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

In the previous blog, we took a look at the some of the factors driving the positive uptick in Quebec’s economy and how the Economic Plan is capitalizing on those factors to create a stronger province financially. In particular, changes to the corporate tax structure and the Small Business Deduction (SBD) affect entrepreneurs that create small and medium sized businesses.

In this part, we take a closer look at the SBD.

Small Business Deduction

As indicated in Part I of this blog, corporate tax rates will be gradually reduced from 11.9 per cent to 11.5 per cent. This will take place between 2017 – 2020. However, the minimum tax rate, which is 8 per cent of income for small businesses, will not change. This is because there will be a gradual subtraction of points from the SBD rate at the same time the general tax rate is being reduced.

The Reduction by the Numbers

Here is how the joint step-by-step process will work:

  • General tax rate by year/rate:
    • 2016/11.9
    • 2017/11.8
    • 2018/11.7
    • 2019/11.6
    • 2020+/11.5
  • Maximum SBD rate by year/rate
    • 2016/-3.9
    • 2017/-3.8
    • 2018/-3.7
    • 2019/-3.6
    • 2020+/-3.5

 

Eligibility

In order to take advantage of the SBD, your company must meet certain criteria. Namely, you must be a corporation that employs more than three full-time employees, or you must be a corporation a corporation in the primary or manufacturing sector.

Here is an example:

  • A small or medium sized business with four employees: Jill’s Hairdressing Shop is owned by Jill. She has a full-time receptionist and three full time stylists. Jill’s is eligible.

In this scenario Jill’s Hairdressing Shop is eligible for the maximum SBD rate providing she maintains her edibility status for the duration of the taxation year, but what happens when a company does not have the minimum number of employees?

To find out the answer, stay tuned for Part III of our 2015 Quebec Budget and What it Means for my Small Business blog series.

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