On February 20, 2014, the Quebec Minister of Finance and the Economy, Mr. Nicolas Marceau, tabled his government’s second budget, which includes only a handful of tax measures. At the same time, the government released the report of the Task Force on the Protection of Quebec Businesses, a committee that was set up in June 2013.
This bulletin summarizes the key measures included in the Budget. Note that the measures contained in the Budget do not have the force of law and will have to be passed by the National Assembly.
Measures to fight tax evasion
Implementation of an attestation from Revenu Québec for private construction contracts
Starting in the fall of 2014, a contractor holding a valid licence from the Régie du bâtiment du Québec will be required to obtain an attestation from Revenu Québec and provide it to the recognized client before entering into a construction contract of $25,000 or more.
The recognized client will then be required to validate, on Revenu Québec's website, the authenticity of the attestation obtained from the contractor.
These requirements apply to all levels of subcontracting. A corporation can be both a recognized client and a subcontractor, and must meet the respective requirements of these statuses.
The Revenu Québec attestation is valid for a 90-day period as of the date on which it is issued. At the end of the 90-day validity period, the contractor will be required to renew the attestation from Revenu Québec. A new valid attestation will then have to be provided, and so on, until the end of the contract.
Penalties will apply if these requirements are not met. Further information on the implementation of these measures will be announced at a later date by the government.
Implementation of an attestation from Revenu Québec for employment agencies
In the 2013-2014 Budget, the government announced that it would require employment agencies to obtain an attestation from Revenu Québec because some networks of unreported work are setting themselves up as employment agencies.
The 2014-2015 Budget lays out the terms and conditions for these measures, namely: (i) the attestation from Revenu Québec will be mandatory for employment agencies’ contracts of $2,500 or more, as of fall 2014, and (ii) apart from the requirement to obtain and validate the attestation, client companies will be required, as of 2015, to enter, on a regular basis, all disbursements made to employment agencies. If any of the requirements set forth in the new rules are not met, various penalties will apply. The application details will be specified at a later date.
Installation of sales recording modules in bars
Starting in the fall of 2014, the sales recording module (SRM) requirement will be extended to bars and resto-bars. Essentially, the same additional measures implemented in the restaurant sector will be introduced in bars and resto-bars, i.e. the requirement to give customers a bill and the requirement to produce the bill using an SRM.
The SRMs will have to be installed within a five-month period starting in the fall of 2014. As was the case when SRMs were installed in the restaurant sector, the government will establish a subsidy program to fund the purchase of the SRMs.
The application details will be specified at a later date.
Measures relating to Capital régional et coopératif Desjardins
Since Capital régional et coopératif Desjardins (CRCD) was formed, the government has supported its mission by allowing individuals who acquire its shares to claim a tax benefit. The 2014-2015 Budget includes various measures regarding CRCD, including the following:
- In order to encourage CRCD investments, the government announced that it intends to extend the program to include regional county municipalities (RCMs) outside resource regions that are facing significant economic difficulties.
- The government also announced that any CRCD investment in an eligible entity located in a territory identified as facing economic difficulties that is made between February 21, 2014 and January 1, 2018 and that does not include any security bond or hypothec will be deemed, up to an amount of $500,000, to be grossed up by 100% for the purposes of the investment requirement.
- Furthermore, other territories and RCMs will be considered for purposes of the gross-up relating to an investment made in a territory identified as facing economic difficulties.
- Lastly, the applicable rate for the purposes of the calculation of the tax credit for the acquisition of CRCD shares will be reduced from 50% to 45% for shares acquired after February 28, 2014. As a result, the maximum amount an individual may deduct in calculating his tax otherwise payable for a given taxation year, for shares acquired during a capital-raising period beginning in such year, will decline from $2,500 to $2,250. The special tax relating to the recovery of the tax credit for the purchase of shares will be adjusted accordingly.
Change to the refundable tax credit to foster the modernization of the tourist accommodation offering
To foster the modernization of the tourism accommodation offering, the 2012-2013 Budget introduced a new refundable tax credit corresponding to 25% of the amount by which the aggregate qualified expenditures incurred by a qualified corporation that carries out renovation or improvement work on a tourist accommodation establishment before January 1, 2016 exceeds an annual threshold of $50,000. In the 2014-2015 Budget, the $50,000 annual threshold is replaced by a single $50,000 threshold, which will apply to any taxation year of a corporation ending after February 20, 2014.
Measures to protect corporate head offices located in Quebec
On June 7, 2013, the Government of Quebec established the Task Force on the Protection of Quebec Businesses, which was mandated to recommend measures to: (i) better protect Quebec businesses from unsolicited takeovers and (ii) help keep corporate head offices in Quebec and attract new businesses to Quebec.
The report of the Task Force was released concurrently with the 2014-2015 Budget and is available on the Ministry of Finance and the Economy website at the following address: http://www.finances.gouv.qc.ca/en/index.asp
The government announced that it intends to move quickly to implement the main recommendations contained in the Task Force’s report, including amending the Quebec Business Corporations Act to: (1) enable the adoption of variable voting rights based on the length of time a shareholder holds its shares, within certain parameters; and (ii) allow the adoption of provisions to prohibit certain transactions by corporations subject to a takeover bid not approved by the board of directors.
The government will table a more detailed version of the measures it intends to adopt at a later date.