Quebec Provincial Budget Tax Updates 2024-2025

Overview

On March 12, 2024, Quebec’s government has announced changes to its provincial tax laws in its 2024-2025 budget “Priorities: Health | Education”. This comprehensive summary highlights the key changes that will influence the Quebec tax environment in the coming years.

Personal Income Tax Measures

There are no proposed changes to personal income tax rates for 2024.

The income tax rates for the 2024 taxation year, based on your taxable income, are as follows :

The current personal combined income tax rates for top marginal tax rate in 2024 are outlined below:

However, multiple changes are made to the refundable tax credit granting an allowance to families, typically called the “Family Allowance”.

This tax credit consists of three primary elements: the basic amount for child support, a supplement for handicapped children (“SHC”) and a supplement for handicapped children requiring exceptional care (“SHCREC”). The SHC and SHCREC supplements offer extra support to qualifying families, irrespective of their income level.

The current eligibility criteria for SHC will be refined to reflect medical advancements, and assessment parameters for impairments will be updated, focusing on diagnosis, severity, and impact on the child’s daily life. Presumed cases of serious handicap related to impairments will also be revised, aligning with modern medical practices.

The SHCREC, which provides additional financial aid to parents of children with severe disabilities, is also subject to changes. Eligibility criteria will be expanded to include children under the age of 2 years old with serious and multiple disabilities, filling a current gap in coverage. Specific conditions, including complex medical care needs and limited life expectancy, will be detailed for eligibility.

Changes to the SHC et the SHCREC will apply to applications filed after June 30, 2024, with adjustments for existing applications.

Corporate Income Tax Measures

There are no proposed changes to corporate income tax rates or the $500,000 small-business limit for 2024.

The corporate income tax rates for Quebec in 2024 are as follows:

Refundable Tax Credit for Quebec Film or Television Productions

The refundable tax credit for Quebec film or television productions is designed around the labour expenditure incurred by corporations involved in Quebec film production. A Quebec film production is defined as a project for which Société de développement des entreprises culturelles (“SODEC”) has issued a favorable advance ruling or certificate.

The tax legislation will be amended to increase the limit to the labour expenditure considered in calculating the basic tax credit from 50% to 65% of production costs directly attributable to film production. This change applies to film productions that submit a request for an advance ruling or a certificate to SODEC after March 12, 2024.

Refundable Tax Credit for Film Production Services

This tax credit was introduced to encourage the filming of foreign productions in Quebec. Adjustments will be made to further promote foreign productions in Quebec and encourage investment in infrastructure and equipment. These changes include:

• The increasing the basic tax credit rate from 20% to 25%.
• Introduction of a 65% limit on eligible costs for contracts related to computer-aided special effects and animation.

Tax Credits for the Development of E-Business (“TCEB”)

The refundable and non-refundable tax credits for the development of e-business were introduced to support businesses in the IT sector engaged in e-business activities. Given the sector’s growth, adjustments are necessary to focus tax assistance on businesses offering higher value-added jobs.

Budget 2024-2025 proposes to introduce the following changes:

• Introducing an exclusion threshold per eligible employee in the calculation of the tax credits (which should correspond to the amount used to determine the basic personal tax credit amount which is $18,056 for 2024).
• Removing the existing wage limit (i.e. current wage limit being $83,333 per qualified employees).
• Increasing the non-refundable tax credit (currently 6%) annually by 1% until it reaches 10%, while reducing the refundable tax credit accordingly, annually by 1% until it reaches 20%.

Tax Credits for the Production of Multimedia Titles

Introduced in 1996, the refundable tax credit for multimedia titles (the “tax credit – general component”) requires corporations to obtain qualification certificates from Investissement Quebec. A second tax credit, introduced in 1998 (the “tax credit – specialized component”), applies to specialized multimedia production.

Both credits are based on qualified labor expenses. Under current rules, tax assistance is determined by specific rates. Qualified labor expenditure includes salaries and a portion of subcontractor payments.

However, the qualifier labor expenditure in respect of salary or wages cannot exceed $100,000 annually for each eligible employee or of a subcontractor with whom it is not dealing at arm’s length. Due to sector growth, changes to the credits aim to refocus credits on businesses offering higher value-added jobs. Budget 2024-2025 proposes to introduce the following changes :

• The introduction of an exclusion threshold per eligible employee (which should correspond to the amount used to determine the basic personal tax credit amount which is $18,056 for 2024).
• The removing of the $100,000 eligible annual per employee wage limit.
• The introduction of a non-refundable tax credits for each component, starting at 2.5% in 2025, gradually increasing by 2.5 percentage points per year to 10% by 2028.
• The reduction of the refundable tax credits correspondingly to the rise of the non-refundable tax credits (annual reduction of 2,5%, until such reduction reaches 10%);
• Introduction of new measures allowing for the carry-back and carry-forward of unused non-refundable credits in a given year. 

These amendments will apply for taxation years beginning after December 31, 2024.

