholesale trade, warehousing, data processing and hosting, development of eligible digital platforms, digital transformation project were eligible);
    • The maximum period for taking advantage of the tax vacation is reduced from 15 years to 10 years.
  2. Changes to the refundable tax credit for Quebec film or television production
    • Amendment to the Act respecting the sectoral parameters of certain fiscal measures to provide for the situation where intermediaries between a distributor and an online video service provider (“aggregator”) are subject to the requirement to make the film available in Quebec;
    • Relaxation of certain requirements related to production fees for documentary films produced in Quebec.
  3. Enhancement of the refundable tax credit for book publishing (subject to certain application parameters) to allow for a
    • Increase from 50% to 65% the cap on eligible labor expenses for preparatory and digital editing costs;
    • Majoration du taux du crédit d’impôt de 27 % à 35 % relativement aux frais d’impression.
  4. Improvement of the refundable tax credit for the production of events or multimedia environments presented outside Quebec (subject to certain application parameters), namely
    • Broadening the scope of the definition of eligible labour so that it applies to all services rendered in Quebec in connection with an eligible production, as is the case with other cultural tax credits;
    • Increase the cap on labor expenses from 50% to 60% to reflect the growth in labor costs in the industry.

Personal Income Tax Measures:

  1. General decrease in the personal income tax rate for the first 2 brackets
    • Reduction of 1% of the first 2 tax brackets from 15% to 14% for the first bracket and from 20% to 19% for the second bracket.
      • This tax cut benefits all Quebec taxpayers. It can reach $814 for a person living alone and $1,627 for a couple;
      • To allow Quebec taxpayers to benefit from this reduction as early as 2023, adjustments will be made to the calculation of source deductions on salaries and certain other amounts paid after June 30, 2023;
      • Legislation and regulations will also be adjusted to take into account the impact of the 1% reduction in the first tax bracket on certain personal tax credits (which will increase, along with the tax rate, from 15% to 14%).
  2. Improvement of the housing component of the solidarity tax credit
    • As of July 1, 2023, the amounts related to the housing component of the solidarity tax credit will be increased to allow low- and middle-income Quebec taxpayers to cope with the inflationary context.
  3. Enhanced non-refundable tax credits for volunteer firefighters and search and rescue volunteers
    • The budget increases the amount used to determine these tax credits from $3,000 to $5,000, beginning with the 2023 tax year (amount will be indexed annually thereafter).

Other tax measures

  1. Make QPP contributions optional at age 65
    • As a follow-up to the February 2023 public consultations, the Quebec government is announcing changes to the QPP that will apply as of January 1, 2024, in an effort to promote job retention for workers aged 65 and over:
      • Offer the possibility, via an election to be made annually by the worker in question, of ceasing contributions to the QPP for beneficiaries of a retirement pension at age 65 or over (applicable to both the employee and the employer);
      • Allow annuity protection for workers age 65 or older earning less than their career average earnings;
      • As of age 73, workers will no longer have to contribute to the QPP and no election will be required on their part.
  2. Strengthening tax compliance regarding cryptoassets
    • Measures are being adopted in this Quebec budget to give the Minister of Revenue the power to ask taxpayers whether they own or have used virtual currencies in transactions during a taxation year.
  3. Changes made concerning tax-advantaged funds (FTQ, Fondaction, CRCD Fund), particularly concerning labour-sponsored funds (FTQ and Fondaction), namely
    • Extension of the minimum holding period for labor-sponsored funds from 2 to 5 years (phased in starting June 1, 2024 and reaching full effect on June 1, 2026);
    • Introduction of a maximum income that must not be exceeded in order to benefit from the 15% non-refundable tax credit for first-time investors in labour-sponsored funds (It is the taxable income of the year preceding the last completed taxation year that will allow investors to determine whether they will have access to the tax credit. For 2024, the first taxation year in which this new rule will apply, the reference year will therefore be the 2022 taxation year. As a result, starting in 2024, only taxpayers with taxable income equal to or less than the threshold of the last taxable income bracket for 2022 ($112,655) will be eligible for the labour-sponsored funds tax credit).