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Quebec Announces Tax Harmonization Measures

Quebec Announces Tax Harmonization Measures

Quebec has announced new measures to harmonize with federal tax legislation.

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Quebec's Information Bulletin 2018-6 will align the province with measures that were announced in the 2018 federal budget and included in Bill C-74 (which received royal assent on June 21, 2018), as well as other recently proposed federal government tax legislation.

When implementing measures relating to the federal budget, the bulletin states that the changes to the Quebec tax system will only be adopted following assent to any federal statute (or adoption of any federal regulation) implementing the proposed federal measure being harmonized. Further, the bulletin states that these changes will apply on the same dates as the federal measures being harmonized.

Measures harmonizing with the 2018 federal budget
Quebec will harmonize with various federal corporate and personal provisions proposed in the 2018 federal budget, including measures that:

  • Extend the accelerated capital cost allowance for certain investments in equipment for the generation and conservation of clean energy 
  • Changes to the at-risk rules for tiered limited partnerships, such that the at-risk rules apply to a partnership that is itself a limited partner of another partnership
  • Introduce a single set of rules that will apply to health and welfare trusts (currently the tax treatment is based on administrative positions) and employee life and health trusts:
    • Revenu Québec will not apply its administrative positions to health and welfare trusts established after February 27, 2018; but it will apply its administrative positions to such trusts established before February 28 until the end of 2020
    • After that date, Revenu Québec will apply its usual tax rules for trusts to those Health and Welfare Trusts that have not converted or wound up
  • Introduce multiple tax measures to include or exclude income received by Veterans.

Quebec also announced that, at a later date, it intends to harmonize with federal 2018 budget measures to: 

  • Improve the collection of beneficial ownership information with respect to trusts (see KPMG's TaxNewsFlash-Canada 2018-06 "2018 Federal Budget Highlights")
  • Reduce the small business limit for Canadian controlled private corporations (CCPCs) with passive investment income.

Quebec will not harmonize with certain 2018 budget measures, including those that relate to:

  • The Canada Workers Benefit enhancement
  • The deductibility of employee contributions to the enhanced portion of the Québec Pension Plan (QPP)
  • The extension of the mineral exploration tax credit for flow-through share investors
  • The restrictions that apply to refunds of the refundable dividend tax on hand (RDTOH) and the addition of an RDTOH account.

Other measures
Quebec announced it will clarify tax legislation to suspend the "reassessment limitation period" in situations where taxpayers are subject to a formal demand concerning unnamed persons and the assessment is GAAR-based, as of the day on which the demand is filed.

The information bulletin also introduced various changes to the parameters of Capital regional et coopératif Desjardins and amendments will be introduced in the Act constituting Capital regional et coopératif Desjardins.

Indirect Tax
Quebec also announced that it will introduce changes to the QST system with respect to the upcoming legalization of cannabis to:

  • Introduce measures so that the QST on cannabis may be part of taxation agreements between Quebec and band councils that wish to impose consumption taxes within their reserves on the sales of cannabis
  • Introduce a new exclusion related to cannabis to the current QST exemption that applies to certain off-reserve goods purchased in specific municipalities by Kahnawake Mohawks, who ordinarily reside in the territory, so that QST is collected on the sales of cannabis.

For more information, contact your KPMG adviser.

Information is current to July 17, 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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