Canada: Government Of Québec 2014-15 Budget – Public Financial Discipline Imposed: Impact On Businesses

The goal of the newly elected majority government (Government) is to create both wealth and employment in Quebec. To achieve this goal, the Government needs to end the structural imbalance of public finances. There are two pillars underlying this goal: a growing economy and sound, balanced public finances. The Government has identified five measures for achieving economic prosperity: support for private investors, a maritime strategy, revival of the Plan Nord, promotion of natural resources, and investment in infrastructure.

Stabilizing public finances is the cornerstone of a return to a balanced budget. The deficit for 2013-14 will be C$3.1 billion, C$600 million greater than expected. The expected deficit for 2014-15 is C$2.35 billion. A balanced budget may be achieved in 2015-16 with an economic growth rate of 1.8% in 2014 and 2% in 2015.

The 2014-15 budget (Budget), unveiled on June 4, 2014 by Minister of Finance Carlos Leitao (Minister), confirms that the balanced budget will come without raising taxes, except for measures to which a large majority of citizens subscribe. To this end, the Minister announced a reduction of Government expenses as well as a reduction in the growth of spending below the growth of revenue. Two committees will be created to ensure a balanced budget: one – the Québec Taxation Review Committee – whose mandate is to examine the Quebec taxation system and propose changes to make the system more competitive and review tax expenditures; and another – the Ongoing Program Review Committee – whose focus is to review Quebec programs with a view to reduce or revise their scope. An in-depth exercise in controlling public finances has been put in place. This process will require rigor on the part of the Government over the next two years. To date, no Quebec government has succeeded in such an exercise.

The Budget affects a number of fiscal programs in order to centre Quebec's fiscal policy on the two pillars identified by the Government. Certain measures are new while others present important changes to existing programs, notably to refundable tax credits for businesses. Nevertheless, the Budget includes no tax increases for businesses or individuals.

Below we present certain fiscal measures that may be of interest to businesses and employers. Nevertheless, certain measures announced in the Budget could be addressed in a distinct Bulletin, including certain proposals regarding opportunities for development of Quebec's natural resources and the limited amendments to the mining tax regime. Noteworthy in this connection is the contemplated transfer of the responsibility relating to the application and enforcement of the Mining Tax Act, currently held by the Minister of Energy and Natural Resources, to the Minister of Revenue as of April 1, 2015.

RELAUNCHING SMALL AND MEDIUM BUSINESSES (SMEs)

The budget contains three measures to support SMEs.

Reduced tax rate for manufacturing SMEs

The general corporate tax rate in Quebec is 11.9%. However, Canadian-controlled private corporations with paid-up capital of C$10 million or less enjoy a tax rate deduction of 3.9% on the first C$500,000 of annual income – the small business income ceiling – from an eligible business.

To help manufacturing SMEs become more competitive, they may also benefit from an additional deduction of up to 4% of their tax rate. This additional deduction may only be claimed for income subject to an 8% tax rate. The final determination of the rate of this additional deduction will depend on the proportion of the SMEs' activities that consist of manufacturing and processing.

The expression "manufacturing SME" means a corporation of which at least 25% of its activities consist of processing and manufacturing. Two items will be considered in determining the proportion of a corporation's activities attributable to manufacturing and processing activities: assets and labour. More specifically, the Budget includes a formula for determining the rate of the additional deduction. Corporations for whom manufacturing and processing represent 50% or more of their activities may benefit from the maximum additional deduction rate each year applicable to that taxation year. Corporations for whom manufacturing and processing represent between 25% and 50% of their activities may claim an additional deduction which will be reduced linearly based on the proportion of those activities.

The maximum additional deduction a manufacturing SME may claim will be 2% taxation years ending after June 4, 2014, while a deduction rate of 4% will apply to the taxation year ending after March 31, 2015. Where the taxation year of the manufacturing SME includes June 4, 2014 or March 31, 2015, the rate is adjusted in proportion to the number of days of such taxation year that follow June 4, 2014 or March 31, 2015.

