Canada: Tax measures in 2022 economic update receive Assent (Quebec)

Quebec Bill 27, which implements certain outstanding business and individual (personal) tax measures, received Assent on 26 September 2023.

The bill includes:

• Measures to harmonize with certain federal tax measures, including to broaden the eligibility for the small business deduction and support the use of the new international accounting standard for insurance contracts (IFRS 17) for income tax purposes
• Amendments to certain provincial tax credits and deductions
• The individual tax rate reduction announced in the 2023 Quebec Budget

The tax measures in Quebec Bill 27, and others included in this bill, were substantively enacted in May 2023. Read TaxNewsFlash

Bill 27 includes various changes to harmonize with certain federal amendments (which were announced in information bulletin 2022-04) to:

• Broaden eligibility for the small business deduction by increasing the upper limit of the range to CA$50 million (from CA$15 million) of taxable capital before the small business deduction is reduced to nil
• Expand the general anti-avoidance rule (GAAR) to apply to tax attributes that have not yet become relevant to the computation of tax
• Support the use of the IFRS 17 standard for income tax purposes, subject to certain adjustments
• Update the rules that address tax planning related to allocations to redeeming fund unit holders in the mutual fund industry
• Eliminate the flow-through share regime for oil, gas, and coal activities
• Introduce a tax-free first home savings account
• Increase the home buyers’ tax credit to CA$10,000 (from CA$5,000)
• Introduce a residential property anti-flipping rule
• Expand the medical expense tax credit for surrogacy and other related expenses

Bill 27 includes changes announced in Quebec information bulletins published in 2021, 2022 and 2023 to, among other things:

• Expand the additional deduction for transportation costs incurred by remote small and medium-sized businesses by increasing the upper limit to CA$50 million (from CA$15 million) of paid-up capital before the additional deduction is reduced to nil (which corresponds to the federal and provincial expansion of the small business deduction), for tax years that begin after 6 April 2022
• Expand access to the income-averaging mechanism for forest producers (which corresponds to the federal and provincial expansion of the small business deduction), for tax years that begin after 6 April 2022

Bill 27 also includes personal tax changes announced in Quebec’s 2023 budget and the province’s 2022 Fall Economic Update to:

• Reduce the individual tax rate by 1% for the tax rate applicable to each of the lowest two tax brackets and the consequential changes to various personal tax credits rates (e.g., the tax rate applicable to the basic personal amount and the amount for a person living alone, will decrease to 14% (from 15%)
• Introduce reporting requirements for cryptoassets
• Enhance the refundable tax credit for senior assistance effective for 2022 and onward
• Eliminate the refundable tax credit for seniors’ activities

Read an October 2023 report prepared by the KPMG member firm in Canada