Québec Budget 2021-2022

O n March 25, 2021, Minister of Finance éric Girard presented the provincial budget for the 2021-2022 fiscal year.

The following is a summary of the main tax-related changes that were announced.

Measures affecting individuals

Enhancement to the refundable tax credit for home-support services for seniors

Several measures were presented with respect to enhancing the refundable tax credit for home-support services for seniors. Some of these changes are presented in the table below:

Change in the rate of the dividend tax credit for non-eligible dividends

In this budget, an increase in the small business deduction (SBD) is proposed. To ensure a better integration of the Québec corporate tax system with the personal tax system, it is proposed that the rate of the dividend tax credit for non-eligible dividends be reduced. Consequently, the tax credit rate for non-eligible dividends will be reduced from 4.01% to 3.42% of the grossed-up dividend amount for a dividend received or deemed received after December 31, 2021.

For greater clarity, no change is made to the non-eligible dividend gross-up rate.

Reduction of the non-refundable tax credit rate for Capital régional et coopératif Desjardins

The rate of the non-refundable tax credit for the acquisition of class “A” shares of the capital stock of Capital régional et coopératif Desjardins will be reduced from 35% to 30% in respect of any class “A” shares acquired after February 28, 2021.

Alleviating the financial burden of students during the pandemic

The government is announcing two one-time support measures for students:

• A lump sum of $100 for both the fall 2020 and winter 2021 semesters for full-time college and university students;
• Eliminating interest on student loans for one year, from April 1, 2021 to March 31, 2022, in order to alleviate student debt.

The Ministère de l’Enseignement supérieur will soon communicate to students the modalities to apply for the lump sum of $100 per session.

Measures affecting corporations

Increase in the small business deduction rate and addition of an option for the number of remunerated hours

To further ease the tax burden on small and midsize businesses, the current 7.5% small business deduction (SBD) rate will be increased so that the maximum rate available to a corporation for the period that begins on the day following the day of the budget speech is 8.3%. The following table shows the tax rates applicable to corporations that qualify for the full SBD.

The announced change to the SBD rate will apply to a corporation’s taxation years ending after the day of the budget speech.

On June 29, 2020, the Ministère des Finances announced that changes would be made to Québec’s tax legislation in order to add an ad hoc adjustment to the calculation of the remunerated hours of a corporation or partnership, which covered the period from March 15, 2020 to June 29, 2020.

Accordingly, for a given taxation year that ended after June 30, 2020, but before July 1, 2021, a corporation may apply to the Minister of Revenue to request that the number of remunerated hours that were used to determine whether it was eligible for the SBD or to establish its SBD rate for its taxation year immediately preceding the given year, be used to determine whether it qualifies for the SBD or to establish its SBD rate for the given year.

Temporary enhancement of the refundable tax credit for on-the-job training periods

The purpose of the refundable tax credit for on-the-job training periods is to support the efforts of businesses that contribute to the development of the professional competence of students and apprentices.

To facilitate labour market integration of students and apprentices, while encouraging businesses to contribute to the development of young people’s skills, the tax credit rates, other than the enhanced rates applicable to eligible trainees enrolled in an education program or a prescribed program, will be increased by 25%.

Measure affecting trusts

To validate their compliance and that of their main players with tax laws, various changes will be made to tax legislation and regulations, in particular to harmonize with the various federal measures presented July 27, 2018 to improve the collection of beneficial ownership information with respect to trusts.

This article was prepared by Advanced Financial Planning for IG Wealth Management Consultants. The purpose is to advise you of current developments, not to provide legal or tax advice. Clients must consult their professional advisors for advice based on specific circumstances.