Quebec Bill 175—Additional CCA and More | KPMG | BE
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Quebec Bill 175—Additional CCA and More

Quebec Bill 175—Additional CCA and More

Quebec Bill 175 received first reading on May 9, 2018.

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This bill contains measures previously announced in Quebec's 2017 budget and in various information bulletins published in 2016 and 2017. The 180-page bill introduces an additional capital cost allowance (CCA) of 35% for certain manufacturing or processing equipment or computer equipment acquired after March 28, 2017. This additional rate will increase to 60% for eligible equipment purchases made after March 27, 2018. This bill enacts other measures related to corporate and indirect tax and various tax credits. It harmonizes several Quebec tax measures with federal tax measures; these harmonization measures are in addition to those already announced by Quebec in November 2017.

Bill 175 is considered substantively enacted for the purposes of IFRS and Accounting Standards for Private Enterprise as of May 9, 2018, the date it received first reading in the Quebec legislature (as Quebec has a majority government).

Key measures from Bill 175 are listed below.

Corporate and personal tax
Bill 175 introduces an additional CCA applicable to manufacturing or processing equipment (property of Class 53) and computer equipment (property of Class 50) acquired after March 28, 2017. The additional CCA rate of 35% will apply to eligible purchases made after March 28, 2017 and before March 28, 2018. An additional capital cost allowance rate of 60% will similarly apply to manufacturing or processing equipment and computer equipment acquired after March 27, 2018 and before April 1, 2020 (as announced in the province's 2018 budget.

Bill 175 also:

  • Increases the amount Quebec employees can claim as a stock option deduction to 50% (from 25%) for shares of publicly traded large companies
  • Defers tax on certain deemed dispositions of certain qualified public corporation shares (i.e., on a person's death and upon the 21st anniversary of a trust
  • Extends the effective time period that applies for the enhancement of the tax holidays for the carrying out of large investment projects
  • Enhances and renews the refundable tax credits aimed at encouraging the creation of new financial services corporations; these measures will apply to expenses incurred after March 28, 2017, 
    • The definition of excluded corporation is changed for the taxation years that begin after December 31, 2018
  • Introduces measures announced in Quebec's Tax Fairness Action Plan to, among other things
    • Increase the penalty for GAAR assessment to 50% (from 25%), effective February 1, 2018
    • Suspend the limitation period for issuing certain reassessments or additional assessments in several situations related to GAAR.

Various tax credits
This bill introduces, enhances, expands, or modifies several tax credits, including:

  • A refundable work premium tax credit
  • A tax credit for Québec film productions and for film production services
  • A temporary refundable tax credit to restore a secondary residence that was damaged by flooding that hit Québec municipalities from April 5 to May 16, 2017
  • A temporary enhancement of the tax credit for taxi drivers or taxi owners
  • A $100 supplement for the purchase of school supplies as part of the tax credit for child assistance.

Indirect tax
Bill 175 proposes to amend a few measures in the Act Respecting the Québec Sales Tax, including measures related to:

  • The tax on lodging for businesses operating a digital platform offering accommodation units
  • The phase-out of the input tax refund restrictions for large businesses.

Harmonization with federal bills
The Taxation Act and the Act respecting the Québec Sales Tax are amended to harmonize with recent changes made to the Income Tax Act and the Excise Tax Act for federal bills enacted in 2016 and 2017. Bill 175 mainly enacts harmonization measures that were announced in Information Bulletins published in 2015, 2016 and 2017, including those that:

  • Modify dividend rental arrangement rules under synthetic equity arrangements 
  • Authorize nurse practitioners to certify eligibility for the disability tax credit 
  • Extend the eligibility criteria for the tuition tax credit to include tuition paid to a university, college or other post-secondary institution in Canada for certain occupational skills courses
  • Eliminate the eligible home relocation loans deduction 
  • Eliminate a tax exemption for farming and fishing property insurers 
  • Introduce new rules for taxation of switch fund shares 
  • Introduce new rules relating to the tax treatment of transactions involving emission allowances
  • Ease the rules relating to donations to charities 
  • Introduce a zero-rated provision for the supply of a service of rendering technical or customer support by means of telecommunications and
  • Introduce a zero-rated provision for naloxone for the treatment of opioid overdose

For more information, contact your KPMG adviser.

Information is current to May 22, 2018. The information contained in this publication is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's National Tax Centre at 416.777.8500

© 2018 KPMG LLP, a Canada limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

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