Abolition of the Tax Credit for Retention of Experienced Workers

Introduced in 2019, the tax credit aimed to encourage corporations to retain workers aged 60 or older. However, due to its limited impact and the presence of other incentive measures, the government plans to abolish this tax credit for contributions made after March 12, 2024.

Only contributions attributable to periods preceding this date will be eligible.

Notion of government assistance for the application of the tax credit for production of biofuel and the tax credit for production of pyrolysis oil in Quebec

To strengthen climate action, the government currently offers two refundable tax credits to businesses:

• One for pyrolysis oil production, introduced in the 2018-2019 budget.
• Another for biofuel production, introduced in the 2022-2023 budget.

These credits apply to eligible products sold in Quebec before April 1, 2033. Corporations operating biofuel or pyrolysis oil businesses in Quebec may qualify for these credits.

The rate of these tax credits is determined in particular by the carbon intensity reduction of the eligible biofuel compared to the fuel that it replaces.

In general, the tax legislation provides rules to prevent the cumulation of government and non-government assistance, and the amount of the refundable tax credits must be reduced by the amount of any government assistance, non-government assistance, benefit or advantage attributable to the eligible production of biofuel and pyrolysis oil. The value of compliance credits granted to a corporation under the Clean Fuel Regulations (issued by the federal government) is currently considered as government assistance.

Recent US legislation introducing the Clean Fuel Production Credit may impact Quebec’s biofuel and pyrolysis oil production investments due to substantial subsidies. This credit applies to the production of biofuels produced in the United States after December 31, 2024, and used or sold before December 31, 2027.

Consequently, to foster the production of biofuel and pyrolysis oil in Quebec, the legislation will be retroactively amended to postpone the application of the preventing cumulation. Specifically, the expression “government assistance” will include the value of compliance credits granted to a corporation under the Clean Fuel Regulations, but only as of a corporation’s taxation year that will begin after December 31, 2027.

Sales Tax measures

Extension of Reference Volume Coverage for Used Vehicles

In Quebec, purchase of a used road vehicle registered under the Highway Safety Code from an unregistered individual is subjected to QST, which must be paid to the Société de l’assurance automobile du Quebec (SAAQ) when the vehicle’s registration is transferred. The QST was typically calculated on the higher of the sale price and the average wholesale price detailed in the Guide d’Évaluation Hebdo (Automobiles et Camions Légers), with a deduction of $500.

The average wholesale prices specified in this publication are limited to a nine-year timeframe. Furthermore, there have been instances of under-reporting of sale prices for used motor vehicles not covered by the reference volume’s average wholesale prices.

To combat tax avoidance in used vehicle transactions, the Quebec sales tax system will extend the coverage of average wholesale prices listed in the Guide d’Évaluation Hebdo from 9 to 14 years, starting January 1, 2025.

Anti-Avoidance Rule for Imported Vehicles

The anti-avoidance rule regarding the market value determination of used road vehicles brought into Quebec will be amended. The estimated value rule will no longer apply to vehicles transferred between related individuals, effective from the budget speech day.

Increases in Tobacco Tax

To support efforts for a tobacco-free Quebec by 2025, the government plans two increases in the specific tax on tobacco products. The first increase takes effect in March 2024, followed by a second in January 2025. The aim is to reduce smoking rates by raising taxes on tobacco products.

Effective March 13, 2024, the specific tax rate will increase from 18.9 cents to 19.9 cents per cigarette or per gram of loose tobacco or leaf tobacco, and the specific tax rate for other tobacco products will be increased from 29.07 cents to 30.61 cents per gram. In addition, the minimum rate applicable to tobacco sticks will also be raised from 18.9 cents to 19.9 cents per stick.

In addition, the tax will be increased again as of January 6, 2025, to 20.9 cents per cigarettes and per gram of loose tobacco or leaf tobacco, to 32.15 cents per gram for other tobacco products, and the minimum rate applicable to tobacco sticks will rise to 20.9 cents per stick.

Other Tax Measures

Supporting Seniors with Disabilities

Apart from offering essential financial security for retirees in Quebec, the Quebec Pension Plan (QPP) plays a vital role in supporting individuals with disabilities. To enhance this support, modifications to the Act respecting the Quebec Pension Plan (CQLR, chapter R-9) are being proposed.

• Amendments will be proposed to end the pension reduction for seniors with disabilities upon reaching the age of 65, effective January 1, 2025.
• Amendments will be proposed to guarantee that benefits to recipients of a disability pension aged 60 to 64 remain at least as high as before the commencement of their retirement pension payments. This protection will apply retroactively to January 1, 2024.

Reducing and Elimination of the Roulez Vert Program Rebates

The government announces a gradual reduction in the amount of financial assistance allocated for the acquisition of electric vehicles as of January 1, 2025. The program will end on December 31, 2026.

For further information, visit :

https://www.finances.gouv.qc.ca/Budget_and_update/budget/index.asp.