QUÉBEC CITY, March 26, 2015 – Raymond Chabot Grant Thornton is pleased to release its post-budget tax bulletin for individuals and business owners. The bulletin was prepared by a team of firm experts who were at the lock-up and provides an overview of the main tax measures announced by the Quebec government. Download the summarized and easy-to-consult information at http://www.rcgt.com/en/2015-2016qcbudget/.
Stimulating the Economy: A Good Start
The budget balancing initiatives announced put Quebec in a better position to grow and prosper. Moreover, the budget presented contains several noteworthy measures to foster economic growth. As stated by Luc Lacombe, Tax Partner, “The announcement to gradually lower the general corporate tax rate will be a major lever to boost the economy.” In this regard, the general corporate income tax rate will be cut by 0.1 percentage point per year as of January 2017 until January 1, 2020, dropping from 11.9% to 11.5%.
“For SMEs in the primary sector, who will benefit from the same 4% tax rate as those in the manufacturing sector as of January 1, 2017, this is also an economically beneficial measure, just like the one for SMEs in the services sector, whose Health Services Fund contribution rate will gradually reduce as of January 1, 2017,” added Jean-François Thuot, Tax Partner. This last measure represents annual tax gains of approximately $194M for these SMEs.
However, part of the tax reduction is financed by SMEs in the service and construction sectors with no more than three employees. Those SMEs will see an increase in the tax rate from 8% to 11.8%, as of January 1, 2017.
More Stringent Measures Necessary
Small Business Tax
Raymond Chabot Grant Thornton invites the government to do more to give our wealth creators the means to achieve their ambitions. “As we indicated in our pre-budget consultations, we advocate abolishing the business tax for SMEs with net taxable earnings under $500,000, provided they invest the amounts saved in production, employment and innovation,” stated Emilio B. Imbriglio, President and CEO. According to the firm, Quebec should abolish income tax for small businesses, as Manitoba did in 2010. “This option would stimulate our economy even more, while giving a breath of fresh air to our economic drivers: SMEs,” added Imbriglio.
With respect to tax credits, the firm commends the government’s decision to enhance or expand certain credits, such as those related to Quebec film and television production and the integration of information technologies in manufacturing SMEs. However, the firm would have liked the government to go further by implementing a tax credit for innovation.
Currently, the tax credit for scientific research and experimental development (SR&ED) is only offered to research and development companies. The firm believes that tax credits are easier to implement than direct aid schemes, which are overly arbitrary and unpredictable. The Quebec government should support tax credits, as the firm indicated in its letter sent to Quebec Finance Minister Carlos Leitão on February 24, 2015.
Business Succession and Transfers
As for succession, Raymond Chabot Grant Thornton supports the government’s announcement to strengthen mentoring services for business successors by financing the Réseau M 2.0 project of the Fondation de l’entrepreneurship and extend to all regions the business transfer services offered by the Centre de transfert d’entreprises du Québec.
Consequently, the firm believes that it’s necessary to create a fund to support businesses so that they may call on external professionals to support them in their transfer process and in developing a succession plan. “Ensuring the sustainability of our wealth creators is necessary for our economic success. Efficient succession planning takes from two to eight years and unfortunately, only 9% of business owners have a formal written plan. It’s essential that they receive the support they need, especially when a third of them will be retiring over the coming years,” stated Éric Dufour, Vice-President of the Saguenay – Lac-Saint-Jean region and National Business Transfer Leader.
Tax Equity and Business Transfers: Excellent News
Raymond Chabot Grant Thornton is very pleased that the Quebec government has taken note of its requests. Since 2010, the firm has been encouraging the Quebec and federal governments to take action with respect to tax equity for business transfers. “As of 2017, business owners will benefit from a capital gains exemption in Quebec when selling their primary or manufacturing sector company to a corporation owned by their children (or to a non-arm’s length party). This is a major step towards equity,” noted Jean Gauthier, Partner and National Tax Manager at the firm.
Now, Raymond Chabot Grant Thornton would like this tax equity to extend to businesses in all of Quebec’s economic sectors, and for the federal government to act quickly as well.
About Raymond Chabot Grant Thornton
Founded in 1948, Raymond Chabot Grant Thornton has become a leader in the fields of assurance, tax, consulting services, and business recovery & reorganization. Its strength is based on a team of over 2,400 people, including some 230 partners in more than 100 offices in Quebec, eastern Ontario and New Brunswick. For over 30 years, Raymond Chabot Grant Thornton has been a member of Grant Thornton International Ltd, providing clients with the expertise of member and correspondent firms in more than 100 countries.
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