Additional deductions for transportation costs to remote manufacturing SMEs

To improve the competitiveness of remote manufacturing SMEs, Canadian-controlled private corporations whose paid-up capital is less than C$15 million may claim an additional deduction in calculating their net income to reflect the higher transportation costs attributable to the distance of certain regions from Quebec's major urban centres. The amount of the additional deduction for taxation year will depend on a number of factors, including the region where the corporation carries out its activities, the level of its manufacturing activities, the size of the corporation, its gross income in the given taxation year, as well as a regional cap. The amount of this additional deduction, for a taxation year, may reach 6% of the gross income for the given taxation year.

The rate of the additional deduction a corporation may claim for a taxation year will depend on the base rate associated with the region where it carries out its activities and on the level of its manufacturing activities. The base rate may be 2%, 4% or 6% of its gross income of the corporation, depending on the region of its activities (three regional zones cover the territory of the province, which vary according to distance from major urban centres). A manufacturing SME whose proportion of activities attributable to manufacturing and processing for a given taxation year is 50% or more may claim the maximum additional deduction available (2%, 4% or 6%, depending on which regional rate is applicable). The applicable rate will be reduced linearly for SMEs whose manufacturing and processing activities represent 25% to 50% of their activities.

Notwithstanding the deduction that may apply under the above formula, the deduction will be capped depending on the corporation's income for the given taxation year as well the regional cap applicable. For zone 1, the region nearest urban areas, the regional cap will be C$100,000. For zone 2 (intermediate area), the cap is C$250,000. These caps are reduced when the tax year is less than 365 days. There is no cap on deductions for zone 3 (the most remote area). For all corporations, regardless of the zone of their manufacturing activities, the amount of their yearly deduction will be subject to the same formula applicable to tax deductions for small businesses when the paid-up capital is between C$10 million and C$15 million. As such, mining activities must be located in the most remote area and the corporation must have paid-up capital of less than C$10 million to benefit from the maximum additional deduction.

Reduced contribution to Health Services Fund to boost innovation in SMEs

To bolster Quebec SMEs' capacity to innovate, a temporary reduction in the contribution to the Health Services Fund will be implemented for full-time jobs created in the natural and applied sciences sector (eligible jobs). This reduction will be granted until 2020 for the increase in payroll attributable to the hiring of specialized employees. The employer can be a legal person, a partnership or an individual. For employers whose payroll is C$1 million or less, determined on a consolidated basis, the reduction will completely eliminate contributions to the Health Services Fund payable for new specialized employees. Employers whose payroll is between C$1 million and C$5 million will receive a partial reduction in the contribution payable for such employees. Employers with a payroll above C$5 million are excluded. Eligible jobs must satisfy certain criteria with regard to the length of the employment contract and must appear on the exhaustive list of recognized jobs provided in the Budget. While the last year of this program has been fixed, the start date of this program is not set forth in the Budget.

INCENTIVES TO FOSTER MARINE INDUSTRY

A number of measures will be put in place to stimulate the economic development of Quebec's coastal regions and give new impetus to marine transportation and tourism. More specifically, the Budget includes two new fiscal measures that will be added to the existing refundable tax credit for the construction or conversion of ships.

Creation of a tax-free reserve

This first measure will allow a Quebec shipowner – a legal person who runs a Quebec business through the intermediary of an organization in Quebec and holds a certificate from the Ministry of Economic Development, Innovation and Export Trade – to create a tax-free reserve. The shipowner will have to maintain separate accounting for the tax-free reserve, though it does not involve the creation of a specific account or a trust. The reserve will allow shipowners to maintain and improve the ships in their fleet or to build new ships.

The Budget specifies that the vessel or shipyard to which these measures apply must be an eligible vessel or shipyard. A prescribed procedure must be respected, including precise measures as to the duration of the reserve, first withdrawal and management of funds. An eligible shipowner's tax-free reserve will end no later than December 31, 2033. Precise rules to deter inappropriate tax planning are included in the Budget.

This measure applies to tax-free reserves duly created after June 4, 2014.

