2022-2023 Quebec budget: Tax highlights

Issue 2022-12

In brief

On March 22, 2022, the Minister of Finance, Éric Girard, presented the 2022-2023 Québec government’s budget. Here are the highlights of the budget’s main tax measures.

In detail

Business tax measures

Extension of the temporary increase in the tax credit relating to investment and innovation 

On March 10, 2020, the tax credit relating to investment and innovation ("C3i") was introduced to encourage productivity gains of businesses while further promoting investments in regions where the economic vitality index is low.

In brief, the C3i is extended to a qualified corporation that acquires, after March 10, 2020 and before January 1, 2025, manufacturing or processing equipment, general-purpose electronic data processing equipment or certain management software packages. It is calculated on the portion of the specified expenses incurred to acquire a specified property in excess of $5,000 or $12,500, depending on the nature of the property.

The specified expenses in respect of which a qualified corporation may claim the tax credit may not, however, exceed a cumulative limit of $100 million calculated over a five-year period. The C3i to which a qualified corporation is entitled, for a taxation year, may be refundable, in whole or in part, or non-refundable. The refundable portion of the tax credit is determined based on the qualified corporation’s assets and gross income.

On March 25, 2021, it was announced that the tax credit rates would be temporarily doubled to encourage Québec businesses to carry out their investment projects and to accelerate Québec’s economic recovery. It was then planned that this temporary increase would end on December 31, 2022. In order to continue the government’s support for business investment, the temporary increase in the C3i will be extended by one year, that is, until December 31, 2023.

The temporary increase to the tax credit rates will apply to specified property or specified costs acquired or incurred after March 25, 2021 and before January 1, 2024. To be eligible, the property must be acquired pursuant to a written obligation entered before January 1, 2024, or construction must begin before that date. The temporary increase does not, however, apply to property acquired pursuant to a written obligation contracted on or before March 25, 2021, or to construction begun at that time.

The table below sets out the C3i rates that will apply based on the place where the property is acquired to be used mainly:

Rates of the tax credit relating to investment and innovation
(percent)

Introduction of the refundable tax credit for the production of biofuel in Québec

The refundable tax credit for the production of ethanol in Québec, the refundable tax credit for cellulosic ethanol production in Québec, and the refundable tax credit for the production of biodiesel fuel in Québec have been announced over the last years. These tax credits will expire on March 31, 2023 and will not be renewed.

In order to increase its efforts in the fight against climate change, tax legislation will be amended to include the refundable tax credit for the production of biofuel in Québec. In summary, a qualified corporation will be able to claim this tax credit in respect of eligible biofuels that it produces in Québec for sale and use in Québec, up to a maximum of 300 million litres per year. The tax credit will be available from April 1, 2023 to March 31, 2033.

It will be granted for the production of biofuels eligible for tax assistance under the current terms of the Québec tax system, that is, ethanol, cellulosic ethanol and biodiesel fuel, as well as for the production of other low-carbon-intensity fuels produced from eligible materials such as organic matter, except for biofuels used to power aircraft, boats, or ships.

The rate of the tax credit will be determined according to various factors so that the level of tax assistance applicable to an eligible biofuel produced by a qualified corporation will increase according to the decrease in carbon intensity observed for that biofuel compared to the gasoline or diesel fuel that it replaces.

Extension of and changes to the refundable tax credit for the production of pyrolysis oil in Québec

The refundable tax credit for the production of pyrolysis oil in Québec was introduced in the budget tabled March 27, 2018 so as to identify issues related to the forestry sector and propose solutions to promote the transformation and modernization of Québec 's forestry sector. This refundable tax credit, at a rate of $0.08 per litre, is granted to a qualified corporation in respect of eligible pyrolysis oil it produces in Québec from residual forest biomass, which is sold in and intended for Québec, up to 100 million litres per year. However, the eligibility period for this tax credit ends on March 31, 2023.

In order to maintain the government’s support for efforts to reduce greenhouse gas (GHG) emissions, the refundable tax credit for the production of pyrolysis oil in Québec will be extended for a period of ten years, that is, until March 31, 2033. Changes will also be made to the credit's calculation and rate.

