2024-2025 Québec budget: Tax highlights

Issue 2024-08

In brief

On March 12, 2024, Minister of Finance Éric Girard tabled the Québec government's budget for 2024-2025. This Tax Insights highlights the main tax measures outlined in the budget.

In detail

Business tax measures

Changes to the tax credit for the development of e-business

The tax assistance for e-business development comprises a refundable tax credit of 24% and a non-refundable tax credit of 6% (hereinafter the “TCEB”). These tax credits target specialized information technology companies that operate in the e-business sector. Briefly, the TCEB is calculated on qualified wages incurred and paid to eligible employees.  The qualified wages incurred and paid may not exceed $83,333, calculated on an annual basis.

Changes will be made to the TCEB to refocus it further on businesses that offer higher value-added jobs and maximize the benefits in Québec.

The tax legislation will be amended to exclude tax assistance offered on the first dollars of the qualified wages. The amount of excluded wages relating to qualified wages will be equal to the lesser of the following amounts:

• The amount corresponding to the qualified wages incurred and paid by a qualified corporation in respect of an eligible employee for the taxation year;
• The amount corresponding to the exclusion threshold applicable to qualified wages for the year.

The exclusion threshold applicable will correspond to the amount taken into account in calculating the basic personal tax credit for the calendar year in which the qualified corporation’s taxation year begins. For illustrative purposes, for 2024, the amount used is $18,056.

The tax legislation will be amended to remove the current $83,333 limit on the definition of the expression “qualified wages” for each eligible employee. These changes will apply to a taxation year that begins after December 31, 2024.

Lastly, the 6% rate of the non-refundable portion of the tax credit will be increased annually by 1% until it reaches 10% in 2028. Similarly, the 24% rate of the refundable portion of the tax credit will be reduced annually by 1% until it reaches 20% in 2028. The table below shows the rates of the refundable and non-refundable tax credits subsequent to the changes that will come into effect on January 1 of each calendar year affected.

Applicable TCEB rates
(per cent)

Changes to the tax credits for the production of multimedia titles

The refundable tax credit for multimedia titles allows corporations to benefit from tax assistance based on the qualified labour expenditure they incur. Under the current rules, the tax assistance is granted at the rates set out in the following table.

Rates of tax credits for the production of multimedia titles
(per cent)

In general, a company's qualified labour expenditure for a taxation year consists of the aggregate of the following amounts:

• The salaries and wages attributable to one or more eligible multimedia titles that a corporation has incurred and paid in respect of its eligible employees for eligible production work relating to the multimedia title
• The portion of the consideration that a corporation paid, under a contract, for eligible production work relating to the multimedia title that was carried out on its behalf during the year, to a subcontract with whom it was not dealing at arm’s length at the time the contract is entered into;
• One-half of the portion of the consideration that a corporation paid, under a contract, for eligible production work relating to the multimedia title carried out on its behalf during the year to a subcontractor with whom it was dealing at arm’s length at the time the contract is entered into.

The labour expenditure in respect of wages and salary cannot exceed $100,000 calculated on an annual basis. An exception to the limit is provided for up to 20% of the total number of eligible employees.

To further refocus these tax credits on businesses that offer the highest value-added jobs and that can maximize the benefits in Québec, the tax legislation will be amended to exclude from the tax assistance the first dollars of wages a company has incurred and paid, or which a non-arm’s length subcontractor has incurred and paid for an eligible employee. The amount of excluded wages relating to qualified wages will be equal to the lesser of the following amounts:

• The amount corresponding to the qualified wages incurred and paid by an eligible company for an eligible employee in the taxation year;
• The amount corresponding to the exclusion threshold applicable to eligible wages for the year.

The exclusion threshold applicable will correspond to the amount taken into account in calculating the basic personal tax credit for the calendar year in which the qualified corporation’s taxation year begins. For illustrative purposes, for 2024, the amount used is $18,056.

The tax legislation will also be amended to remove the $100,000 limit applicable to a salary or wages covered by the definition of the expression “qualified labour expenditure” for each eligible employee. These changes will apply to a taxation year that begins after December 31, 2024.

Moreover, two new non-refundable tax credits will be introduced for the general and specialized components. The initial rates of these tax credits will be 2.5%, rising by 2.5% annually to reach a maximum of 10% by 2028. The current non-refundable tax credit will therefore be reduced 2.5% per year to a maximum of 10% in 2028. The rate changes will be effective January 1 of each calendar year.

