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INTRODUCTION
As part of the 2008-2009 Budget Speech, Finance Minister Monique Jérôme-Forget announced a number of tax measures for individuals and businesses that take effect on March 13, 2008.
The following is a summary of the measures the Minister announced.
MEASURES CONCERNING INDIVIDUALS
Simplification and improvement of the tax assistance granted for home support for elderly persons
Overview of the principal amendments that will be made to the tax legislation regarding home support for elderly persons:
- Increase from 25% to 30% in the rate of the tax credit
- Increase in the eligible expenses limit from $15,000 to $15,600 for individuals not recognized as dependent seniors
- Increase in the eligible expenses limit from $15,000 to $21,600 for dependent seniors
- Reduction of the tax credit on the basis of family income in excess of $50,000
The above measures will be in effect as of January 1, 2008.
Amount for retirement income
An individual's maximum eligible retirement income used to calculate the tax credit will be raised from $1,500 to $1,750 for the 2009 taxation year, and to $2,000 as of the 2010 taxation year.
Refundable tax credit for informal caregivers
Effective in 2008, a refundable tax credit for informal caregivers resident of Québec is introduced equal to 30% of the total expenses they paid in the year, to a maximum of $5,200, for specialized respite services respecting the care and supervision of a person who had a significant disability. The credit is reduced based on family income that exceeds an annual threshold of $50,000.
New work premium for people with a severely limited capacity for employment
A new work premium will be granted as of the 2008 taxation year to individuals who are part of a household that includes an adult with a severely limited capacity for employment and who meet the conditions for receiving the existing work premium.
Supplement to the work premium
A supplement to the work premium will be introduced for long-term recipients giving up last-resort financial assistance after March 31, 2008.
Certain measures for workers
As of January 1, 2009, the following measures will be automatically indexed:
- Deduction for workers (currently $1,000)
- Amount for emergency services volunteers (currently $1,000)
- Refundable tax credit for holders of a taxi driver?s or owner?s permit (currently $500)
- Amount with respect to age (currently $2,200)
Enhancement of the stock option deduction granted to employees of innovative small and medium size enterprises (SMEs)
The stock option deduction granted to employees of innovative SMEs will be raised from 25% to 50%. The increase in the rate will apply to any event, operation or circumstance relating to a stock option granted by a corporation that agrees, after March 13, 2008, to sell or issue a share of its capital stock to its employees.
A corporation will be considered an SME carrying out innovative activities for a given calendar year that includes a time when a stock option is granted, if, during that year, it carries on a business and has an establishment in Québec, and meets the following conditions:
- The amount of its assets and the assets of the corporations with which it is associated is less than $50 million
- It was granted an amount as a refundable R&D tax credit for its taxation year ended in the given year, or for one of the three previous taxation years
Meal expenses for commission employees
The tax legislation will be amended to provide that the 12-hour rule will no longer apply to business meals consumed, after March 13, 2008, by commission employees whose office or employment is connected with the selling of property or negotiating of contracts on behalf of their employer.
Enhancement of the tax credit for childcare expenses
The family income brackets to determine the refundable tax credit for childcare expenses will be enhanced. As of 2009, the minimum credit rate of 26% will be applicable to family income above $100,550 (currently $85,535).
Refundable tax credits for infertility treatment and adoption expenses
As of 2008, the rate of the refundable tax credits for the treatment of infertility and for adoption expenses will be raised from 30% to 50% (eligible amounts remain capped at $20,000).
Foreign tax credit
Contributions to the U.S. social security system (e.g. Federal Insurance Contributions Act (FICA) contributions, including Social security and Medicare) will be eligible for the purpose of calculating the foreign tax credit. The modification will apply retroactively as of the 2004 taxation year.
MEASURES CONCERNING BUSINESSES
Investment tax credit to assist to the manufacturing sector
An investment tax credit to assist the manufacturing sector is introduced for eligible investments incurred from March 14, 2008 to January 1, 2016, with regard to manufacturing and processing equipment (class 43), by a corporation that carries on a business in Québec and has an establishment there.
