2023-2024 Quebec budget: Tax highlights

Issue 2023-11

In brief

On March 21, 2023, Minister of Finance Éric Girard tabled the Québec government's budget for 2023-2024. This Tax Insights highlights the main tax measures outlined in the budget.

In detail

Business tax measures

Introduction of a new tax holiday relating to the carrying out of a large investment project

On November 20, 2012, the tax holiday relating to the carrying out of a large investment project (hereinafter referred to as the “former TH-LIP”) was introduced.

Briefly, under the rules applicable to the former TH-LIP, a corporation that carries out a large investment project in Québec may, under certain conditions, benefit from a tax holiday on the income tax derived from eligible activities relating to the project and a holiday from the employer contribution to the Health Services Fund (HSF) on a portion of the wages paid. These rules have been eliminated, except for companies that have already obtained an initial certificate.

In order to expand the sectors that are eligible, foster investment in regions where the economic vitality index is lower, and simplify the measure’s application, a new tax holiday is being introduced. Like the former tax holiday, the new tax holiday relating to the carrying out of a large investment project will allow a company, under certain conditions, to benefit from a tax holiday on revenue and employer contributions to the HSF for that project.

The new tax holiday will have a duration of 10 years (in contrast with 15 years for the former TH-LIP). It will be calculated by applying a rate of 15%, 20% or 25% to the cumulative total eligible expenditures related to the project (compared with the previous tax holiday's cap of 15%) for a large investment project, subject to the calculation of a maximum annual amount. The rate will be set based on the economic vitality index of the territory in which the large investment project will be carried out, so as to encourage more businesses to invest in the regions.

The cumulative total of the eligible expenditures cannot exceed one billion dollars. The large investment project must reach an investment threshold of $100 million within a period of 48 months. The tax assistance may be applicable to the entire eligible tax burden, rather than just the tax burden associated with the large investment project.

To benefit from the tax holiday, companies must obtain an initial qualification certificate and annual certificates issued by the Minister of Finance. The application for the initial certificate must be submitted to the Minister of Finance no later than December 31, 2029.

The new tax holiday will apply to investment projects for which initial certificate applications are submitted after the day of the budget speech.

The table below shows the tax holiday rates that will apply to large investment projects depending on the territory where the investment project is being carried out:

Rate of the tax holiday for large investment projects
(per cent)

Changes to the refundable tax credit for Québec film or television production

The refundable tax credit for Québec film or television production applies to the labour expenditure incurred by a corporation in respect of a property that is a Québec film. However, this expenditure must not exceed 50% of the production costs incurred by the corporation. The base rate of this tax credit is between 32% and 40%, but may be enhanced.

In order to adapt the tax credit to the reality of online broadcasting and support the growth of the Québec film and television industry, amendments will be made to the Act respecting the sectoral parameters of certain fiscal measures to accommodate the situation of aggregators (intermediary between a distributor and online video service provider). The Act will be amended to require the aggregator to make the film available in Québec.

In addition, some requirements pertaining to production costs for films in the documentary category will be loosened to support documentary production in Québec.

These changes will apply in respect of a film or television production for which an application for an advance ruling, or an application for a qualification certificate if no advance ruling was previously filed for that production, is filed with the Société de développement des entreprises culturelles (SODEC) after the day of the budget speech.

Enhancement of the refundable tax credit for book publishing

Briefly, the refundable tax credit for book publishing is calculated on the basis of the qualified labour expenditures attributable to the preparation costs and digital version publishing costs and the printing and reprinting costs for an eligible work or eligible group of works.

Given the highly competitive market and significant increase in operating costs, qualified labour expenditures will increase from 50% to 65% for the preparation costs and digital version publishing costs.

Moreover, the rate of the refundable tax credit for book publishing will increase from 27% to 35% for the eligible labour costs attributable to printing and reprinting costs.

These changes will apply to an eligible work or group of eligible works for which an application for an advance ruling, or an application for a qualification certificate if no advance ruling has been filed in respect of that work or group of works, is filed with the SODEC after the day of the budget speech.

Enhancement of the refundable tax credit for the production of multimedia events or environments presented outside Québec

Briefly, the refundable tax credit for the production of multimedia events or environments presented outside Québec applies to certain labour expenditures of a corporation regarding a property that is a qualified production. The qualified labour expenditure of a corporation giving rise to this credit, which is 35%, may not exceed 50% of the production costs incurred.

To make Québec multimedia event or environment production corporations more competitive, the tax legislation will be amended to broaden the base for labour expenditures and to increase the limit on qualified labour expenditures, bringing it to 60% of the production costs incurred.

These changes will apply in respect of a qualified production for which an application for an advance ruling, or an application for a qualification certificate if no advance ruling has been filed in respect of that production, is filed with the SODEC after the day of the budget speech.

