2014-2015 Quebec budget highlights

Canadian tax alert

February 20, 2014

Read a summary of the Quebec budget highlights from Deloitte's tax professionals

Economic context

Quebec’s Finance and Economy Minister Nicolas Marceau today tabled the 2014-2015 Quebec budget.

Listed below are the economic and tax highlights contained therein:

  • The budget calls for a balanced budget in 2015-2016.
  • The following deficits are anticipated: $2.5 billion in 2013-2014 and $1.75 billion in 2014-2015.
  • The Minister announced that he will avoid raising taxes.
  • The Minister also announced that Quebec’s real GDP increased by 1.2% in 2013 and is expected to grow by 1.9 % in 2014 and 2015.
  • The Quebec Infrastructures Plan provides for public investments of $90.8 billion over the next ten years.
  • The Quebec government will continue to invest in the energy and natural resource sectors.
  • The government will intensify the fight against tax evasion, unreported work income and crime, particularly in the construction sector.
  • The government is maintaining its debt reduction objectives with respect to gross debt and the debt representing accumulated deficits with the goal of their elimination by 2025-2026.

Tax and economic measures concerning business

  • For taxation years ending after February 20, 2014, the refundable tax credit fostering the modernization of the tourism accommodation offering will be amended such that the annual threshold of $50,000 will be replaced with a single threshold of $50,000.
  • The Act constituting Capital régional et coopératif Desjardins (CRCD) will be amended such that:
    • an eligible investment  in an entity located in certain regional county municipalities outside resource regions facing economic difficulties, after February 20, 2014 and before January 1, 2018, will be considered, for the purposes of CRCD’s investment requirement, as having been made in an entity located in a resource region;
    • an investment that includes no security bond or hypothec made by CRCD (directly or through a limited partnership) in an eligible entity located in a territory identified as facing economic difficulties will, up to an amount of $500,000, be deemed grossed up by 100% for the purposes of the investment requirement;
    • CRCD will retain the right to collect a maximum of $150 million for the capital-raising period beginning March 1, 2014 and ending February 28, 2015;
    • the rate applicable for calculating the tax credit for the acquisition of CRCD shares will be reduced from 50% to 45% for shares acquired after February 28, 2014, and consequential changes will be made to the tax legislation to reflect this reduction.
  • To foster growth among Quebec’s most promising businesses, the following measures have been announced:
    • special support for high-growth business (“gazelles”);
    • a commitment to invest $50 million in a venture capital fund of funds;
    • more capital for the Chantier de l’économie sociale trust.
  • To facilitate business start-up and seeding, the following measures have been announced:
    • an additional $25 million investment in the Anges Quebec capital fund;
    • a renewal of the local investment funds;
    • a $10 million investment to develop the residual forest biomass sector.
  • To take advantage of surplus electricity, the government will review the terms and conditions of the investment-job pricing offer in order to encourage projects with significant economic spinoffs, particularly in the manufacturing sector.
  • The government introduced new measures to foster development in the mining sector, in particular by:
    • promoting mining exploration through accelerated capitalization of SOQUEM in an amount of $100 million over three years;
    • raising its financial participation in mining companies developing resources in Quebec by taking equity stakes negotiated on a project-by-project basis or by a system of equity options;
    • continuing to improve the sector’s oversight, in particular by indexing fees for mining claims and indexing the maximum amount paid to the mining activity management component of the Natural Resources Fund.
  • The government will be intensifying its fight against tax evasion and unreported work. It has announced new initiatives aimed at enhancing controls, particularly in the construction industry, and for improving revenue collection through the installation of sales recording modules in bars and resto–bars. In addition, the government is proposing to improve its capacity to process legal cases.

Tax and economic measures concerning individuals

  • The government is announcing a gradual increase in the parental contribution inchildcare services as of September 1, 2014. The parental contribution will be set at $8 as of September 1, 2014 and at $9 as of September 1, 2015. Subsequently, the contribution will be subject to rate indexing.
  • The government will review the fees payable by foreign university students.

Sales and excise tax measures

  • Changes will be made to the Quebec sales tax (QST) system to incorporate the federal measures relating to the GST/HST election for closely related persons and those seeking to strengthen compliance with GST/HST registration.

Harmonization measures and consequential amendments

  • Quebec’s tax legislation and regulations will be amended to incorporate the measures introduced by the federal budget of February 11, 2014 relating to:
    • the changes concerning the accelerated capital cost allowance for clean energy generation equipment to include water-current energy equipment and gasification equipment;
    • the elimination of graduated rate taxation for certain trusts and estates;
    • the increase in the thresholds determining how frequently employers must remit source deductions;
    • donations made in the context of death;
    • the addition of certain eligible expenses for the medical expense tax credit;
    • the introduction of a tax credit for volunteers participating in search and rescue activities;
    • the property used to carry on a farming business and a fishing business;
    • the tax deferral granted to certain farmers located in regions hit by drought, flooding or excessive moisture;
    • the inclusion of certain income attributed to a minor by a partnership or a trust for the purposes of calculating tax on split income (kiddie tax);
    • the elimination of the 60-month exemption from the residency presumption rules that apply to non-resident trusts and from certain other related rules;
    • the extension from five to ten years of the deferral period for gifts of eco-sensitive land made by an individual;
    • donations of cultural property acquired under a gifting arrangement that is a tax shelter;
    • the registration of organizations or associations that receive gifts from foreign states that support terrorism;
    • the change to the anti-avoidance rule concerning captive insurance corporations;
    • the addition of new eligibility conditions for the exception relating to offshore regulated financial institutions;
    • the change to the anti-avoidance rule currently contained in the thin capitalization rules.
  • However, Quebec’s tax legislation and regulations will not be amended for the following measures introduced in the federal budget of February 11, 2014:
    • the increase in the maximum amount of expenditures eligible for the adoption expense tax credit;
    • the extension of the mineral exploration tax credit for flow-through share investors;
    • the inclusion of income paid to an amateur athlete trust for the purposes of determining the maximum amount deductible on account of RRSPs by the trust beneficiary;
    • the automatic determination of the GST/HST credit;
    • consequential amendments arising from the elimination of graduated rate taxation for certain trusts and estates;
    • the extension from five to ten years of the deferral period for gifts of eco-sensitive land made by a corporation;
    • the addition of a specific anti-avoidance rule concerning tax withholding on interest payments;
    • the rules on the cap applicable to transfers of pension benefits to an RRSP where the amount of accumulated benefits has been reduced, in particular because of the underfunding of the registered pension plan.

For further details, we refer you to the Quebec Ministry of Finance and the Economy web site.


Heather Evans
Canadian Managing Partner, Tax

Albert Baker
National Tax Policy Leader

Judith Bellehumeur
Managing Partner, Quebec, Tax

Denis de la Chevrotière
Managing Partner, Quebec Regions, Tax

This publication is produced by Deloitte LLP as an information service to clients and friends of the firm, and is not intended to substitute for competent professional advice. No action should be initiated without consulting your professional advisors. Your use of this document is at your own risk.

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