The second budget of François Legault’s government is firmly focused on the environment and infrastructure.
The new electrification and climate change framework policy, with a budget envelope of $6.2B between now and 2026, and the $15B increase in the 2020-2030 Quebec Infrastructure Plan are two key measures in this budget.
In addition to major announcements in education (an additional $1.5B over the next five years), culture (an additional $400M over six years), regional economic development (an additional $900M and $650M earmarked for natural resource development between now and 2025), businesses will benefit from key measures to stimulate their development. Here are a few of these measures.
Tax credit for investments and innovation (C3i)
Businesses from all sectors will be able to claim a tax credit equal to 10%, 15% or 20% of eligible investments, depending on their region, for manufacturing and processing equipment, computer hardware and management software. This tax measure represents $526M in financial support over five years.
Incentive deduction for the commercialization of innovations (IDCI)
An amount of $334M from now to 2025 has been granted to encourage businesses in all economic sectors to commercialize Quebec innovations in the province. This tax measure will enable Quebec businesses that develop and market Quebec intellectual property in the province to benefit from a competitive tax rate of 2% on this specific income.
Synergy capital tax credit
Businesses that invest in an eligible SME will be able to claim a non-refundable tax credit equivalent to 30% of the value of their investment in eligible shares.
Eligible investments will be limited to $750 000 per investor per year, for a maximum tax credit of $225 000.
Action plan for foreign investment and export growth
The budget also provides of $110M in financing in the coming years to stimulate the growth of businesses by helping them reach new heights. The Ministère de l’Économie et de l’Innovation will be announcing an action plan in this regard in the near future.
Moreover, an additional amount of $213M is announced to encourage labour market integration and retention. Among others, this should serve to better integrate immigrants in the next five years ($160M), promote in-house training for workers ($29M) and facilitate the integration of people with severely limited capacity for employment ($13.7M). The budget provides $10M to attract qualified workers. Given the current workforce shortage, more extensive assistance to support employers in their international recruiting would have been preferable.
No tax reduction for individuals and balanced budget anticipated in 2020
Of note is the lack of specific measures to counter the negative effects of the rail blockade and COVID-19. According to this budget, the budget will be balanced in 2021, after payment into the Generations Fund.
As well, no tax cuts have been announced for individuals and the tax burden on businesses remains high, except for those that develop and commercialize products derived from intellectual property that will benefit from a reduction in income tax on these innovations. For more information on the tax measures announced in the 2020-2021 budget, read our tax bulletin below.