Tax measures concerning individuals

General reduction in personal income tax as of the 2023 taxation year

To protect Quebecers’ standard of living and encourage their participation in the labour market, the government will make a general reduction in personal income tax, which will result in a decrease in the tax rates applicable to the first two taxable income brackets:

• The tax rate for the first taxable income bracket, which does not exceed $49,275 for the 2023 taxation year, will be reduced by one percentage point from 15% to 14%.
• The tax rate for the second taxable income bracket, which is the bracket over $49,275 but not exceeding $98,540, will also be reduced by one percentage point from 20% to 19%.

The tax legislation and regulations will be amended so that personal tax credits and the amounts granted for calculating certain personal tax credits take the above decreases into account.

Enhancement of the housing component of the refundable solidarity tax credit

In general, the refundable solidarity tax credit is intended to provide financial support to low- and middle-income households. It is made up of three components: the Québec sales tax component, the housing component, and the component for individuals living in northern villages.

As a result of the inflationary environment and to help households cope with the increase in housing costs, the indexation normally provided for the housing component of the solidarity tax credit will be doubled and applied as of the next payment period, which begins July 1, 2023.

Other tax measures

Reduction in Québec Pension Plan contributions for workers aged 65 or older

The Québec Pension Plan (QPP) is a public plan introduced to provide a compensatory income to partially offset the loss of work income upon the worker’s retirement, disability or death. The plan, in which participation is mandatory, provides workers and their families with financial protection in the form of benefits.

In 2019, the QPP was enhanced by the addition of a supplementary plan with the aim of offering retirees sufficient income. Currently, employees must start to make contributions in the month following the month in which they turn eighteen years of age. Even if an employee reaches the age of 70 or receives a retirement pension under the QPP, they are generally still required to pay QPP contributions on any eligible earnings received (unlike the CPP). For 2023, an employee’s maximum QPP contribution totals $4,038.40, while a self-employed worker’s maximum contribution is $8,076.80.

In order to encourage the retention of experienced workers in Québec and offer them more financial flexibility, an option allowing workers aged 65 or older to stop paying QPP contributions will be offered as of January 1, 2024, provided they are also receiving a QPP or CPP retirement pension.

Employees may elect to stop making QPP contributions as of the day following their 65th birthday by means of a form to be submitted to their employer. This election will also apply to the employer, which will be exempted from contributing to the QPP as of the date applicable to the employee.

The Act respecting the Quebec Pension Plan will also be amended so that, as of 2024, the obligation to contribute to the QPP will cease for workers over 72 years of age, for all workers subject to the contributions provided for by this Act.

Strengthening tax compliance regarding cryptoassets

Since tax authorities consider virtual currencies to be assets, not money, transactions involving them are deemed to be barter transactions. When a taxpayer uses virtual currency in a transaction or trades in virtual currency, there may be tax consequences and the taxpayer must generally report it to the tax authorities.

Amendments will be made to the tax legislation and regulations to give the Minister of Revenue the power to ask taxpayers whether they own or have used virtual assets to carry out certain transactions and to request the details of these transactions as of the date of assent to the bill giving effect to this measure.

Changes to the intervention framework for tax-advantaged funds

Amendments will be made to the constituting act of the tax-advantaged funds as well as to the tax legislation to optimize the economic spin-offs resulting from the interventions of the three tax-advantaged funds (Fonds de solidarité des travailleurs du Québec, Fonds de développement de la Confédération des syndicats nationaux pour la coopération et l’emploi and Capital régional et coopératif Desjardins), to limit the tax expenditure associated with them, to ensure a better match between the investment horizon of the labour-sponsored funds and the minimum holding period of the shares entitling them to the non-refundable tax credit, and to enable more individuals to become shareholders of these funds.

For the shareholders, the amendments will increase the minimum holding period for a share in a labour-sponsored fund. Currently, shareholders may, under certain conditions, require the redemption of their shares after a minimum holding period of 730 days (two years) since their issue. In general, however, shareholders may not redeem their shares before reaching the age of 65 or, if they have not reached this age, before they have availed themselves of their right to early retirement or retirement.

The current two-year minimum holding period will gradually be extended to five years. It will be increased to three years for shares acquired as of June 1, 2024, to four years for shares acquired as of June 1, 2025, and to five years for shares acquired as of June 1, 2026.

The tax legislation will also be amended so that high-income individuals will no longer be eligible for the non-refundable tax credit. In particular, an individual will no longer be able to benefit from this tax credit if their taxable income is subject to the highest tax rate of the personal income tax table for the base year. For the 2024 taxation year, the first year in which the measure will be implemented, the base year will be the 2022 taxation year, in which the maximum taxable income not subject to the highest tax rate was $112,655.