The criteria for the credit will remain the same as for the current multimedia credit. The tax credit for the general component will be introduced as of 2025. Moreover, the portion of the tax credit that does not reduce tax payable may be carried back 3 taxation years or carried forward 20 taxation years. No carry-over will be allowed for a taxation year that begins before January 1, 2025.

Applicable rates of the tax credits for the production of multimedia titles
(per cent)

Enhancement of the refundable tax credit for Québec film or television productions

The refundable tax credit for Québec film or television productions is calculated based on labour expenditure incurred by a corporation in respect of services rendered on a Québec film production. The base rate of this tax credit is generally 32%, but can reach 40% for certain French-language and giant-screen productions. The base rates may be increased based on public assistance for computer-aided special effects and animation, as well as for regional productions.

The labour expenditure considered in calculating the basic tax credit may not exceed 50% of the production costs incurred. In order to provide a more structuring and favourable tax environment for Québec production companies, the tax legislation will be amended to increase the limit from 50% of production costs to 65% of production costs incurred directly for the film production.

Adjustments to the refundable tax credit for film production services

Under the current rules, a qualified corporation can benefit from a tax credit of 20% on all of its eligible production costs attributable to the various stages of a qualified production, and an increase of 16% for computer-aided special effects and animation.

In order to further promote the shooting of foreign film productions in Québec and foster investment in infrastructure and equipment, the base tax credit will be increased by 5% to reach 25%.

The tax legislation will also be amended to allow only 65% of the portion of the cost of a visual effects and animation contract to be considered in calculating the base tax credit and enhancement. These adjustments will apply in respect of a qualified production for which an application for an approval certificate will be submitted to SODEC after the day of the budget speech (if SODEC deems that work on the production was not sufficiently advanced on the day of the budget speech) or after May 31, 2024.

Easing of the notion of government assistance for the application of the tax credit for the production of biofuel and the tax credit for the production of pyrolysis oil in Québec

To intensify its fight against climate change, the government offers businesses two refundable tax credits: the refundable tax credit for the production of pyrolysis oil and the production of biofuel.

In general, the tax legislation provides rules to prevent the cumulation of government and non-government assistance. Due to the size of the U.S. subsidies granted to stimulate biofuel production and to foster the production of biofuel and pyrolysis oil in Québec, the government will propose an amendment to these credits. The expression “government assistance” will be broadened to include the value of compliance credits granted to a corporation under the Clean Fuel Regulations, but only as of a corporation’s taxation year that will begin after December 31, 2027.

Abolition of the tax credit to foster the retention of experienced workers

Briefly, this refundable tax credit is granted to qualified corporations that employ individuals aged 60 or over. It is calculated on the employer contributions paid by the corporation in respect of such an employee.

Given the low impact that this tax credit has had on the retention and attraction of experienced workers, the tax credit for experienced workers will be abolished in respect of an employer contribution amount paid after March 12, 2024.

Tax measures concerning individuals

Changes relating to the supplements for handicapped children under the refundable tax credit granting an allowance to families

The refundable tax credit granting an allowance to families aims to help families meet the needs of their children under 18 years of age. This tax credit has three main components:a basic amount for child support, a supplement for handicapped children (SHC) and a supplement for handicapped children requiring exceptional care (SHCREC). The basic component is determined by the number of children under 18 living with the individual, the individual's family situation and the family income. When an individual has a handicapped child, that individual may also benefit in certain cases from the SHC and sometimes the SHCREC. Various changes will be made to the Family Allowance, in particular to the two supplements for handicapped children.

An amount of $229 may be paid monthly under the SHC in respect of a child who has an impairment or a mental function disability that significantly limits the child. An impairment is manifested by a persistent alteration which must currently be confirmed by objective signs and such observations must be attested to by a member of a professional order.

In order to clarify certain parameters required to assess a child's eligibility, the attestation of the results and methods used will be replaced by a requirement that the professional's assessment report include the diagnosis or diagnoses made, a description of the extent and severity of the impairments, and a precise description of the therapeutic care received over the past 12 months and planned for the coming year. Moreover, in order to take into account the evolution of science and medical practices, the various tables of presumed cases of serious handicap related to an impairment will be updated.

Also, the tax legislation, which currently provides for two situations in which a child qualifies for the first level of the SHCREC, will be amended to add a new situation (Situation C). This amendment will allow some children under the age of two to be eligible for the SHCREC. These changes will apply to any application filed after June 30, 2024.

Elimination of the QPP pension reduction as of age 65

The government is announcing that, as of January 1, 2025, it will completely eliminate the retirement pension reduction for seniors with disabilities reaching the age of 65.