The tax credit rate will be 5%, but may rise to 20% if the eligible investment is made in an intermediate zone (Saguenay-Lac-Saint-Jean, Mauricie, La Vallée-de-la Gatineau and Pontiac RCM's, Laurentides and the Antoine-Labelle RCM), to 30% when the investment is made in the Bas-Saint-Laurent regions and up to 40% in a remote zone (the Abitibi-Témiscamingue, Côte-Nord, Nord-du-Québec and Gaspésie-Îles-de-la-Madeleine regions).
Elimination of the tax on capital for manufacturing corporations
A manufacturing corporation whose proportion of activities attributable to manufacturing and processing activities, for a given taxation year, is 50% or more, may claim a deduction in calculating its paid-up capital, for such taxation year, corresponding to the amount of such paid-up capital. Such corporation will completely eliminate the capital tax regarding the taxation year. As a result, eligible investments made as of March 13, 2008 will no longer give rise to a non-refundable capital tax credit.
Tax credit for the development of e-business
An eligible corporation may claim a refundable tax credit equal to 30% of the eligible salaries it incurs as of March 13, 2008 and paid to eligible employees to carry out eligible activities. An eligible corporation may claim this tax credit regarding such salaries incurred until December 31, 2015. The maximum amount of the tax credit that an eligible corporation may claim regarding an eligible employee, for a taxation year, will be limited to $20,000, calculated on an annual basis.
Tax credit for francization in the workplace
This assistance will consist of a 30% refundable tax credit that any eligible employer operating in Québec may claim regarding training expenditures relating to francization it incurs for its immigrant employees. The tax credit will apply to an eligible training expenditure incurred after March 13, 2008 and before January 1, 2012.
Tax credit for on-the-job training periods
The current rates of 30% if the employer is an eligible corporation, and 15% in other cases, will be raised to 40% and 20% respectively where the tax credit is claimed regarding an eligible trainee who is a handicapped person or an immigrant. Refundable tax credit for R&D salary
The tax legislation will be amended so that the spending limit for R&D that applies to the increased rate of 37.5% will be raised from $2 million to $3 million. This change will apply regarding R&D spending eligible for this tax credit incurred by a Canadian-controlled corporation for a fiscal period ending after March 13, 2008. For a fiscal period that includes this day, the new spending limit of $3 million will be established according to the proportion of the number of days in such fiscal period that are after that day.
Inter-provincial tax avoidance
The tax legislation will be amended to provide that the fiscal period end date of a corporation must be synchronized with the one chosen for the purposes of the Income Tax Act.
OTHER MEASURES
Use of a person's computer hardware in the course of an audit, inspection or investigation
The Act respecting the ministère du Revenu will be amended to clearly give the auditors and inspectors of Revenu Québec the power to use the computer hardware of a person (for instance, the computer, terminal, printer or burner) in the course of exercising their powers to audit or examine the supporting documents and registers of a person.
MEASURES RELATING TO THE FEBRUARY 26, 2008 FEDERAL BUDGET
The March 13, 2008 Québec Budget Speech confirmed the measures announced in the February 26 Federal Budget Speech.
Measures retained:
- the implementation of tax-free savings accounts;
- the time limits applicable to registered education savings plans;
- the educational assistance payments from registered education savings plans;
- the adjustments to the gross-up rates applicable to eligible dividends;
- the addition and clarifications to the list of eligible expenses for the purposes of the non-refundable medical expense tax credit;
- the end of a registered disability savings plan;
- gifts of publicly-traded securities to registered charities;
- the deduction for inhabitants of northern regions;
- the disposition of taxable Canadian property;
- the donation of medicines to developing countries;
- the amendments pertaining to capital cost allowance applicable to certain types of assets.
In addition, although they require no legislative or regulatory amendments, the measures relating to excess corporate holdings by private foundations will also be retained for the purposes of Québec's tax system.
As always, readers are reminded that while budget proposals are customarily given the effect of law immediately, the amending legislation, when ultimately adopted by the Legislative Assembly, may be altered to some degree.
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