Quebec: 2020 Budget
Québec’s Minister of Finance Eric Girard presented the province’s 2020-2021 Budget, Your Priorities, Your Budget, on March 10, 2020. Budget 2020 projects a balanced budget in fiscal 2020-2021, after depositing $2.7 billion in the Generations Fund. Some of the main highlights of the budget’s numerous tax measures are summarized below.
See the Budget Dispatch for a full analysis of all the tax measures that were announced in the budget.
New Refundable Caregiver Credit
A new refundable tax credit for caregivers will replace the four existing components of the tax credit for informal caregivers. The new caregiver tax credit will have two components:
- a universal basic tax assistance of $1,250 where the caregiver co-resides with the person and an additional $1,250 with no requirement that the caregiver co-reside with the person, and
- universal tax assistance of $1,250 for a caregiver who supports and co-resides with a relative aged 70 or older.
The amount from component (a) that has no co-residency requirement is reduced by 16% of the amount by which the care recipient’s income exceeds $22,180, so this amount is nil once income reaches $29,993 (for 2020).
As of January 1, 2021, the refundable credit for respite expenses and refundable credit for persons providing respite to informal caregivers will be repealed.
Simplifying Payment of Credit for Solidarity to the Surviving Spouse
Following the death of a spouse, the surviving spouse will be able to continue receiving payments of the solidarity tax credit without applying to Revenu Quebec, effective July 1, 2020.
Tax Credit for Investments and Innovation
A tax credit for investments and innovation is introduced for specified expenses incurred for the acquisition of a specified property after March 10, 2020, but before January 1, 2025. The tax credit may be deducted from the qualified corporation’s total taxes for the taxation year, and any portion that cannot be used to reduce total taxes for the year may be refunded, in whole or in part, or carried back to the preceding three taxation years or forward to the subsequent 20 taxation years. The non-refundable portion may not be carried back to a taxation year that ends on or before March 10, 2020.
Specified property includes manufacturing or processing equipment, computer equipment, or certain management software packages. The credit will be calculated on the portion of the expenses incurred to acquire the property in excess of $5,000 or $12,500, depending on the property. The applicable tax credit rate, in respect of a particular property, may reach up to 20% and will be determined based on the economic vitality index of the region where the acquired property will be mainly used. The expenses may not exceed a cumulative limit of $100 million.
Incentive Deduction for the Commercialization of Innovations in Quebec
Effective for taxation years beginning after December 31, 2020, there will be a new deduction for the commercialization of innovations in Québec. This deduction will enable a corporation that commercializes a qualified intellectual property asset developed in Québec to benefit from an effective tax rate of 2% on the qualified portion of its taxable income attributable to that qualified intellectual property asset. Currently, the corporate income tax basic rate is 11.5% in Québec.
The amount of the credit is reduced for corporations with assets and gross income, applicable for the taxation year, over $50 million, and will be eliminated when assets and gross income for the year exceed $100 million.
The tax credit for investments and innovation will replace the tax credit for investments. A corporation may nevertheless, on certain conditions, elect to receive the tax credit for investments according to its current terms and conditions.
Introduction of the Synergy Capital Tax Credit
To support the growth of innovative businesses that, to develop their full potential, need to have access to capital and to business networks, a new tax credit will be introduced in respect of a share subscription carried out after December 31, 2020. This tax credit will foster business networking and synergy between Québec businesses.
The synergy capital tax credit will be granted to a corporation, other than a financial institution, a real estate sector corporation, or a corporation whose activities consist mainly in granting loans or making investments, that subscribes shares of the capital stock of a qualified corporation in the life sciences, manufacturing or processing, green technologies, artificial intelligence, or information technologies sectors. It will be calculated at a rate of 30% on the amount paid by the corporation for subscription of shares. The shares subscribed must be retained by the corporation for a minimum period of five years.
The tax credit will be non-refundable and can be, for a corporation, up to $225,000 annually. This is based on a rate of 30% multiplied by the total amounts, not exceeding $750,000, each of which is an eligible investment of the investor for the year.
Numerous other business and corporate tax measures were proposed in the budget, so be sure to read the full Budget Dispatch to review all of these pending changes.