Additional capital cost allowance of a vessel

To support Quebec's shipyards, a second measure is included in the Budget so that a Quebec shipowner may claim an additional deduction for work done to a vessel in a Quebec shipyard. Current tax legislation and regulations allow a taxpayer to deduct a rate of 33.33% of the cost of a Canadian vessel, which is defined as a vessel that was built in Canada, is registered in Canada, and was not used for any purpose before being acquired by the taxpayer.

To support Quebec's shipyards, Quebec's tax legislation and regulations will be amended so that a taxpayer may claim an additional capital cost allowance where the taxpayer has such a vessel built or has renovation work done on it by a Quebec shipyard.

This additional deduction will apply solely to work a taxpayer has done by a qualified shipyard. The additional deduction will correspond to 50% of the amount the taxpayer deducts in calculating the taxpayer's income for a taxation year on account of the capital cost allowance in relation to the cost included in the separate class applicable to a Canadian vessel and relating to work done by a qualified shipyard.

This amendment will apply for a taxation year to the cost of work done by a qualified shipyard in relation to a Canadian vessel pursuant to a contract a taxpayer enters into with such shipyard after June 4, 2014, but before January 1, 2024.

REDUCTION OF TAX INCENTIVES: 20% REDUCTION IN RATES OF NUMEROUS TAX CREDITS

Considering the substantial efforts needed to offset the budgetary impasse, a 20% reduction in the tax rates to approximately 30 business refundable tax credits are proposed. Although the application date of the various measures differs depending on the applicable tax credit in question, generally the changes will apply either June 4, 2014 or June 5, 2014. The Québec Taxation Review Committee will be tasked with assessing the impact of such measures once enacted.

Below is a table from the Budget documents (Table A.27 of the Québec Budget Plan documents). The table sets forth the title of the relevant Quebec tax credit, current rates and proposed reduced rates of such tax credit, the relevant tax base upon which the tax credit is applied to and the contemplated financial savings of the reduction to the Government.

Financial impact of 20% reduction in tax credit rates

Tax Credits

Rates

Tax base

Financial Impact
(millions of dollars)

