This enhancement will be integrated into the parameters of the personal income tax system applicable as of 1 July 2023.
Enhancement of the non-refundable tax credits for volunteer firefighters and search and rescue volunteers
The Québec tax system allows individuals to apply for a tax credit for volunteer firefighters or a tax credit for search and rescue volunteers for a given tax year if they carry out at least 200 hours of eligible volunteer service during the year with one or several fire safety services or eligible organizations. The amount of the credit corresponds to the product obtained by multiplying $3,000 by the rate for the first taxable income bracket of the personal income tax table applicable for the year.
As of the 2023 taxation year, these non-refundable tax credits will be increased. Accordingly, the amount used to determine these tax credits will be increased to $5,000 instead of $3,000, and this new amount will automatically be indexed as of the 2024 taxation year.
Reduction in Québec Pension Plan contributions for workers aged 65 or older
The Act respecting the Québec Pension Plan (“ARQPP”) will be amended to introduce, as of 1 January 2024, an option allowing workers aged 65 or over to stop paying Québec pension plan (“QPP”) contributions, provided they are also receiving a QPP or Canada Pension Plan (“CPP”) retirement pension.
The election to cease paying QPP contributions will be subject to specific conditions for employees, self-employed workers and workers responsible for a family-type resource (“FTR”) or an intermediate resource (“IR”). The election must be made in accordance with the prescribed terms and conditions and will be revocable. An employee may elect to file a prescribed form to the employer who must conserve it. An employer will be able to stop deducting QPP contributions as of the first pay of the month following the month in which the election form is provided. Self-employed workers and workers responsible for an FTR or an IR may elect to stop contributing to the QPP when they file their income tax return. Once made, the election to stop making QPP contributions by a worker who is an employee will also apply to his employer, so that the latter will also become exempt from making QPP contributions as of the same date as that which applies to the employee.
In addition, the ARQPP will be amended so that, as of the year 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.
Other tax measures
Increase in the specific duty on new tires for road vehicles
To fund the Québec Integrated Used Tire Management Program (hereinafter referred to as the “Program”), whose administration has been entrusted to the Société québécoise de récupération et de recyclage, (“RECYC-QUÉBEC”), a specific duty on new tires for road vehicles was introduced on 1 October 1999.
This specific duty of $3 applies, among other things, regarding any new tire of a road vehicle which a person acquires by retail sale in Québec or brings into Québec for purposes other than resale or installation on a road vehicle intended for sale or long-term lease. It also applies regarding any new tire provided as equipment on a road vehicle which a person acquires in Québec by retail sale or by long-term lease.
In 2020, it was estimated that the accumulated surplus would no longer be sufficient to fund the Program from 2024 onwards. Furthermore, the one-time duty for car and truck tires does not adequately reflect the difference in processing costs between these two types of tires.
Accordingly, the specific duty on new tires for road vehicles, as it is currently applied, will be increased as follows:
- $4.50 for new tires for road vehicles for which the diameter of the rim is less than or equal to 62.23 cm (24.5 inches) and the overall diameter is less than or equal to 83.82 cm (33 inches);
- $6.00 for new tires for road vehicles for which the diameter of the rim is less than or equal to 62.23 cm (24.5 inches) and the overall diameter is greater than 83.82 cm (33 inches) but does not exceed 123.19 cm (48.5 inches).
The increase in specific duty will apply as of 1 July 2023.
Implementation of the new program for managing the tax exemption of First Nations regarding taxes
Under the federal Indian Act, the personal property of a person with Indian status or a band situated on a reserve is exempt from taxation.
Due to some technical considerations, such an exemption is complex to apply to certain property that are subject to a specific tax. Where the tax exemption cannot be granted at the time of purchase, the purchaser must apply to Revenu Québec for a reimbursement.
Since 1 July 2011, a mechanism called the fuel tax exemption management program for persons with Indian status (the “FTEI program”) has made it possible to replace the reimbursement measure with a purchase exemption measure.
To facilitate the application of the tax exemption for certain products covered by a specific tax, this budget provides funding, over five years, for the implementation of a computer system under the new program for managing the tax exemption of First Nations from taxes (hereinafter referred to as the “TEFNT program”).
This program, which will be phased in as of 1 July 2023, will allow persons with Indian status to benefit from the exemption, to which they are entitled with respect to the tax on alcoholic beverages, directly at the time of purchase. The program will therefore aim to facilitate the application of the tax exemption at the time of each retail sale of alcoholic beverages intended for home consumption.
