2022-2023 Québec Budget: New Funds Injected into Several Sectors and Assistance to Reduce Inflationary Pressure

The fourth and last budget of the François Legault government before the fall general elections has been wide-ranging. Health, education, tourism, culture, regional development, environment, community, almost everything can be found in this budget, which is injecting more than $3.2B to give 6.4 million adult Quebecers with a net income of $100,000 or less, a cheque of $500 to cope with inflationary pressure.

Québec’s public finances are in good shape. In 2022-2023, the budget balance will post a deficit of $6.5B once $3.9B is paid into the Generations Fund. The financial framework provides for an allowance for economic risk and other support and recovery measures of $2.5B in 2022-2023 and $1.5B per year as of 2023-2024. The government expects a balanced budget by 2027-­2028, but it should be acknowledged that this could be achieved as of 2023-2024, for accounting purposes (excluding the Generations Fund payment). Revenues could reach $138.5B in 2022-2023, with a 2.2% growth. Expenses will have risen to $136.6B in 2022-2023, with an increase of 4.8%.

In addition to providing massive support for major sectors such as health ($9B over five years), education ($2.8B over five years), tourism ($304M over six years), regional economic development, culture and the environment (including an additional $1B in investments for the new 2022­-2027 implementation plan of the 2030 Plan for a Green Economy), this budget aims to support businesses and economic growth through initiatives totalling close to $4.2B between now and 2026-2027. It includes:

• An additional $1.3B over five years to implement the new Québec Research and Innovation Strategy;
• An additional $110M over three years to renew the new Québec Life Sciences Strategy;
• $156M to help Québec businesses stimulate their investments in new technologies by extending the increase in the tax credit for investments and innovation (C3i) by one year;
• $1.5B over six years to support regional development by contributing to their prosperity, promoting the development of the forestry sector and protection of wildlife capital and by preparing the tourism sector for recovery;
• $255M over five years to continue supporting regional air transportation by fostering the establishment of accessible regional services;
• $290M over five years to bolster the integration of immigrants into the labour market;
• $627M over five years to support the growth of the bio-food sector;
• $257M over five years to support the recovery and to promote Québec’s culture and cultural sector.

Furthermore, the budget grants $2.2B in support to reinforce community action and implement measures for supporting communities. For vigorous regional economies, it’s important to acknowledge the significant contribution of community organizations as a vector for growth and social inclusion.

In order to ensure better tax fairness, the government intends to revamp its digital services offering, in particular, by launching the Revenu Québec VISION project. This project is designed to transform the provision of services to individuals and businesses by introducing a more efficient, simplified digital tax administration model. The government also plans to devote $1M every year as of 2022-2023 to fight against illegal and abusive practices in the financial market’s crypto-asset sector.

For more information on the tax measures announced in the 2022-2023 budget, please download our Tax Bulletin.

The Grant Thornton International IFRS team has published the document Accounting Implications of the Conflict in Ukraine.

In light of the latest conflict in Ukraine, including the introduction of wide-ranging sanctions against certain Russian companies and individuals, entities need to carefully consider the accounting implications of this situation.

The publication considers the financial reporting impact of the conflict as at December 31, 2021 and subsequent year-ends as well as determining the importance of assessing going concern.

Updated on January 30, 2024

The accrued gain on your principal residence is generally not taxable. Be careful however as there are certain exceptions.

Without necessarily getting into the details, individuals who sell their residence know that they are no reporting requirements regarding this sale.

However, they should know that since 2016, the tax authorities have introduced new rules for improving the compliance and administration of taxes in this regard. Since these rules have changed how things are done, they could result in some nasty surprises for those who do not comply, so pay careful attention.

Certain exceptions apply

There are three main exceptions to the general rule where a gain on the sale of a principal residence is tax exempt:

• Your property cannot be qualified as a principal residence for each of the years owned (e.g., due to the surface area of the land or because another property was designated as such for certain years by you or your spouse);
• Your property was used, in whole or in part, to earn income;
• You are selling a principal residence and have held the property for less than a year (early sale of a property).

Early sale of a property (or property flip)

Since January 1, 2023, an individual who sells a residential property that they have held for less than a year will be deemed to have earned business income rather than realized a capital gain. As a result, the profit gained from the sale will be taxable at 100% rather than 50% and will not qualify for the primary residence exemption.

The exceptions to this rule include the following events: death, separation, serious disability or illness, change of employer and involuntary disposition (resulting from a fire or expropriation, for example).

Your obligations

As long as you lived in your residence in each of the years that you owned it and if you or your spouse did not own any other property that could be qualified as a principal residence and the residential property rule does not apply, the gain will be entirely exempt and no tax will be payable. Up to here, nothing has changed.

However, you can no longer sell your residence without notifying the tax authorities. Since 2016, you must comply with disclosure obligations if you disposed of your residence during the year.

At the very least, you must complete the prescribed forms (T2091 and TP-274) and designate the property in Schedule 3 of your income tax return. You must also specify the year of acquisition, sale price and description of the property sold in the prescribed forms.

Additionally, if the property sold cannot be designated as your principal residence for each of the years you owned it, you will have to complete the prescribed forms in detail to calculate the tax-exempt and taxable portions.

Don’t forget to declare the sale, otherwise…

Unless you declare the sale of your residence during the year, you will not be able to benefit from the exemption for a principal residence, such that the profit realized (called capital gain) will be taxable.

If you neglect to declare the disposal of your property and to designate it as a principal residence in the year it was sold, you could request to amend your income tax return. Please note that the tax authorities may grant the right to file a late designation in certain situations, but a penalty may apply. This penalty will correspond to the lesser of the following two amounts:

• $100 per late month calculated since the filing deadline for the sale year;
• $8,000.

Furthermore, individuals who have not reported the sale could be in for another surprise. The period during which the the tax authorities can issue a new assessment (which is currently three years) will be indefinitely extended. The tax authorities will therefore have all the time needed to ask questions.

Reminder: procedure to follow when selling your principal residence

• Make sure you satisfy all the criteria for designating the property sold as a principal residence for each of the years.
• Make sure that you are not subject to the rules regarding early sale of residential properties.
• Make sure you comply with the new disclosure requirements in order to benefit from the exemption for a principal residence.
• If you forget to declare the sale of your principal residence, consider notifying the tax authorities and paying the penalty applicable. It could be less costly than the capital gains tax.
• Remember: keeping track of the cost of your property and related improvements will help you make the best choice at the time of the sale and reduce your tax bill if you or your spouse held more than one property for the same period.
• Specific rules apply if you’re a non-resident of Canada or if you hold a residence in a personal trust.

To avoid nasty surprises, you should consult a tax specialist.