Personal tax measures 

Introduction of the refundable tax credit granting a one-time amount to mitigate the increase in the cost of living

In its November 25 Update on Québec’s Economic and Financial Situation, the government introduced a refundable tax credit to mitigate the increase in the cost of living. This tax assistance was paid at the beginning of 2022 to low- and middle-income households based on their eligibility for the refundable solidarity tax credit at the end of the 2020 reference year.

In order to continue to support Québec taxpayers facing this persistent increase in the cost of living, the government is creating additional tax assistance. The refundable tax credit will be granted in a single instalment of at most $500 in the coming quarter.

Eligible individuals may receive the full amount if their personal net income does not exceed $100,000 for the 2021 calendar year. However, if the individual’s personal net income is greater than $100,000, but not more than $105,000, the amount granted is reducible at the rate of 10% applicable to the amount of personal net income in excess of $100,000. Revenu Québec will disburse the assistance to eligible individuals who have filed their income tax returns for the 2021 calendar year.

Eligible taxpayers do not need to apply to Revenu Québec to receive the amount; it will be remitted automatically, if applicable, as long as they file their income tax returns for the 2021 calendar year. Eligible individuals who have filed their 2021 tax returns before March 22, 2022, and seen them processed by Revenu Québec will receive a new notice of assessment that includes the refundable tax credit.

Perpetuation of the tax credit for a major cultural gift

In Information Bulletin 2013-6, the Québec government introduced an additional tax credit of 25% for a major cultural gift of at least $5,000 but not exceeding $25,000. This tax credit of up to $6,250 is available to individuals, under certain conditions, in relation to a donation made to an eligible cultural donee before January 1, 2023.

With a view to perpetuating this support for the financing of the cultural sector, the government decided to amend the tax legislation to remove the deadline for making a donation, thereby making the tax credit permanent. 

Extension of the refundable tax credit for the upgrading of residential waste water treatment systems

To financially assist homeowners who must undertake work to upgrade their septic systems, the refundable tax credit for the upgrading of residential waste water treatment systems was introduced on a temporary basis as part of the March 2017 budget speech. 

Individuals can claim the tax credit of 20% on eligible expenses in excess of $2,500 for work carried out under a service agreement entered into before April 1, 2022.

To keep encouraging homeowners to undertake repair work on their septic systems, the government announced that it was extending the period in which a service agreement can be entered into by five years, that is, until March 31, 2027.

Other tax measures 

Amendment to the rules governing the interruption of the prescription period

Under the Tax Administration Act ("TAA"), the recovery of an amount owed under a fiscal law is prescribed by 10 years. The prescription period starts the day the notice of assessment is sent or, in the case of charges or fees, from the time the charges or fees are applied.

However, the prescription period for Québec tax claims can be extended by "suspension" or "interruption." Where the prescription period is “suspended”, it does not run during the period of suspension. The calculation of the prescription period resumes when the suspension ends. In contrast, when the prescription period is "interrupted," it resets the prescription period, regardless of how much time elapsed prior to the interruption.

Among other things, the prescription period is interrupted when a tax refund is applied to payment of a taxpayer's debt. Taxpayers whose refunds are applied to their tax debt lose the prescription period accumulated prior to interruption. The prescription period for the tax debt is once again 10 years.

The TAA will be amended to remove compensation as a reason for interrupting the prescription period when a taxpayer who is a debtor under a fiscal law has a refund applied to payment of the tax debt.

This measure will be applicable on a date to be determined by the government after the bill giving effect to this measure is assented to.

Facilitating compliance with tax obligations in the residential renovation sector

Revenu Québec is introducing Project VISION to help contractors fulfill their fiscal obligations more easily. Consultations are underway on this matter and a web version of the sales recording module (SRM-WEB) will be tested in the residential construction industry to allow information to be transmitted continuously and completely securely.

Lightening the administrative burden in the restaurant and bar sector

To ensure fairness in the restaurant and bar sector, starting in 2011 Revenu Québec implemented mandatory billing measures requiring use of a sales recording module (SRM).

A transition to the SRM-WEB will begin in the spring of 2023. This solution does not require a physical device, eliminates the need for monthly sales summaries, and makes it possible to send clients invoices electronically.