It is important to note that the computer solution implemented under the FTEI program will be replaced by the one chosen for the new TEFNT program.
Strengthening tax compliance regarding cryptoassets
More and more taxpayers are using virtual assets, commonly called cryptoassets, in the course of their transactions. Since tax authorities have confirmed that virtual money is not a currency and that it is not legal tender in Canada, virtual money operations are considered as barter transactions. The tax consequences arising from such transactions must be declared to tax authorities as any other transaction. To strengthen compliance in respect of such transactions and to be able to carry out the necessary tax audits, amendments will be made to the legislation giving power to the minister of revenue to ask taxpayers whether they own or have used virtual assets to carry out certain transactions during a taxation year or a fiscal year, as the case may be. They will also allow for the requesting of details of such transactions, as applicable.
This measure will apply as of the date of assent to the bill giving effect to this measure.
Changes to the intervention framework for tax-advantaged funds
The budget proposes amendments to the constituting act of the tax-advantaged funds, the Fonds de solidarité des travailleurs du Québec (“Fonds de solidarité F.T.Q.”), the Fonds de développement de la Confédération des syndicats nationaux pour la coopération et l’emploi (“Fondaction“, and with Fonds de solidarité F.T.Q. “labour-sponsored funds“) and the Capital régional et coopératif Desjardins (“CRCD Fund”).
In particular, the current eligible investment categories will be reorganized into three new investment categories: Category 1 – Québec businesses, Category 2 – Québec investment funds and Category 3 – Other investments for the benefit of Québec. The constituting acts of the three tax-advantaged funds will be amended so that the new eligible investment categories and other terms and conditions can be incorporated into the respective legislation to take effect on 1 June 2024, in the case of the labour-sponsored funds, and 1 January 2024, in the case of the CRCD Fund.
Additionally, the functions set out in each of the constituting acts will be updated and will be used to express the mission of each of the entities from now on. The constituting acts of the three tax-advantaged funds will be amended to give effect to the new missions of the tax-advantaged funds as of 1 June 2024, in the case of the labour-sponsored funds, and 1 January 2024, in the case of the CRCD Fund.
Furthermore, amendments will be made to the constituting act of each labour-sponsored fund to provide that the current minimum holding period of two years for equity funds to be gradually extended to five years. Accordingly, the minimum holding period for shares of a labour-sponsored fund will be increased to three years for shares acquired as of 1 June 2024, to four years for shares acquired as of June 1, 2025, and to five years for shares acquired as of 1 June 2026. The constituting acts of the two labour-sponsored funds will be amended to give effect to this change as of 1 June 2024.
Finally, the tax legislation will be amended so that high-income individuals will no longer be eligible for the non-refundable tax credit for a labour-sponsored fund. An individual will no longer be able to benefit from this tax credit, for a taxation year, as long as the individual’s taxable income is subject to the highest tax rate of the personal income tax table for the base year.
The base taxation year will mean the taxation year that ends on 31 December of the second calendar year preceding the taxation year for which an individual claims the non-refundable tax credit for a labour-sponsored fund.
This change will apply to a claim for the non-refundable tax credit for a taxation year after the 2023 taxation year in respect of shares acquired after 31 December 2023. Consequently, for the 2024 taxation year, the first year of application of this new measure, the base year will be the 2022 taxation year. Therefore, only individuals whose taxable income for the 2022 taxation year did not exceed the $112,655 threshold will have access to the tax credit for a labour-sponsored fund for the 2024 taxation year.
Learn more
For more information, please contact your EY or EY Law advisor or one of the following professionals:
Jonathan Bicher, Montréal
+1 514 731 7902 | jonathan.bicher@ca.ey.com
Philippe Dunlavey, Montréal
+1 514 879 2662 | philippe.dunlavey@ca.ey.com
Stéphanie Jean, Montréal
+1 514 879 8047 | stephanie.jean@ca.ey.com
Stéphane Leblanc, Montréal
+1 514 879 2660 | stephane.leblanc@ca.ey.com
Sandy Maag, Montréal
+1 514 874 4377 | sandy.maag@ca.ey.com
Benoît Millette, Montréal
+1 514 879 3562 | benoit.millette@ca.ey.com
Nancy Avoine, Québec City
+1 418 640 5129 | nancy.avoine@ca.ey.com
Martin Dessureault, Québec City
+1 418 640 3019 | martin.dessureault@ca.ey.com
Sylvain Paquet, Québec City
+1 418 640 5138 | sylvain.paquet@ca.ey.com