Québec's Minister of Finance, Éric Girard, has tabled his government's economic and budget update. The new government has announced tax measures to stimulate investment in businesses.
Alignment of some measures announced by the federal government on November 21, 2018, in its Fall Economic Statement
Subject to the specific rules regarding intellectual property and general purpose electronic data processing equipment described below, the government is proposing an alignment with the Accelerated Investment Incentive measure announced by the federal government in the Fall Economic Statement on November 21, 2018.
These measures will apply on the same dates and with the same conditions as for federal tax purposes:
- The Accelerated Investment Incentive, which will enable businesses to write off the costs of property acquired after November 20, 2018, more rapidly. The enhanced allowance will suspend the half year rule and will generally equal three times the half rate. The Accelerated Investment Incentive will be phased out gradually for property that becomes available for use after 2023, and will be completely eliminated for property that becomes available for use after 2027;
- The accelerated CCA for manufacturing and processing equipment (class 53) and for clean energy generation equipment (classes 43.1 and 43.2), at the rate of 100% in the first year for property in classes 43.1, 43.2 and 53 acquired after November 20, 2018, that is ready for use prior to 2024. The rate will drop to 75% for property that is ready for use in 2024 and 2025, then to 55% for property that is ready for use in 2026 and 2027. The enhanced deduction will be eliminated entirely for property that is ready for use after 2027. The half-year rule will be suspended for property eligible for this measure.
Accelerated CCA for intellectual property (classes 14, 14.1 and 44) and general-purpose electronic data processing equipment (class 50)
The government is proposing an enhanced first year CCA at a rate of 100% for eligible Class 14, 14.1, 44 and 50 property acquired after December 3, 2018, that becomes available for use in Québec before 2024. The half year rule will be suspended for property eligible for this measure.
Amendment and elimination of the additional 60% capital cost allowance announced in the March 27, 2018, budget
The government intends to eliminate the additional 60% CCA announced in the March 27, 2018, budget for manufacturing and processing equipment and general-purpose electronic data processing equipment acquired after December 3, 2018. There are transition rules for qualified new property acquired between November 21 and December 3, 2018, and for property acquired between December 4, 2018, and June 30, 2019, under an agreement concluded before December 4, 2018.
Introduction of a permanent additional capital cost allowance of 30%
To encourage investment in manufacturing and processing equipment (class 53), clean energy generation equipment (classes 43.1 and 43.2), general-purpose electronic data processing equipment (class 50) and intellectual property (classes 14, 14.1 and 44), an additional 30% CCA will be introduced for such property acquired new after December 3, 2018, if it is to be used in Quebec for at least two years. This additional deduction will be permanent. The additional amount corresponds to 30% of the amount deducted as CCA for the previous fiscal year. A new class will be created for all property of the same class that is eligible for the additional deduction.
By way of example: A class 50 property that qualifies for this new measure, acquired in 2018 at a cost of $100,000 and for which a CCA of $100,000 was claimed in 2018, will, under the new rules described above, entitle the taxpayer to an additional CCA of $30,000 in 2019, i.e. 30% of the CCA claimed for the said property in 2018. The total CCA will amount to $130,000 over two years, or 130% of the property's cost.
Collection of the Quebec sales tax on purchases from suppliers outside Quebec
As of January 1, 2019, foreign companies that sell more than $30,000 in taxable supplies per year of incorporeal property or services to Quebec consumers will be required to register for the Quebec sales tax, collect the Quebec sales tax, and remit it to Revenu Québec. The same will apply beginning on September 1, 2019, to Canadian companies without a physical or significant presence in Quebec that sell more than $30,000 in taxable supplies per year to Quebec consumers.