2014-2015

2015-2016

2016-2017

Research and Development

Salaries of researchers

17.5% / 37.5% to 14% / 30%

Salaries paid / research contracts

18.8

112.6

151.2

University research

35% to 28%

Research contracts

0.2

1.0

1.4

Private partnerships

35% to 28%

Salaries and equipment / research contracts

0.6

5.2

7.5

Research consortium

35% to 28%

Dues and contributions

0.0

1.1

1.9

Technology adaptation services

50% to 40%

Technology transfer expenses

0.1

0.3

0.4

Development of e-business

30% to 24%

Salaries paid

3.2

37.3

59.4

Production of multimedia titles

26.25% / 37.5% to 21% / 30%

Salaries paid

0.2

22.3

32.4

Major employment-generating projects

25% to 20%

Salaries paid

0.2

1.7

2.2

Design

15% / 30% to 12% / 24%

Salaries paid

0.5

2.7

3.5

Processing activities in resource regions

10% to 8%

Increase in payroll

0.2

1.5

2.0

Gaspésie and certain maritime regions of Quebec

20% / 40% to 16% / 32%

Increase in payroll / salaries paid

0.1

2.0

3.2

Vallée de l'aluminium

20% to 16%

Increase in payroll

0.1

1.1

1.6

Operator of an international financial centre

30% to 24%

Salaries paid

0.3

2.6

3.7

New financial services corporation

40% to 32%

Start-up costs

0.0

0.3

0.5

Hiring of employees by a new financial services corporation

30% to 40%

Salaries paid

0.0

0.1

0.2

Investments relating to manufacturing and processing equipment

7.2

23.4

27.0

Base rate

5% to 4%

Machinery and equipment

Central regions

10% to 8%

Machinery and equipment

Resource regions

20% / 30% / 40% to 16% / 24% / 32%

Machinery and equipment

Tax credit relating to resources

15% / 38.75% to 12% / 31%

Exploration expenses

0.3

9.8

15.4

Diversification of markets of manufacturing businesses

30% to 24%

Certification expenses

0.0

0.5

0.7

Modernization of tourism accommodation offering

25% to 20%

Renovation expenditures

0.1

1.4

1.8

Quebec film and television production

35% / 65% to 28% / 52%

Salaries paid

0.8

19.9

26.5

Film production services

25% / 45% to 20% / 36%

All expenditures

0.8

12.3

14.6

Film dubbing

35% to 28%

Salaries paid

0.0

0.5

0.7

Production of sound recordings

35% to 28%

Salaries paid

0.0

0.2

0.3

Production of shows

35% to 28%

Salaries paid

0.1

2.0

2.8

Book publishing

35% / 27% to 28% / 21.6%

Salaries paid

0.2

1.3

1.8

Production of multimedia environments or events

35% to 28%

Salaries paid

0.0

0.3

0.4

On-the-job training period

30% / 40% to 24% / 32%

Salaries paid

1.5

6.8

8.4

Manpower training in the manufacturing, forest and mining sectors

30% to 24%

External training and salaries paid

0.0

0.2

0.2

TOTAL

35.5

270.4

371.7

Flow-Through Shares

The 20% reduction in tax credit rates will also apply to the two additional deductions under Quebec's flow-through share regime.

If exploration expenses are incurred in Quebec by a corporation that renounces such expenses to a Quebec resident individual who acquires a flow-through share of such corporation, the shareholder may claim a base deduction equal to 100% of the shareholder's acquisition cost of the flow-through shares of the issuing corporation.

On top of such base deduction, an additional 25% deduction is available for Quebec-based exploration expenses. Furthermore, a supplementary 25% deduction may be claimed if the expenses incurred by the issuing corporation, from the proceeds obtained from the issuing of flow-through shares, are surface mining exploration or oil and gas exploration.

The reduction of two such additional rates will accordingly result in an individual shareholder being entitled to claim a deduction of 110% or 120%, as the case may be, for mining exploration expenses, or 120% for oil or gas exploration expenses incurred in Quebec by a corporation that are renounced in favour of the shareholder. These reductions will apply to flow-through shares issued after June 4, 2014 unless the shares were issued after June 4, 2014 either further to a subscription made no later than June 4, 2014 or pursuant to an interim prospectus receipt application or prospectus exemption application, as the case may be, made no later than June 4, 2014.

OTHER REDUCTION OF TAX INCENTIVES

Elimination of increase from 17.5% to 27.5% in rate of refundable tax credit for R&D salary in relation to biopharmaceutical activities

An eligible biopharmaceutical corporation may be entitled to receive a refundable tax credit for R&D salary equal to 27.5% of its eligible R&D expenditures for a given taxation year. If the eligible biopharmaceutical corporation is a Canadian-controlled corporation it can benefit from an increase in the credit rate of up to 37.5%.

To qualify as an eligible biopharmaceutical corporation, a corporation must obtain an initial certificate from Investissement Québec and an eligibility certificate from Investissement Québec regarding each taxation year for which it wishes to benefit from the increased rate of the refundable tax credit for R&D salary.

This tax credit rate increase from 17.5% to 27.5% for R&D salary will be eliminated as of June 4, 2014. Investissement Québec will accordingly not accept applications for an initial certificate submitted by a corporation as of June 4, 2014. Investissement Québec will also no longer issue an annual certificate for a taxation year of a corporation beginning June 5, 2015.

However, a corporation previously recognized by Investissement Québec as an eligible biopharmaceutical corporation may continue to benefit from the increase in the rate of the refundable tax credit for R&D salary for its taxation year including June 4, 2014, but the current increase will be reduced by 20%. The rate of the tax credit will therefore be reduced to 22%. In the case of a Canadian-controlled corporation, the rate increase will vary from 22% to 30%.

Refundable tax credit for development of e-business

The refundable tax credit for the development of e-business (EBTC) of 30% is granted to a qualified corporation that pays salaries to eligible employees carrying out an eligible activity. The amount of the tax credit may not exceed C$20,000 per employee annually.

Pursuant to Information Bulletin 2013-7 released on July 11, 2013, it was announced that EBTC would be extended for 10 years, i.e. until December 31, 2025 and that the annual cap of C$20,000 per employee would be raised to C$22,500 as of January 1, 2016.

