Budget 2015-2016: The Table is Set for Wealth Creation
Provincial budget, March 26, 2015
In his second budget, Quebec Finance Minister, Carlos J. Leitão, has set the table for wealth creation in two ways: by returning to budgetary balance and by bringing a breath of fresh air, from a tax perspective, for wealth creators: our dynamic local businesses.
The budget includes over twenty measures drawn from the report of the Québec Taxation Review Committee. Among these, of note is the capital gains exemption, which will be available as of January 1, 2017, when business owners sell their business to a corporation owned by their children (or to a non-arm’s length party). Raymond Chabot Grant Thornton has been lobbying for such a tax equity measure since 2010. However, it will only apply to business in the primary and manufacturing sectors.
Additionally, a gradual decrease in the general corporate tax rate has been announced. As of January 2017, the general corporate income tax rate will be cut by 0.1 percentage point a year until January 1, 2020, dropping from 11.9% to 11.5%. This reduction represents a decrease in the tax burden of Quebec businesses of about $120 million.
More specifically, in the case of SMEs in the services sector, there will be a gradual reduction of the Health Services Fund contribution rate from 2.7% to 2.25% as of January 1, 2017. On full implementation, this measure represents an annual decrease in the tax burden of $194 million.
SMEs in the primary sector for their part will benefit from the same tax rate as those in the manufacturing sector as of January 1, 2017, that is 4%. The rate reduction from 8% to 4% will affect about 6,500 SMEs and represent an annual reduction in their tax burden of $28 million.
However, part of the tax reduction is financed by SMEs in the service and construction sectors with no more than three employees that will see an increase in the tax rate from 8% to 11.8%, as of January 1, 2017. On full implementation, this will result in a $207 million increase in their tax burden.
Moreover, some tax credits are increased or expanded, including the following four:
- The tax credit for the integration of information technologies in manufacturing SMEs is reinstated and broadened to include the primary sector;
- The minimal tax credit rate for the production of multimedia titles is increased from 30% to 37.5%, with a fiscal assistance cap of $37,500;
- The tax credit for the development of e-business is increased by 6 percentage points and the fiscal assistance cap per job is $25,000;
- Lastly, the tax credit for investments relating to manufacturing and processing equipment for the regions, which was to end in 2017, is extended until 2022.
Other notable measures
In business succession, the budget provides for investments of $2 million per year over the next three years to:
- extend to all regions the business transfer services offered by the Centre de transfert d’entreprises du Québec; and
- strengthen mentoring services for business successors by financing the Réseau M 2.0 project of the Fondation de l’entrepreneurship.
Additionally, to further stimulate the economy, the Quebec government is announcing the acceleration, for the next four years, of $1.4 billion in public investment projects.
We invite you to read the following pages for an overview of the main measures.