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.

You can also read our press release here.

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Canadian taxpayers who spend time in the United States may be subject to taxes in this country, based on certain conditions and exemptions prescribed by the law.

Here are the answers to the FAQs posed to our American tax experts on this topic.

Q: If I spend more than 130 days per year in the U.S., am I subject to U.S. taxes?

A: A non-resident of the U.S. is subject to U.S. taxes if he passes the substantial presence test, that is, if he is present in the U.S. for more than 183 days over a three-year period. For the purposes of the application of this test, the number of days in the U.S. is calculated as follows:

Number of days in the U.S.
in the current year X 1

+

Number of days in the U.S.
in the previous year X 1/3

+

Number of days in the U.S.
in the second preceding year X 1/6

Example for 2019:

2019: 1 X 130 days                     =                     130 days

2018: 1/3 X 130 days                  =                       43 days

2017: 1/6 X 130 days                  =                       22 days

Total:                                                                195 days

 

Q: If the result of this calculation is greater than 183 days and I pass the substantial presence test, do I have to file a U.S. tax return as a U.S. resident and be taxed in the U.S. on my world income?

A: There is an exception (closer connection exception) that allows a taxpayer to be considered a non-resident of the U.S.. To take advantage of the closer connection exception, the taxpayer must meet the following conditions:

  • During the current year, the taxpayer was present in the U.S. for less than 183 days;
  • During the current year, the taxpayer’s tax home is not in the U.S.;
  • During the current year, the taxpayer maintained closer economic and social ties with the country of his tax domicile than with the U.S.

If the taxpayer meets these criteria, he must complete and send the IRS Form 8840 (Closer Connection Exception Statement for Aliens) to the Internal Revenue Service before June 15 of the following year.

Q: If during the current year I spend more than 183 days in the U.S., and I do not qualify for the closer connection exception, am I subject to U.S. taxes?

A: Yes. Under U.S. domestic law, you will qualify as a U.S. resident for tax purposes and will therefore be subject to U.S. taxes on your world income. Fortunately, Canada and the U.S. signed a tax treaty that overrides this U.S. law. Under Section IV of this treaty, you may be considered a Canadian resident for tax purposes. In such a case, you will simply have to file a $0 U.S. tax return (1040NR, U.S. Nonresident Alien Income Tax) along with a form that will allow you to avail yourself of the provisions of this tax treaty. The deadline to file these forms is June 15 of the year following the calendar year to which the filing obligation applies.

Please note that this exemption from U.S. tax liability under the tax treaty does not relieve you of the obligation to file U.S. information forms for assets you hold outside the United States. Failure to comply with this requirement could subject you to substantial penalties.

Do you have questions relating to U.S. tax issues? Our tax experts can help you.

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In December 2018, the Canadian Accounting Standards Board (AcSB) amended Section 3856, Financial Instruments, to review, in particular, requirements regarding financial assets originated or acquired and financial liabilities issued or assumed in a related party transaction (hereafter, “related party financial assets and liabilities”).

The amendments apply to fiscal years beginning on or after January 1, 2021 (in April 2020, the AcSB deferred the application date from 2020 to 2021). They apply to entities that prepare their financial statements in accordance with Accounting Standards for Private Enterprises (ASPE) or Accounting Standards for Not-for-Profit Organizations (ASNFPO).

This issue of Flash provides a summary of the main amendments. However, it does not deal with all aspects of the accounting for related party financial assets and liabilities and the related requirements. Readers are encouraged to refer to Section 3856 before making any decisions.

Download the document below.

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To guard against phishing and other cyber-attacks, SMEs need to invest in IT security. Is your business prepared?

Cybersecurity has become a major issue in today’s markets. The growth of your business, and perhaps even its survival, depend on it, because a cyber-attack can have serious consequences. Beyond the ransom payment, it can cause, among others:

  • the shutdown of the company’s activities;
  • litigation;
  • loss of trust with clients and partners.

No organization is safe: 71% of Canadian businesses were victim to a cyber-attack that had an impact on their organization in 2019. This statistic only includes businesses that reported an incident.

Protect yourself from phishing and data theft

Did you know that hackers are often present for more than six months, without your knowledge, before triggering more serious attacks?

Many SMEs are not sufficiently protected against cyber-attacks. Cybercriminals target them, in part because they act as a gateway to the large companies they do business with.

SMEs can fall victim to several types of incidents. Through phishing, hackers can:

  • gain access and break into the computer network in order to steal data;
  • access e-mail accounts (imagine the consequences if a cyber hacker manages to send a message to your customers from your e-mail address asking them to pay you for a new bank account);
  • disable corporate defence systems;
  • affect data backup systems.

Cybersecurity RCGT

Ransomware, a new form of fraud

Ransomware is another common type of threat, especially since the emergence of cryptocurrency, which now allows cybercriminals to monetize their actions in an undetectable way.

In the classic scenario, cybercriminals break into a company’s computer system and paralyze it by encrypting files. They then demand a ransom to unlock the system but, in the meantime, the company may have to shut down all operations.

Moreover, there is no guarantee that the hackers won’t start their game again a few days later or that they haven’t deleted all the company’s strategic data.

Secure your data to stay competitive

Does your company meet the minimum cybersecurity requirements that must now be included in calls for tenders? If not, many contracts are in danger of slipping through your fingers.

Given the frequency and scale of cyber-attacks, large corporations and public organizations want to ensure that their suppliers have information security controls in place and that they comply with increasingly stringent industry standards.

In order to remain competitive and do business with large companies and organizations, including governments, it is essential that your company include cybersecurity measures in its strategy.

Prepare a plan to prevent security incidents

A business interruption due to a cyber-attack could prove costly to your business. To protect yourself from the consequences, it is important to prepare an adequate incident response and business continuity plan. Being prepared for any eventuality will make a huge difference in the event of an attack. As the saying goes, an ounce of prevention is worth a pound of cure.

Prevent financial losses

The financial losses associated with the partial or total suspension of your activities can be very high. In addition to the direct costs (resources devoted to responding to incidents, lost data and contracts, ransom payments), you may also have to pay fines, particularly if you violate the Personal Information Protection and Electronic Documents Act.

Remain vigilant and invest upstream rather than incurring excessive expenses.

Maintain the bond of trust with your customers and partners

Of course, the theft of personal information and sending of false messages to customers and business partners as a result of e-mail account hacking are extremely damaging to a company’s credibility.

Did you know that 81% of Canadians would never do business with an organization if their personal data had been compromised during a cyber-attack?

It is all the more important to preserve your reputation by properly equipping your company against cyber-attacks and other computer security incidents.

Avoid costly lawsuits

SMEs that are victims of a cyber-attack are exposed to lawsuits and litigation from their customers and business partners. This could be the case, for example, following the theft of personal information or if a paralyzed SME can no longer honour its contracts.

Establish a computer incident response plan to preserve and document evidence to defend yourself in the event of a lawsuit.

Conserve your resources to take advantage of business opportunities

An SME that has to work hard to recover from a cyber-attack may postpone or even cancel an important project because it no longer has the time or resources to carry it out.

Although the threats are numerous and serious, SMEs can protect themselves adequately by calling on specialized resources that will provide them with state-of-the-art solutions and tailor-made strategies. Do you have questions about this? Please contact us for more information.

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