The rate of the EBTC will be reduced to 24%. This change will apply to salaries incurred in respect of an eligible employee after June 4, 2014. The annual cap of C$20,000 per employee will be maintained and will not be raised to C$22,500 as of January 1, 2016.

Tax credit for investments relating to manufacturing and processing equipment

For a given taxation year, a qualified corporation that acquires qualified property may receive, in respect of eligible expenses it incurred, the tax credit for investments relating to manufacturing and processing equipment (TCI).

The base rate of the TCI is 5%. This rate may rise up to 40% where the qualified property is acquired for use mainly in certain remote Quebec regions. The base rate can also reach anywhere from 10% to 35%, depending on which Quebec regions the acquired qualified property is mainly used. The TCI can be deducted from income tax otherwise payable for such taxation year. The portion of the TCI regarding a taxation year that cannot be applied against income tax payable by the corporation for such taxation year may be refunded or carried over.

A qualified property, for the purposes of the TCI, is a property included in Classes 29, 43, 50 or 52 of Schedule B of the Regulation respecting the Taxation Act that is used mainly for making or processing articles intended for sale or lease of a property acquired after March 20, 2012 for use mainly in the course of ore smelting, refining or hydrometallurgy activities, other than ore from a gold or silver mine, extracted from a mineral resource located in Canada. The property must have been acquired before January 1, 2018 and, prior to its acquisition, it must not have been used for any purpose.

It was announced in Information Bulletin 2013-10 that an additional increase of up to 10% would be added to the rate of the TCI applicable to a qualified corporation, for a taxation year, regarding expenses eligible for the additional increase, i.e. the eligible expenses incurred by the corporation while its activities are mainly manufacturing or processing.

Generally, effective for eligible expenses incurred after June 4, 2014, the Budget proposes to eliminate the 10% rate increase announced in Information Bulletin 2013-10, as well as reduce by 20% the TCI base rate of 5% and the increases to such rate mentioned above.

Elimination of refundable tax credit relating to buildings used in the course of manufacturing or processing activities by a Quebec manufacturing SME

The refundable tax credit relating to expenditures related to the acquisition of, or additions to, buildings used in the course of manufacturing or processing activities by a Quebec manufacturing small and medium-sized enterprise (TCB) was introduced on October 7, 2013. The TCB refundable tax credit could reach 50%, depending on where the building is located and the paid-up capital of the qualified corporation for the taxation year.

The TCB tax credit will be eliminated as of June 5, 2014. Consequently, expenditures relating to a building incurred after June 4, 2014 will not give rise to the TCB.

Refundable tax credit for integration of information technologies in manufacturing SMEs

Pursuant to Information Bulletin 2013-10 dated October 7, 2013, a new temporary refundable tax credit was introduced to support Quebec manufacturing SMEs that wanted to invest in technology and integrate information technologies (IT) in their business processes.

The IT refundable tax credit provides that a qualified corporation may claim the credit regarding its expenditures relating to the supply of a qualified management software package. The IT credit is equal to 25% of the expenses relating to a qualified IT integration contract for which Investissement Québec has issued a certificate. The total amount of the IT credit regarding one or more qualified IT integration contracts, as the case may be, is limited to C$62,500.

Starting June 4, 2014 and until further notice, Investissement Québec will not accept applications for an IT integration contract certificate submitted by a corporation as the IT refundable tax credit is under review.

EMPLOYER CONTRIBUTIONS

In recent years, Quebec's fiscal authorities have been confronted with circumstances where employers have challenged the tax assessment of the payroll on which contributions to various Quebec programs is calculated. These programs include employer contributions to the Health Services Fund and the Québec Pension Plan. Quebec employers have generally not included in their payroll the value of benefits conferred by a parent company on the employers' Quebec employees. Since the parent company may not itself have been required to contribute to Quebec programs, the Government was unable to collect payroll taxes in respect of the taxable benefits received by a Quebec employee from a person not subject to Quebec contributions. The amount of these benefits could be substantial given that they were often linked to the value of "in-the money" stock options. The lost revenue could be substantial since the amount of the benefit is linked to the employer contribution bases forming part of the Health Services Fund, which can represent 4.26% of the employer's payroll contributions.

