The 2015 Quebec Budget and What it Means for my Small Business: Part I

The 2015 Quebec budget (the Economic Plan) is designed to decrease the province’s debt burden and improve the economy.

What changed?

For a long time, economic growth in Quebec was slow.  This changed in 2014 when exports rose by 10.4 per cent. Gross Domestic Product growth is projected to grow at 2 per cent in 2015 – 2016 as continued exports and a stronger American economy help to boost the province’s bottom line.  While the Prairie Provinces are reeling from the slump in oil prices, Quebec, who imports its oil, can also take advantage of the much lower oil prices.

With the economy on the rise, the budget has been structured to take full advantage of these stimulating factors, using the upturn in the economy as a base for a better, more stable financial future.

However, what does this mean for entrepreneurs?  Will the anticipated end of a long-running deficit help your small business?  To answer these questions, let’s break down the two main points of the Economic Plan that affect small businesses: corporate taxes and the small business deduction.

Quebec Corporate Taxes

Last year the Québec Taxation Review Committee was formed with the mandate to review the corporate tax structure and identify ways to improve the system. The Committee recommended a reduction of approximately $1.6 billion, financed by adjusting the current corporate tax laws.  They also recommend something any small business would be happy to see – a simplified tax system. The Committee worked hard to show how the corporate tax burden could be eased, and their hard work paid off.

The Economic Plan summarizes:

“To act on this important initiative, Budget 2015-2016 includes many measures on corporate taxation that are aimed at:

 — reducing the tax burden of SMBs;

— making taxation more favourable to investment;

— ensuring the effectiveness of sectoral tax assistance;

 — supporting the activities of tax-advantaged funds.

These actions will be financed in part by adjustments to certain tax expenditures. In total, these represent a reduction in the tax burden of $216 million per year at term for Québec businesses.

By focusing on general application measures, the government is making sure that as many Québec businesses as possible benefit from a competitive tax system and take full advantage of business opportunities.”

Based on findings from the Committee, the budget allows for a gradual decrease in the corporate tax rate from 11.9 per cent to 11.5 per cent (as of January 2017) and will also reduce the investment tax credit rate for manufacturing and processing equipment.  The good news doesn’t stop there.  The investment tax credit utilized by regions outside of urban settings was scheduled for termination in December 2017.  This is no longer the case; these regions now see this program extended until further notice.

What’s the impact?

Over time, these (and other measures in the Economic Plan) allows for $125 million in corporate tax cuts annually; and reducing the corporate tax rate will benefit 90 000 companies, a very sharp increase over the mere 4 000 companies that benefited from the previous budget’s investment tax credit plan.

As small and medium sized businesses make up over 90 per cent of all the businesses in Quebec and provide two-thirds of the jobs, easing the corporate tax burden is a wonderful way to stimulate the economy, generate interest in entrepreneurs creating new businesses and stabilizing the corporate tax system.

More to come

Stay tuned for part II, where we will take a look at changes to the small business deduction.

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