In the interests of fairness and neutrality and to avoid any erosion in the base of salary-based contributions, a change is proposed to be made to the base wages, as defined in the Taxation Act for the purposes of the compensatory tax required of financial institutions, which is used as the point of departure in determining the contributions required under the Act respecting the Québec Pension Plan, the Act respecting the Régie de l'assurance maladie du Québec, the Act respecting labour standards, the Act respecting industrial accidents and occupational diseases, and the Act to promote workforce skills development and recognition. As such, the definition of "base wages" will be modified to include any amount paid, allocated, granted or awarded to the employee because of, or in the course of his or her office or employment by a person not at arm's length with the given employer, unless such amount was excluded from the employee's base wages if it were paid, allocated, granted or awarded by the employer.

The application of this amendment will be declaratory. However, it will not apply to cases pending on June 4, 2014, and notices of objection served to the Minister no later than 4 p.m. on June 4, 2014, where the reason for the objection is that an amount has been paid, allocated, granted or awarded to an employee by a person not at an arm's length with the employee's employer rather than the employee.

TAX EVASION

The Budget confirms that the Government is determined to step up the battle against tax evasion and unreported work. In particular, the Budget announces initiatives at further improving tax auditing in the construction section, ensuring sales recording modules in bars and resto-bars and expediting penal case management. The Government expects that such initiatives will augment tax revenues by more than C$100 million a year as of 2014-15.

MEASURES RELATING TO FEDERAL TAX LEGISLATION AND REGULATIONS

Harmonization with certain measures of 2014 federal budget

On February 11, 2014, Canada's Minister of Finance presented the federal government's budget for 2014. See our previous Blakes Bulletin: 2014 Federal Budget – Selected Tax Measures for more details. Along with the budget, the Minister of Finance tabled, in the House of Commons, supplementary information as well as notices of ways and means motions and draft amendments to various regulations to amend, among others, the income tax system and the goods and services tax and harmonized sales tax (GST/HST) system.

The Budget confirms that Quebec's tax legislation and regulations will be amended to incorporate certain measures announced in the 2014 federal budget after the assent of any federal statute or the adoption of any federal regulations implementing the retained measures, taking into account technical amendments that may be made prior to such assent or adoption. The changes will apply on the same dates as those for the purposes of the federal measures with which they are harmonized.

Measures retained relating to income tax

Quebec's tax legislation and regulations will be amended to incorporate, with adaptations on the basis of their general principles, measures relating to the:

  • Addition of certain expenses eligible for the tax credit for medical expenses
  • Introduction of a tax credit for volunteers participating in search and rescue activities
  • Property used in the course of carrying on a farming business and a fishing business
  • Tax deferral granted to certain farmers located in regions hit by drought, flooding or excessive moisture
  • Inclusion of certain income attributed to a minor by a partnership or a trust for the purposes of calculating tax on split income
  • Elimination of graduated rate taxation for certain trusts and estates
  • Elimination of the 60-month exemption from the residency presumption rules that apply to non-resident trusts and from certain other related rules
  • Extension from five to 10 years of the deferral period of gifts of ecosensitive land made by an individual
  • Donations in the context of death
  • Donations of cultural property acquired under a gifting arrangement that is a tax shelter
  • Registration of organizations or associations that receive gifts from foreign states that support terrorism
  • Change to the anti-avoidance rule concerning captive insurance corporations
  • Addition of new eligibility conditions to the exception relating to offshore regulated financial institutions
  • Change to the anti-avoidance rule currently contained in the thin capitalization rules
  • Increase in the thresholds determining how frequently employers must remit withholdings at source
  • Changes concerning the accelerated capital cost allowance for clean energy generation equipment to include water-current energy equipment and gasification equipment

The measures relating to the inclusion of income paid to an amateur athlete trust for the purpose of determining the maximum amount deductible on account of registered retirement savings plans and the cap on transfers of pension benefits to registered retirement savings plans where the amount of accumulated benefits has been reduced in particular because of the under-funding of the registered pension plan will also be retained for the purposes of Quebec's tax system.

Measures not retained relating to income tax

Some measures have not been retained because they do not correspond to the features of Quebec's tax system or because Quebec's tax system is satisfactory or has no corresponding provisions. These measures regard the:

  • Increase in the maximum amount of expenditures eligible for the adoption expense tax credit
  • Extension of the mineral exploration tax credit for flow-through share investors
  • Automatic determination of the GST/HST credit
  • Consequential amendments arising from the elimination of graduated rate taxation for certain trusts and estates
  • Extension from five to 10 years of the deferral period of gifts of ecosensitive land made by a corporation
  • Addition of a specific anti-avoidance rule concerning tax withholding on interest payments

Measures relating to GST/HST

Changes will be made to the Quebec sales tax (QST) system to incorporate, with adaptations on the basis of its general principles, the federal measures relating to the GST/HST election for a closely related person and those seeking to strengthen compliance with GST/HST registration.

In Information Bulletin 2014-4 of February 12, 2014, it was announced that the QST system will be harmonized with certain changes to the GST/HST system proposed in the federal budget tabled on February 11, 2014. These harmonization decisions concern the federal measures to improve the application of the GST/HST in the health-care sector.

Tax treatment of awards paid under Offshore Tax Informant Program

The Canada Revenue Agency launched the Offshore Tax Informant Program on January 15, 2014. This program offers financial awards to individuals who supply information on major cases of international tax non-compliance resulting in the recovery of a substantial amount of tax owing. Various amendments to the federal tax legislation and regulations were in Bill C-31, entitled Economic Action Plan 2014 Act, No. 1, which was tabled in the House of Commons on March 28, 2014.

Quebec's tax legislation and regulations will be amended to incorporate, with adaptations based on their general principles, the federal amendments relating to the tax treatment applicable to awards paid under the Offshore Tax Informant Program or a similar program that are stipulated in sections 2, 3, 23 and 32 of Bill C-31. The amount of the tax withholding at source in respect of an award paid under the Offshore Tax Informant Program or a similar program will be equal to 20% of the amount paid. Such amendments to Quebec's tax system will apply on the same dates as they do in the federal tax system.

Harmonization with certain technical measures made public on April 8, 2014

On April 8, 2014, the Department of Finance Canada made public draft legislative and regulatory proposals making technical changes to the income tax system and the GST/HST system to improve their fairness and certainty.

Measures relating to income tax

The measures relating to income tax deal with the Canadian Film or Video Production Tax Credit and the communication of information. The proposals to that effect were previously made public on July 18, 2005.

These measures will not be retained because Quebec's tax system has its own features regarding the tax incentives granted in relation to a film or television production and regarding the communication of information.

Measures relating to GST/HST

In accordance with the principle of general harmonization of the QST system with the GST/HST system, Quebec's tax system will be changed to incorporate, with adaptations on the basis of its general principles and specific features arising from the provincial context, the federal measures:

  • Making technical changes to the provisions concerning real property to ensure consistent treatment of different types of housing and see that the special valuation rule for subsidized housing applies as it should within the framework of the rules on the place of supply as in the context of a change in the tax rate
  • Clarifying the application of GST/HST public service body rebates in relation to non-profit organizations that operate certain health-care facilities
  • Zero-rating precious metals refining services supplied to non-resident persons not registered for the purposes of the GST/HST system
  • Simplifying the tax treatment of the temporary importation of certain railcars
  • Codifying the long-standing relieving provisions related to the tax treatment upon re-entry into Canada of Canadian goods on which the GST/HST has already been paid
  • Updating certain legislative references stipulated in the regulations, other than the reference stipulated in the Taxes, Duties and Fees (GST/HST) Regulations, which has no equivalent in the QST system

The harmonization measures retained in Quebec's tax system will be adopted only after the assent of any law or the adoption of any regulation stemming from the federal news release, taking into account the technical changes that may be made prior to such assent or adoption. They will apply on the same dates as those retained for the purposes of the federal measures with which they harmonize, except for the measures applicable before July 1, 1992 or since July 1, 2010 that, for the purposes of the QST system, will take effect on July 1, 1992 and January 1, 2013 respectively.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions