November 12, 2004 - Ministère des Finances

Transcription

2004-9
November 12, 2004
Technical Adjustments to Various Tax Laws
and Harmonization Measures
This information bulletin provides a detailed description of a number of changes to the tax laws
that, for the most part, are designed to improve the integrity and coherence of the tax system.
It also states the position of the ministère des Finances concerning a number of announcements
by the Department of Finance Canada, including those of the federal Budget Speech of last
March 23 on the regulatory reform respecting registered charities. For information concerning the
matters dealt with in this information bulletin, contact the Secteur du droit fiscal et de la fiscalité
at (418) 691-2236.
The French and English versions of this bulletin are available on the website of the ministère des
Finances at: www.finances.gouv.qc.ca
Paper copies are also available, on request, from the Direction des communications, at
(418) 528-9323.
2004-9
November 12, 2004
Technical Adjustments to Various Tax Laws and Harmonization
Measures
1.
MEASURES CONCERNING INDIVIDUALS.................................................... 3
1.1
Tax treatment of certain benefits designed to replace an income or
financial support ............................................................................................... 3
1.2
Reducing unfairness related to the reception of certain benefits from
a public indemnity plan ..................................................................................... 7
1.3
Tax treatment of financial assistance paid under the Solidarité
jeunesse program........................................................................................... 18
1.4
Application for exemption from tax withholding at source............................... 19
1.5
Rounding of parameters subject to automatic indexation............................... 21
2.
MEASURES CONCERNING BUSINESSES.................................................. 23
2.1
Adjustments to refundable tax credits allowed in certain regions ................... 23
2.2
Refundable tax credit for R&D........................................................................ 27
2.3
Adjustment to the penalty for false statement or omission ............................. 28
3.
OTHER MEASURES ..................................................................................... 30
3.1
Limitation on estimates eligible for the purposes of the calculation of
the Québec sales tax regarding the sale of road vehicles .............................. 30
3.2
Increase in the exemptions granted for determining premiums under
the prescription drug insurance plan .............................................................. 31
3.3
Harmonization with federal measures relating to the regularoty
reform respecting registered charities ............................................................ 32
3.4
News releases 99-111 of December 16, 1999, 00-101 of
December 21, 2000 and 2003-032 of June 23, 2003 ..................................... 34
2
2004-9
November 12, 2004
1.
MEASURES CONCERNING INDIVIDUALS
1.1
Tax treatment of certain benefits designed to replace an
income or financial support
Many Québec laws stipulate that, following an accident or injury, certain benefits designed
to replace an income or financial support may be paid to the victim of such accident or
injury or to the members of his family.
In general, these benefits must be included in calculating the income of the person who
receives them and, accordingly, are considered in the calculation of the government
assistance provided by various transfer programs and the refundable and non-refundable
tax credits that reduce with income. However, no tax is payable regarding such benefits
since a corresponding deduction is allowed in the calculation of taxable income.
To ensure that the rules applicable for the purpose of calculating the income used to
determine government assistance more adequately reflect the financial situation of
taxpayers receiving benefits designed to replace an income or financial support, a number
of amendments will be made to the tax legislation.
R Clarifications regarding the nature of the benefits to be included in
the calculation of income
Currently, the tax legislation stipulates that an individual must include in the calculation of
his income, an amount, other than a prescribed amount, received as compensation under
an employees' or workers' compensation law of Canada or a province in respect of an
injury, a disability or death. This inclusion covers, in particular, income replacement
indemnities paid under the Act respecting industrial accidents and occupational diseases,
the Workers’ Compensation Act and the Act respecting indemnities for victims of
asbestosis and silicosis in mines and quarries.
It also stipulates the inclusion in the calculation of income, of income replacement
indemnities granted under the Act respecting occupational health and safety as well as
pensions received under the Automobile Insurance Act, except for a death benefit paid
regarding a person who suffered bodily injury before January 1, 1990, the Crime Victims
Compensation Act, the Act to promote good citizenship or a similar law of another
province.
Essentially, the amounts to be thus included are amounts designed either to replace
labour income or to offset the loss of financial support following the death of an accident
victim or a bodily injury. However, as currently worded, the tax legislation does not afford
the same treatment to all benefits that may be paid for any of these purposes under a
public indemnity plan.
Accordingly, changes will be made to the tax legislation to better define the type of benefits
that must be included in the calculation of income.
3
2004-9
November 12, 2004
•
Income replacement indemnity and compensation for the loss of
financial support paid under public indemnity plans
As of taxation year 2005, the tax legislation will be amended to stipulate that an individual
will be required to include in the calculation of his income, any benefit consisting of an
income replacement indemnity or compensation for loss of financial support he receives,
under a public indemnity plan, following an accident, employment injury, bodily injury or
death or with a view to preventing bodily injury.
In this regard, the expression “public indemnity plan” means any plan established under a
law of Québec or elsewhere, other than the Act respecting the Québec Pension Plan, the
Canada Pension Plan or any other law establishing a plan equivalent to the Québec
Pension Plan, that provides benefits following an accident, employment injury, bodily injury
or death or to prevent bodily injury.
The plans stipulated by the Workers’ Compensation Act, the Act respecting industrial
accidents and occupational diseases, the Automobile Insurance Act, the Act to promote
good citizenship, the Crime Victims Compensation Act, the Act respecting indemnities for
victims of asbestosis and silicosis in mines and quarries, the Act respecting occupational
health and safety and the Public Health Act are included in this expression.
Moreover, the expression “income replacement indemnity” means any benefit that is paid
to compensate the total or partial incapacity of a person to earn labour income or the loss
of employment insurance income, unless, according to the terms of the public indemnity
plan, no employer may – whether or not he is personally required to pay all or part of the
benefits stipulated by the plan – obtain reimbursement of the expense attributable to the
benefit he paid. For this purpose, any benefit calculated on the basis of a person’s
earnings as recognized by the public indemnity plan will be deemed paid to compensate
the total or partial incapacity of such person to earn labour income.
For example, the following amounts determined by the Commission de la santé et de la
sécurité du travail (CSST) will be considered income replacement indemnities:
—
pensions for permanent total disability, pensions for permanent partial disability,
pensions for temporary total disability and pensions for temporary partial disability
in accordance with the Workers’ Compensation Act;
—
financial assistance payments for social stabilization or economic stabilization in
accordance with the Regulation respecting social stabilization and economic
stabilization programs;
—
income replacement indemnities in accordance with the Act respecting industrial
accidents and occupational diseases;
—
supplementary indemnities under the Act respecting indemnities for victims of
asbestosis and silicosis in mines and quarries.
4
2004-9
November 12, 2004
However, the following benefits, for example, will not be considered income replacement
indemnities:
—
the net salary or wages paid by an employer, in accordance with the Act respecting
industrial accidents and occupational diseases, for the portion of the workday
during which a worker becomes unable of performing his job because of an
employment injury, when he would normally have worked during such portion of the
day, had he not been disabled;
—
industrial accidents and occupational diseases, for each day or portion of a day
when, at his request, a worker was absent from work to undergo a medical
examination;
—
the remuneration paid by an employer, in accordance with the first paragraph of
section 36 of the Act respecting occupational health and safety, for the first five
work days of cessation of work because of a worker’s protective re-assignment.
The amounts an employer pays a worker in accordance with a public indemnity plan and
that do not qualify as an income replacement indemnity because no employer may, under
the terms of the plan, obtain reimbursement of the expense attributable to them, must be
included in the calculation of the worker’s income from an office or employment.
The expression “compensation for loss of financial support” means any benefit payable as
a pension, including a lump sum replacing pension payments, that, because of the death
of a victim of an accident, employment injury or bodily injury, is granted to the surviving
spouse or to the persons who, under the public indemnity plan, were considered
dependants of the victim.
For example, pensions received under the Automobile Insurance Act as a death benefit
paid regarding a person who suffered bodily injury before January 1, 1990 will be
considered compensation for the loss of financial support.
For greater clarity, an individual who must include, in calculating his income for a given
taxation year, a benefit consisting of an income replacement indemnity or compensation
for loss of financial support he receives, under a public indemnity plan, may deduct, in
calculating his taxable income, for the year, an equivalent amount.
•
Amounts paid in 2004 by an employer to a worker who suffered an
employment injury
The existing tax legislation stipulates that a worker who suffers an employment injury must
include, in calculating his income, any amount, other than a prescribed amount, that he
receives as compensation under an employees' or workers' compensation law of Canada
or a province in respect of an injury, a disability or death.
5
2004-9
November 12, 2004
For taxation year 2004, an indemnity paid by an employer must be considered a
prescribed amount if, under the terms of the law stipulating its payment, no employer –
whether or not he is personally required to pay all or part of the indemnities stipulated by
such law – may obtain reimbursement of the expense attributable to the indemnity.
It follows that the indemnities paid in these circumstances must no longer receive the tax
treatment applicable to income replacement indemnities but rather must be included in the
calculation of income from the worker’s office or employment.
More specifically, this measure will cover, regarding Québec’s legislation on industrial
accidents for injury, disability or death, the following indemnities:
—
industrial accidents and occupational diseases, for the portion of the workday
during which a worker becomes unable of performing his job because of an
employment injury, when he would normally have worked during such portion of the
day, had he not been disabled;
—
industrial accidents and occupational diseases, for each day or portion of a day
when, at his request, a worker was absent from work to undergo a medical
examination.
•
Amounts paid under the Public Health Act
For almost 20 years, people who suffer bodily injury caused by voluntary vaccination
against certain diseases or infections or by compulsory vaccination may receive
indemnities calculated according to the rules stipulated in the Automobile Insurance Act
and its regulations.
Although the tax legislation did not specify the tax treatment applicable to these
indemnities, they have always received, rightly, the tax treatment applicable to indemnities
paid under the Automobile Insurance Act.
To maintain the integrity of the tax system, the tax legislation will be amended to specify
that, for a taxation year prior to taxation year 2005, pensions paid under the compensation
program for victims of a vaccination established under the Public Health Act must receive
the tax treatment they would have received had they been paid under the Automobile
Insurance Act.
R Deduction relating to the reimbursement of a benefit over-payment
Under the current tax legislation, when, during a given taxation year, an individual repays
an amount received as a benefit from a public indemnity plan that he included in
calculating his income for the year or a prior taxation year, the amount so repaid cannot be
deducted in calculating his income for the year.
6
2004-9
November 12, 2004
Considering that the amount of benefits to be included in the calculation of income is taken
into consideration in determining the government assistance granted by the various
transfer programs and refundable and non-refundable tax credits that reduce with income,
the tax legislation will be amended to stipulate that an individual may deduct, in calculating
his income for a given taxation year, the amount of benefits he repaid during the year,
provided such amount was included in calculating his income for the year or a prior
taxation year.
However, since the amount of benefits received during a taxation year prior to a given
taxation year in which they were repaid was deductible in calculating taxable income for
such prior taxation year, the tax legislation will be also be amended to stipulate that the
amount thus reimbursed that is deducted in the calculation of income for the given taxation
year must be included in calculating taxable income for the year.
In addition, the tax regulations will be amended to stipulate that the CSST and the Société
de l’assurance automobile du Québec (SAAQ) must also indicate on the information return
they are required to file for a given calendar year, using the prescribed form, the amount of
benefits that were repaid during such calendar year in excess of the amount of benefits
determined or paid during such year.
These amendments will apply as of taxation year 2004.
1.2
Reducing unfairness related to the reception of certain
benefits from a public indemnity plan
The March 30, 2004 Budget Speech announced that, to reduce the unfairness related to
the reception of certain income replacement indemnities, the beneficiaries of such
indemnities would, as of taxation year 2004, have to adjust their tax payable to allow for
the fact that personal tax credits and basic compulsory employee contributions are taken
into account both in the method used to determine these indemnities and in the calculation
of the tax payable in respect of their other income.
Briefly, this adjustment means, for taxation year 2004, the inclusion in the calculation of tax
otherwise payable of beneficiaries of such indemnities resulting in a reduction of the
amount of their personal tax credits and, as of taxation year 2005, the reduction of the
basic amount granted for the purpose of calculating the basic personal tax credit for the
year.1
To better reflect the specific features of the various public indemnity plans, which stipulate
in particular that income replacement indemnities can be reduced in certain
circumstances, various changes will be made regarding the determination of the amount of
the adjustment for taxation year 2004 and subsequent years.
1
As of taxation year 2005, following the simplification of the personal income tax system, a complementary amount is
added to the amount of recognized essential needs to form the basic amount that is allowed for the purposes of
calculating the basic personal tax credit.
7
2004-9
November 12, 2004
R Adjustment to tax payable
An individual who is resident in Québec at the end of the 2004 taxation year must include,
in the calculation of his income tax otherwise payable for the year, an amount equal to the
lesser of $1 840 or 20% of all the amounts each representing the adjustment calculated
regarding a covered benefit that is attributable to the year and of which he is the
beneficiary, provided such benefit was determined in such year.
As of taxation year 2005, an individual who is resident in Québec at the end of a given
taxation year must reduce the basic amount allowed him for the year for the purposes of
calculating the basic personal tax credit, by an amount equal to all the amounts each
representing the adjustment calculated regarding a covered benefit that is attributable to
the given year and of which he is the beneficiary, provided such benefit was determined in
such year.
However, for a given taxation year, this tax adjustment must not exceed the total of the
amount of recognized essential needs and the minimum amount used to determine the
complementary amount for the purposes of calculating the basic personal tax credit for the
year, hereunder called the “maximum amount of the adjustment”.
R Retrospective determination of a covered benefit
When a covered benefit attributable to a given year is determined – for the first time or
once again2 – in a later year and such determination, had it been made in the given year,
would have given rise to an adjustment of tax other than the one that was made, such
determination will produce tax consequences for the year in which it is made, if the
beneficiary of the covered benefit is resident in Québec at the end of the said year.
More specifically, these tax consequences, which will result in an addition in the
calculation of tax otherwise payable or a refundable tax credit, as the case may be, may
occur when, in a given taxation year, a covered benefit attributable to a taxation year prior
to the given year but later than taxation year 2003, hereunder called “prior year”, is
determined and such determination, had it been made in the prior year, would have
resulted in changing the amount taken into consideration in the calculation of tax otherwise
payable by the beneficiary of the covered benefit for such year as the total of the amounts
each representing the adjustment calculated regarding a covered benefit attributable to
such year.
Accordingly, when, in a given taxation year, a covered benefit attributable to a prior year is
determined, the beneficiary of such benefit will be required to include, in the calculation of
his tax otherwise payable for the given year, the amount obtained, for such year, using the
rectification formula described below, provided such amount is positive.
2
This new determination may result in increasing, reducing or eliminating the amount of the adjustment regarding a
covered benefit attributable to a given taxation year.
8
2004-9
November 12, 2004
However, if the amount obtained for such taxation year using the rectification formula is
negative, the beneficiary of the covered benefit may claim, for the year, a refundable tax
credit equal to such amount.
Rectification formula
4
Difference3 between
Difference between the amount that
Total of each of the
Total of each of the
the tax the benethe eligible spouse of the beneficiary
amounts that the
amounts that the
beneficiary
was
ficiary would have
for the prior year deducted in
beneficiary obtained
required to include
had to pay for the
calculating his (her) tax otherwise
for the refundable tax
payable for such year as transfer of
credit for a previous
in the calculation of
prior year had the
determination of the
unused tax credits between spouses
taxation year further
his tax otherwise
for
a
covered
benefit + and the amount that such spouse + to the application of – payable
could have deducted as such for
this formula regarding
been made in such
previous taxation
a covered benefit
year and the tax
such prior year had the deteryear further to the
mination of the covered benefit been
attributable to the
payable
by
the
application of this
made in such year – without
beneficiary for the
prior year
formula regarding
exceeding his (her) tax otherwise
a covered benefit
prior year
payable for the prior year calculated
attributable to the
excluding the deduction for the
prior year
transfer of unused tax credits
between spouses5
For example, an individual with unused tax credits amounting to $1 840 for taxation year
2004 and whose eligible spouse for the year deducts an amount of $200 in the calculation
of his (her) tax otherwise payable for the transfer of unused tax credits between spouses
will, if a covered benefit attributable to taxation year 2004 of which he is the beneficiary is
determined, for the first time, during 2005, be required to include a maximum amount of
$200 in the calculation of his tax otherwise payable for taxation year 2005.
The beneficiary of a covered benefit attributable to taxation year 2004 with tax payable for
such year of $2 000 after making a tax adjustment of $1 578.74 regarding such benefit
may, in the event that the amount of the adjustment regarding the benefit – that initially
was $7 893.72 – is reduced further to a new determination during a subsequent taxation
year, receive a refundable tax credit for such year corresponding to 20% of the amount by
which the adjustment is reduced.
3
For greater clarity, the term “difference” is used to take a negative result, if any, into consideration.
4
Ibid.
5
For greater clarity, the amount of tax otherwise payable, for the prior year, by the spouse of the beneficiary must be
calculated taking into account the deduction for alternative minimum tax carried forward that would have been granted
to him (her) for the year.
9
2004-9
November 12, 2004
R Covered benefits
For the purposes of the measures relating to reducing the unfairness related to the
reception of certain benefits from a public indemnity plan, when the expression “covered
benefit” applies to a benefit attributable to taxation year 2004, it means either of the
following benefits:
—
a benefit, other than an excluded benefit, intended to compensate the total or
partial incapacity of a person to earn labour income, established on the basis of net
income and determined in accordance with the Workers' Compensation Act, the
Act respecting industrial accidents and occupational diseases, the Act to promote
good citizenship, the Crime Victims Compensation Act or the Act respecting
occupational health and safety;
—
a pension established on the basis of net income and determined by the SAAQ in
accordance with the Automobile Insurance Act or the Public Health Act, except for
a death benefit paid regarding a person who suffered bodily injury prior to
January 1, 1990;
—
any other similar payment made under an employees’ or workers’ compensation
law of another province or of Canada for injury, disability or death.
For this purpose, the expression “excluded benefit” means the following benefits:
—
industrial accidents and occupational diseases, for each day or portion of a day that
a worker must be absent from his work to receive care or undergo medical
examinations in relation to his injury or to carry out an activity as part of his
personal rehabilitation program;
—
a financial assistance payment for social stabilization or for economic stabilization
stipulated in the Regulation respecting social stabilization and economic
stabilization programs.
Furthermore, where the expression “covered benefit” applies to a benefit attributable to a
taxation year after taxation year 2004, it means any benefit consisting of an income
replacement indemnity or compensation for loss of financial support that is established on
the basis of net income and determined under a public indemnity plan, following an
accident, employment injury, bodily injury or death or with a view to preventing bodily
injury.6
However, the net salary or wages paid by an employer, in accordance with the Act
respecting industrial accidents and occupational diseases, for each day or portion of a day
in which the worker must be absent from his work to receive care or undergo medical
examinations in relation to his injury or to carry out an activity as part of his personal
rehabilitation program will not be considered a covered benefit.
6
In this regard, the expressions “income replacement indemnity”, “compensation for loss of financial support” and
“public indemnity plan” have the same meaning as they have for the purposes of the inclusion measure described in
subsection 1.1 of this information bulletin.
10
2004-9
November 12, 2004
R Calculation of the adjustment regarding a covered benefit
The calculation of the adjustment regarding a covered benefit attributable to a given
taxation year varies depending on whether the benefit is determined by the CSST, the
SAAQ or another entity.7
•
Covered benefits determined by the CSST
The adjustment regarding a covered benefit determined by the CSST that is attributable to
a given taxation year is equal to the amount corresponding to the total of the amounts
obtained using the following formulas:
—
when the covered benefit is paid by an employer for the first 14 full days following
the beginning of the disability, the lesser of the amounts calculated using the
following formulas:
·
·
Conversion rate
for the year
0.90
x
Total covered benefits paid by the employer for the first
14 full days following the beginning of the disability
x
Basic amount used, for the year,
for the purposes of calculating
tax withholdings at source
Number of days of the year
excluding Saturdays and
Sundays
—
Number of days, excluding Saturdays and
Sundays, included between the day of the
x start of disability and the day closest to the
return to work and the 15th full day
8
following the start of disability
in all other cases, for each day included in the given year for which a covered
benefit is determined, the lesser of the amounts calculated using the following
formulas:9
·
0.90
Conversion
x rate for the
year
x
Gross annual income
used to determine the
benefit
Number of days of the
year
Employment
– reduction for
the year
x
Excess of 1
over the
benefit
reduction
rate
7
The expression “other entity” refers to an entity responsible for determining a covered benefit stipulated under a law of
a province, other than Québec, or a Canadian employees’ or workers’ compensation law, in the case where the
covered benefit is determined for taxation year 2004 and, in other cases, to an entity responsible for determining a
covered benefit stipulated by a public indemnity plan established by a law, other than a law administered by the CSST
or the SAAQ.
8
When the period of 14 days following the disability overlaps two taxation years, only the days included in the taxation
year regarding which the covered benefit is attributable are to be taken into consideration.
9
For greater clarity, when the amount calculated using either of the formulas is less than zero, such amount is deemed
to be equal to zero.
11
2004-9
November 12, 2004
Employment reduction for the year
·
·
Conversion rate
for the year
0.90
x
x
Gross annual income of a suitable job or job held
Recognized amounts used to
establish net income used for
determining the benefit
–
Employment
reduction for
the year
x
Excess of 1 over
the benefit
reduction rate
Employment reduction for the year: the lesser of:
·
Conversion rate
x
for the year
Gross annual income of a
suitable job or job held
AND
•
Recognized amounts used
to establish net income of a
Covered benefits determined by the SAAQ
The adjustment regarding a covered benefit determined by the SAAQ attributable to a
given taxation year is equal to the total of the amounts each of which corresponds, for
each day included in the year for which a covered benefit is determined, to the lesser of
the amounts calculated using the following formulas:10
·
0.90 x
Conversion
rate for the
year
Gross annual
income used to
determine the
x
–
benefit
Number of
days of the
year
Rate
attributable to a
job held
Employment
x reduction
for the year
x
Excess of
1 over the
benefit
reduction
rate
–
Reduction
for social
benefits
Number of
days of the
year
Employment reduction for the year
·
10
Conversion rate
for the year
x
Gross annual income of a suitable job or job held
Ibid.
12
2004-9
November 12, 2004
·
0.90 x
Recognized amounts
used to establish net
income used for
determining the benefit
Rate
attributable
– to a job held x
Number of days of
the year
Employment
reduction
for the year
x
Excess of 1
over the
Reduction for
benefit
– social benefits
reduction
rate
Number of days
of the year
Employment reduction for the year: the lesser of:
Conversion rate
x
for the year
·
Gross annual income of a
AND
•
Recognized amounts used
to establish net income of a
Covered benefits determined by an entity other than the CSST and the
SAAQ
The adjustment regarding a covered benefit that is attributable to a given taxation year is
equal to the lesser of the amounts calculated using the following formulas:
·
Conversion rate for the year
·
0.90
x
x
Total covered benefits attributable to the year
Amount of recognized essential needs and minimum
amount used to determine the complementary amount
for the purposes of calculating the basic personal
11
tax credit for the year
x
Number of days of the year for
which covered benefits were
determined
•
Definitions of certain terms of the formulas
For the purposes of the various formulas used to calculate the adjustment regarding a
covered benefit attributable to a given taxation year, the expression:
—
“Benefit reduction rate” means, for a given day that is included in the given year
and for which a covered benefit attributable to the year is determined, the
percentage applied to reduce this benefit.
11
However, when the covered benefit is attributable to taxation year 2004, the numerator shall read: “Amount of
recognized essential needs for the purposes of calculating the basic personal tax credit and the flat amount under the
simplified tax system”.
13
2004-9
November 12, 2004
—
“Conversion rate for the year” means the rate obtained by dividing the rate of the
first taxable income bracket of the tax table applicable for the given taxation year by
the rate applicable, for such year, to the conversion of the amounts of recognized
essential needs into personal tax credits.12
—
“Gross annual income of a suitable job or job held” means, for a given day that is
included in the given year and for which a covered benefit attributable to the year is
determined, the gross annual income relating to a suitable job or a job held –
including, when the benefit is determined by the CSST, the gross annual income
from any benefit paid to the beneficiary, because of his termination of employment,
under a law of Québec or elsewhere, other than the Act respecting industrial
accidents and occupational diseases – that is taken into consideration in the
determination of the covered benefit for the day. However, in the case where the
covered benefit attributable to the year is subject to an annual adjustment,13 this
expression, when used to determine the gross income of a suitable job, means, for
a given day for which the benefit is determined, the amount that the gross annual
income relating to a suitable job that is taken into consideration in the determination
of the benefit would have been for such day if, as of the year following for which it
was established for the last time, it had been adjusted according to the same rules
as the covered benefit.
—
“Gross annual income used to determine the benefit” means, for a given day that is
determined, the gross annual income used as the basis for determining the
covered benefit for such day. However, in the case where the covered benefit
attributable to the year is subject to an annual adjustment,14 this expression means,
for a given day for which the benefit is determined, the amount that the gross
annual income used as the basis for determining the benefit for such day would
have been had it been adjusted according to the same rules as the covered benefit.
—
“Rate attributable to a job held” means, for a given day that is included in the given
year and for which a covered benefit attributable to the year is determined, a rate of
100%, unless only a portion of the net income earned from holding a job is to be
used to reduce the benefit determined for the day, in which case, it means the
percentage attributed by the public indemnity plan regarding the net income earned
from holding the job.15
12
For taxation year 2004, the conversion rate is 80%.
13
This specific condition applies to any covered benefit that must, according to Québec legislation, be adjusted annually,
in a prescribed way and prescribed times, in accordance with section 119 of the Act respecting the Québec Pension
Plan. Such adjustment is stipulated, in particular, in section 48 of the Automobile Insurance Act as it was worded on
December 31, 1989.
14
Ibid.
15
For example, the first paragraph of section 56 of the Automobile Insurance Act stipulates that where a victim holds a
job at which he earns a gross income less than that on which the SAAQ calculated a benefit, the latter is reduced
solely by 75% of the net income from such job.
14
2004-9
November 12, 2004
—
“Recognized amounts used to establish net income” means, for a given day that is
determined:
—
–
where the covered benefit attributable to the year is determined by the
CSST, the total of the amounts that the CSST estimated for the year as the
amount of recognized essential needs for the purposes of calculating the
basic personal tax credit and the flat amount under the simplified tax
system, in the case where the given taxation year is taxation year 2004 and,
in other cases, the total of the amount of recognized essential needs and of
the minimum amount used to determine the complementary amount for the
purposes of calculating the basic personal tax credit for the year;
–
where the covered benefit attributable to the year is determined by the
SAAQ, the total of the amount of recognized essential needs for the
purposes of calculating the basic personal tax credit for taxation year 2003
and the estimated annual amount, on the basis of the parameters applicable
for 2003, as employee contributions to the Québec Pension Plan and
employment insurance that is taken into consideration in the determination
of the benefit for such day, in the case where the given taxation year is
taxation year 2004 and, in other cases, the total of the amount of recognized
essential needs for the purposes of calculating the basic personal tax credit
for the year and the estimated annual amount for employee contributions to
the Québec Pension Plan, the parental insurance plan16 and employment
insurance that is taken into consideration in the determination of the benefit
for such day.
“Reduction for social benefits” means, for a given day that is included in the given
year and for which a covered benefit attributable to the year is determined, the
product of the multiplication of the conversion rate for the year by the annual
amount of benefits for old age pension or the annual amount of a disability benefit
payable under an income security program of another jurisdiction equivalent to that
established by the Act respecting the Québec Pension Plan, as the case may be,
for the given year, used to reduce the benefit determined for the day.
R Application details
•
Death or cessation of residence
For the purposes of the measures relating to reducing the unfairness related to the
reception of certain benefits from a public indemnity plan, where an individual dies or
ceases to reside in Canada during a given taxation year, the last day of his taxation year
will be deemed to be the day of his death or the last day on which he resided in Canada,
as the case may be.
16
This plan, established under the Act respecting parental insurance, will become effective on the date set by the
government.
15
2004-9
November 12, 2004
•
Individuals who reside in Canada for part of a year
Where an individual resides in Canada for only part of a taxation year, the amount of the
adjustment regarding a covered benefit attributable to such year must be determined by
taking into account only a benefit that may reasonably be considered as entirely
attributable to any period of the year throughout which the individual resides in Canada.
Moreover, for the purposes of calculating the maximum amount of the adjustment, the
amount of recognized essential needs and the minimum amount used to determine the
complementary amount for the purposes of calculating the basic personal tax credit will
correspond respectively to the portion of that amount represented by the ratio between the
number of days included in any period of the year throughout which the individual resided
in Canada and the number of days in the calendar year.17
•
Individual residing in Québec and carrying on business in Canada but
outside Québec
According to the existing tax rules, individuals who reside in Québec at the end of a given
taxation year and who carry on a business in Canada outside Québec must do a prorate
calculation to determine their income tax payable under certain provisions of the tax
legislation.18
For these individuals, the tax adjustment for a given taxation year regarding any covered
benefit attributable to such year that was determined in such year may not exceed the
portion of the adjustment calculated in their regard for the year represented by the
proportion used to determine their tax payable for such year.
In addition, for the purposes of the calculation of the maximum amount of the adjustment
for a given taxation year, the amount of recognized essential needs and the minimum
amount used to determine the complementary amount for the purposes of calculating the
basic personal tax credit correspond, respectively, to the amount obtained by applying, to
each of these amounts, the same proportion as the one used to determine the tax payable
for such year.19
Moreover, in the case where a covered benefit attributable to a given taxation year is
determined retrospectively, the term of the rectification formula bearing on tax payable or
that would have been payable by the beneficiary for the given year must be calculated, if
the beneficiary carried on a business in Canada but outside Québec in such year, taking
into account the proportion used to determine his tax payable for the year.
17
For taxation year 2004, the breakdown will apply to the amount of $1 840 – which represents the maximum amount of
the adjustment for that year.
18
This calculation is carried out on the basis of the proportion existing between the income earned in Québec and the
income earned in Québec and elsewhere, as determined by the tax regulations.
19
Supra, note 17.
16
2004-9
November 12, 2004
However, this proportion must not be applied to the amount obtained using the rectification
formula.
For greater clarity, the term of the rectification formula bearing on the amount that the
eligible spouse of the beneficiary for the prior year deducted or could have deducted in
calculating his (her) tax otherwise payable for the year as transfer of unused tax credits
between spouses must be determined by taking into account, if applicable, the proportion
used to determine the tax payable of the eligible spouse for the year.20
•
Individuals who go bankrupt during a year
Under the tax legislation, an individual who goes bankrupt during a calendar year is
deemed to have two taxation years during that calendar year: the first covering the period
from January 1 to the day before the bankruptcy (pre-bankruptcy); the second covering the
period from the day of the bankruptcy to December 31 (post-bankruptcy).
For the purposes of the calculation of the maximum amount of the adjustment for each of
the pre-bankruptcy and post-bankruptcy taxation years, the amount of recognized
essential needs as well as the minimum amount used to determine the complementary
amount for the purposes of calculating the basic personal tax credit correspond
respectively to the portion of that amount represented by the ratio between the number of
days in the taxation year concerned and the number of days in the calendar year.21
For greater clarity, the amount of the adjustment regarding a covered benefit attributable to
a pre-bankruptcy or post-bankruptcy taxation year must be determined by taking into
account only the portion of the covered benefit that may reasonably be considered as
entirely attributable to such year.
Moreover, when an individual goes bankrupt during a calendar year in which a covered
benefit has been determined retrospectively, the rule under which the bankrupt's taxation
year is deemed to begin on the date of the bankruptcy and the current taxation year is
deemed to end the day before that date will not apply to the amount of the rectification that
must be made for such year.
•
Alternative minimum tax
The amount of the adjustment that must taken into consideration for the purposes of
calculating an individual's tax otherwise payable for a given taxation year must also be
taken into consideration for the purposes of calculating the alternative minimum tax
applicable to such individual for the year.
20
The tax legislation stipulates that individuals who reside in Québec and who carry on a business in Canada, outside
Québec, those who reside in Canada, outside Québec, and who carry on a business in Québec, as well as those who
do not reside in Canada but who are in particular employed in Québec or carry on a business there must do a prorate
calculation to determine their income tax payable.
21
Supra, note 17.
17
2004-9
November 12, 2004
An individual must also take into account, in calculating the alternative minimum tax
applicable to him for a given taxation year, the amount he will be required to include in the
calculation of his tax otherwise payable for the year following a retrospective determination
of a covered benefit.
•
Indians or persons of Indian ancestry
The measures relating to reducing the unfairness related to the reception of certain
benefits from a public indemnity plan will not apply to a covered benefit that replaces an
income situated on a reserve or premises and is determined regarding an Indian or a
person of Indian ancestry.
R Information return
For any year after 2003, the CSST and the SAAQ must produce an information return, on
the prescribed form, indicating, for any covered benefit they determine during the year, the
amount of the adjustment calculated regarding such benefit as well as the year to which it
is attributable.
This information return must be sent to the Minister of Revenue no later than the last day
of the month of February of the calendar year following the one during which a covered
benefit has been determined. A copy of this return must also be sent, by the same
deadline, to the beneficiary of the covered benefit.
1.3
Tax treatment of financial assistance paid under the
Solidarité jeunesse program
From November 1, 2000 to March 31, 2003, the Solidarité jeunesse project offered young
people from 18 to 20 years of age who were otherwise eligible for income security
benefits, the opportunity to embark on a period of reflection and guidance leading to a
social and vocational integration initiative to prevent, as far as possible, recourse and
long-term dependence on income security.
On April 1, 2003, because of its success, the Solidarité jeunesse project became a regular
program of the ministère de l’Emploi, de la Solidarité sociale et de la Famille. By raising
the eligible age limit, the program gradually reached more people and is now geared to
young people age 18 to 24.
The Solidarité jeunesse program operates essentially under the same formula as the initial
project.
During the first phase of the program, young people are directed by an external resource
to participate in structured activities to help them reorient themselves and develop an
action plan for self-sufficiency. During this phase, the young people receive the following
amounts of financial assistance:
—
a basic allowance corresponding to the benefit they would have received had they
been accepted for employment assistance, to which $30 per week may be added;
18
2004-9
November 12, 2004
—
reimbursement of certain additional expenses attributable to their participation in
the program, in particular travel and child-care expenses.
The goal of the second phase of the program is to carry out the participant’s action plan
that, generally, results in their entering the labour market or returning to school.
In addition, since April 1, 2004, some participants in the program may, during the second
phase, join an active measure determined by Emploi-Québec and receive financial
assistance in this regard. This financial assistance includes a basic allowance, for an
amount corresponding to the benefit they would have received had they been accepted for
employment assistance, as well as, according to the active measure in which they
participate, an increase in this allowance and reimbursement of certain expenses relating
to their participation.
From a tax point of view, the payments received by young people during the first phase of
the initial Solidarité jeunesse project were taxable, except for the portion attributable to
child-care expenses. In addition, these payments were not subject to deductions at source
for income tax payable.
Accordingly, so that the financial assistance paid under the Solidarité jeunesse program
receives the same tax treatment as that applied to the financial assistance paid under the
initial Solidarité jeunesse project, the tax legislation will be amended to stipulate that any
amount received as financial assistance under the Solidarité jeunesse program, except for
the portion of such amount that relates to child-care expenses, will be taxable.
For greater clarity, the amounts paid under the Solidarité jeunesse program will not be
subject to withholding at source for income tax.
This change will apply as of taxation year 2003.
1.4
Application for exemption from tax withholding at
source
A person who pays, at any time during a taxation year, remuneration, a retirement benefit,
employment insurance benefits or other similar amounts must withhold an amount on
account of tax payable by the recipient for the year.
In general, the amount the payer must withhold regarding such a payment is equal to the
amount determined according to a mathematical formula authorized by the Minister of
Revenue or in accordance with tables prepared by him, taking into account in particular
the amount of personal tax credits of the recipient attributable to a given pay period.
19
2004-9
November 12, 2004
However, under the existing tax regulations, an employer must not retain any tax at source
from the remuneration he pays an employee for a given year if such employee has filed a
Source Deductions Return advising him that his income from employment for the year will
be less than the net amount22 he claims for the year in such return.
To prevent an employee who receives other payments on which no tax is withheld at
source23 from having a balance of tax payable when he files his tax return and to allow for
the fact that the rate applicable to the conversion of the amounts of recognized essential
needs into personal tax credits does not correspond to the rate applicable to the first
taxable income bracket of the tax table, changes will be made to the terms and conditions
governing the application for exemption from tax withholding at source.
More specifically, the tax regulations will be amended to provide that an employer must not
withhold any tax at source on the remuneration he pays to one of his employees24 during a
given taxation year if such employee files the Source Deductions Return advising that his
income from all sources for the year will be less than the aggregate of the following
amounts:
—
the product obtained by multiplying the total of the amounts used in calculating the
personal tax credits he indicates in his return by the effective rate applicable for the
year;
—
the total of the amounts that may be applied to reduce the remuneration on which
tax is withheld at source for the year that he will indicate in his return.
For this purpose, the effective rate applicable for a given taxation year means the rate
obtained by dividing the rate applicable, for the year, to the conversion of the amounts of
recognized essential needs into personal tax credits by the rate applicable, for the year, to
the first taxable income bracket in the tax table.25
These changes will apply as of taxation year 2005.
22
This net amount consists, first, of amounts used in the calculation of personal tax credits (i.e. the basic amount, the
amount for spouse reduced by, if applicable, the spouse’s income, the amounts for persons living alone, with respect
to age and for retirement income, the amounts for a person suffering from a severe and prolonged mental or physical
impairment and the amounts for a dependant reduced by, if applicable, the income of the dependant) and, second,
amounts that may be applied to reduce the remuneration on which tax must be withheld at source (i.e. the amounts
that may be deducted as support payments and the amounts that may be deducted by individuals who live in a
recognized remote area for the deduction for residence).
23
For instance, a retirement pension from the Québec Pension Plan, an old age security pension, dividends or interest.
24
I.e. a person holding a job or an office with an employer.
25
For taxation year 2005, the applicable effective rate will be 1.25.
20
2004-9
November 12, 2004
1.5
Rounding of parameters subject to automatic indexation
The March 30, 2004 Budget Speech announced that the main parameters of the personal
income tax system would be indexed as of January 1, 2005 using a new indexing factor
that notably will disregard any change in liquor and tobacco taxes.26
To determine the value of a parameter subject to automatic indexation for a given taxation
year, the indexing factor calculated for such year must be applied to the value of the
parameter established for the preceding year.27
In general, where the amount obtained after applying the indexing factor to a given
parameter is not a multiple of 5, it must be adjusted to nearest multiple of 5 or, if it is
equidistant from two multiples of 5, to the nearest higher multiple of 5. However, in certain
cases, it is stipulated that the adjustment must be made to nearest multiple of 1 to prevent
an adjustment to the nearest multiple of 5 from being without effect.28
Considering that the parameters of the refundable tax credits that are automatically
indexed, except for the applicable reduction thresholds, would be five times higher were
they to be converted into an amount of recognized essential needs giving rise to a
non-refundable tax credit,29 the tax legislation will be amended to stipulate that, where
such parameters must be used for a taxation year after taxation year 2004, they will be
adjusted to the nearest multiple of 1.
The following table lists all the parameters that, where the amount resulting from indexing
is not a multiple of 1, must be adjusted to the nearest multiple of 1 or, if equidistant from
two multiples of 1, to the nearest higher multiple of 1. The shaded areas of the table
highlight the parameters that, when used after December 31, 2004, will be subject to such
adjustment.
26
More specifically, the new indexing factor will correspond to the percentage change in the overall average Québec
consumer price index without alcoholic beverages and tobacco products (QCPI-WAT) for the 12-month period ending
on September 30 of the year preceding the one for which an amount is to be indexed, compared with the average
QCPI-WAT for the 12-month period that ended on September 30 of the year prior to the year preceding the one for
which an amount is to be indexed.
27
The indexing factor applicable for taxation year will be 1.427347987%.
28
The adjustment must be made to the nearest multiple of 1 or, if the result is equidistant from two multiples of 1, to the
nearest higher multiple of 1, regarding the monthly allowance for handicapped children used to calculate the
refundable tax credit for child assistance, the basic amount, the amount for spouse and the amount for a person living
alone used for the purpose of calculating the refundable tax credit for the Québec sales tax (QST) and the monthly
basic amount, amount for spouse and amount for a dependant used for the purpose of calculating the refundable tax
credit for individuals living in a northern village.
29
The applicable rate for the conversion of the amounts of recognized essential needs into non-refundable tax credits is
currently of 20%.
21
2004-9
November 12, 2004
PARAMETERS SUBJECT TO ADJUSTMENT TO THE NEAREST MULTIPLE OF 1
(in dollars)
PARAMETER
2004
2005
Refundable tax credit for child assistance
Maximum basic amount for a 1st child1
Maximum basic amount for a 2nd and 3rd child1
Maximum basic amount for a 4th child and subsequent children1
Maximum amount for a single-parent family1
Minimum basic amount for a 1st child2
Minimum basic amount for a 2nd child and subsequent children2
Minimum amount for a single-parent family 2
Monthly allowance for handicapped children2
n/a
n/a
n/a
n/a
553
510
276
119.22
2 000
1 000
1 500
700
561
517
280
121
Basic amount
Amount for spouse
Amount for a person living alone
Refundable tax credit for medical expenses
163
163
110
165
165
112
Maximum amount
Refundable tax credit for individuals living in a northern village
535
543
38
38
15
39
39
15
Refundable tax credit for the QST
Monthly basic amount
Monthly amount for spouse
Monthly amount for a dependant
1.
This amount will be automatically indexed as of January 1, 2006.
2.
The amount shown for 2004 refers to the amount that had been announced in the March 30, 2004 Budget Speech as
being the amount that, after indexing, would be allowed as of January 1, 2005.
22
2004-9
November 12, 2004
2.
MEASURES CONCERNING BUSINESSES
2.1
Adjustments to refundable tax credits allowed in certain
regions
In recent years, three refundable tax credits were put in place to encourage job creation in
Québec's resource regions, namely the refundable tax credit for the Vallée de l'aluminium,
the refundable tax credit for the Gaspésie and certain maritime regions of Québec and the
refundable tax credit for processing activities in the resource regions.
In general, these tax credits are granted with respect to the increase in payroll attributable
to eligible employees of an eligible corporation operating in a target region, for five
consecutive calendar years.
More specifically, to determine its refundable tax credit, an eligible corporation must
compare the payroll of a given calendar year with that of its reference calendar year. This
reference calendar year generally corresponds to the calendar year preceding the one
during which the corporation began to carry on a certified business, i.e. a business
regarding which Investissement Québec issued an eligibility certificate.
According to existing terms and conditions, an eligible corporation may request, following a
major unforeseen event causing the suspension of its activities, the cancellation of an
eligibility certificate issued for a given calendar year. Such a corporation may, when it
resumes activities, apply for an eligibility certificate regarding a subsequent calendar year
if it otherwise satisfies the other eligibility conditions. However, the corporation must
resume its activities in the same municipality or in a municipality that is no more than
40 kilometres distant.
Moreover, territorial exclusivity is allowed regarding specific activities carried out in certain
resource regions of Québec. For example, an activity covered by the refundable tax credit
for Gaspésie and certain maritime regions of Québec, such as the manufacturing of
wind-power generators, may not be recognized as the activity of a certified business for
the purposes of the refundable tax credit for processing activities in the resource regions.
To enable a corporation that must cease activities following a major unforeseen event to
obtain a tax credit for the stipulated period of five years, even if it does not resume
activities in the same municipality or in a municipality that is no more than 40 kilometres
distant, the application details of the three refundable tax credits granted in the resource
regions will be adjusted.
In addition, a clarification will be made to the notion of certified business, for the purposes
of the refundable tax credit for Gaspésie and certain maritime regions of Québec, to
confirm the territorial exclusivity granted to these regions regarding the manufacturing of
wind-power generators.
23
2004-9
November 12, 2004
R Refundable tax credit for the Vallée de l'aluminium
Briefly, the refundable tax credit for the Vallée de l'aluminium is granted regarding the
increase in payroll attributable to eligible employees of an eligible corporation operating in
the administrative region of Saguenay-Lac-Saint-Jean, for five consecutive calendar years.
To be eligible, a corporation must carry on a certified business, i.e. a business regarding
which an eligibility certificate was issued by Investissement Québec and whose activities
consist, in particular, in manufacturing finished or semi-finished products from aluminum
that has undergone primary processing.
To determine its refundable tax credit for a given calendar year, an eligible corporation
must compare the payroll for such given calendar year with that of its reference calendar
year. This reference calendar year generally corresponds to the calendar year preceding
the one during which the corporation began to carry on a certified business.
As mentioned above, an eligible corporation may request, following a major unforeseen
event causing the suspension of its activities, the cancellation of an eligibility certificate
issued for a given calendar year. Upon resumption of its activities, such a corporation may
apply for an eligibility certificate regarding a subsequent calendar year if it otherwise
satisfies the other eligibility conditions. In such a case, the reference calendar year of the
new certificate generally corresponds to the calendar year preceding the one during which
Investissement Québec issued the new certificate.
Under the existing terms and conditions, to take advantage of the adjustment relating to
the eligibility certificate, following a major unforeseen event, a corporation must resume its
activities in the same municipality or in a municipality that is no more than 40 kilometres
distant. This criterion was introduced to mitigate the impacts of a major unforeseen event,
while providing a measure of stability for a local economy.
Various factors may influence a corporation in deciding to resume activities outside the
municipality where it previously carried on its business, including some over which the
corporation has no control such as regulatory constraints or the lack of municipal
infrastructures sufficient to the needs of the business.
Accordingly, to recognize that, in some circumstances, a corporation may be unable to
resume its activities in the same municipality or in a municipality that is no more than
40 kilometres distant, while maintaining the objective that led to the introduction of this
criterion, the application details of the refundable tax credit for the Vallée de l’aluminium
will be eased in the specific case where the corporation resumes its activities beyond the
40-kilometre limit.
More specifically, Investissement Québec may, at the request of an eligible corporation,
cancel the eligibility certificate issued to such corporation regarding a given calendar year.
However, such cancellation will become effective only as of the calendar year following the
last calendar year for which the tax credit was claimed.
24
2004-9
November 12, 2004
Such an eligible corporation may, at a later date, apply for an eligibility certificate regarding
a subsequent calendar year, even though it resumes its activities in a municipality that is
more than 40 kilometres distant from the one where it previously carried out its activities.
However, the reference calendar year of the new certificate will then correspond to the
calendar year of the certificate that was cancelled.
The period of eligibility for the tax credit, following the issuing of the new eligibility
certificate, shall be established by considering the number of years during which the
corporation received the tax credit.
For example, during calendar year 2003, an eligible corporation ceases to carry on its sole
certified business after a fire. In the course of the same year, the corporation obtains the
cancellation of the eligibility certificate issued for calendar year 2002. This cancellation will
become effective in calendar year 2003. If the corporation obtains an eligibility certificate
for calendar year 2005, i.e. when it resumes activities, the eligibility period will be four
consecutive calendar years because it had already received the tax credit for calendar
year 2002. Since the corporation resumes its activities in a municipality that is more than
40 kilometres distant from the one where it previously carried on its certified business, the
reference calendar year will then be calendar year 2001, i.e. the reference calendar year
of the certificate that was cancelled.
This change will apply as of calendar year 2002.
R Refundable tax credit for Gaspésie and certain maritime regions of
Québec
Briefly, the refundable tax credit for Gaspésie and certain maritime regions of Québec is
allowed with respect to the increase in payroll attributable to eligible employees of an
eligible corporation operating in the administrative regions of Gaspésie–Îles-de-laMadeleine, Côte-Nord, Bas-Saint-Laurent and the Matane RCM, for five consecutive
calendar years.
which an eligibility certificate is issued by Investissement Québec and whose activities are
in particular the manufacturing and processing of finished or semi-finished products in the
marine biotechnology, wind-power generator manufacturing or mariculture fields.
•
Correlative change to the refundable tax credit for the Vallée de
l’aluminium
Like the change made to the refundable tax credit for the Vallée de l’aluminium, the
change to the application of the 40-kilometre criterion, in the case of a major unforeseen
event, will also apply in the case of the refundable tax credit for Gaspésie and certain
maritime regions of Québec.
25
2004-9
November 12, 2004
•
Clarification to the notion of certified business
As mentioned above, the activities covered by the refundable tax credit for Gaspésie and
certain maritime regions of Québec, may not be recognized as activities of a certified
business for the purposes of the refundable tax credit for processing activities in resource
regions.
For example, the manufacturing of wind-power generators must be carried out in the
region of Gaspésie−Îles-de-la-Madeleine or in the Matane RCM, even if this activity could
otherwise be considered as the manufacturing of a finished product from metal, which is
covered by the tax credit for processing activities in resource regions.
The definition of a wind-power generator varies depending on the reference source used.
For instance, the mast of a wind-power generator could be considered a structure
supporting the wind-power generator rather than one of its components.
According to this interpretation, the making of a mast of a wind-power generator would be
an activity covered by the tax credit for processing activities in resource regions because it
would then be considered as the making of a finished product from metal. On the other
hand, if the mast of a wind-power generator is considered a component of the wind-power
generator, its making would then be an activity covered by the refundable tax credit for
Gaspésie and certain maritime regions of Québec.
To remove any doubt and better reflect the objective of the territorial exclusivity granted
regarding activities carried out in the maritime regions, namely, among other things, to
stimulate the development of the wind-power generation sector, the notion of certified
business will be clarified to indicate that the manufacturing of wind-power generators
includes the manufacturing of its main components, in particular the tower, the rotor and
the nacelle.
This clarification will apply as of calendar year 2005.
However, to avoid penalizing a corporation on the basis of the interpretation given to the
expression wind-power generator, a clarification will also be made to the refundable tax
credit for processing activities in the resource regions to enable a corporation to have the
manufacturing of components of wind-power generators recognized, under certain
conditions, as the activity of a certified business, for calendar years prior to 2005. This
clarification is described below.
R Refundable tax credit for processing activities in the resource
regions
Briefly, the refundable tax credit for processing activities in the resource regions is granted
regarding the increase in payroll attributable to eligible employees of an eligible
corporation operating in a resource region of Québec, for five consecutive calendar years.
26
2004-9
November 12, 2004
which an eligibility certificate is issued by Investissement Québec and whose activities
concern in particular the secondary or tertiary processing of wood, metals or non-metallic
minerals.
According to the existing terms and conditions, territorial exclusivity is granted regarding
specific activities carried out in the maritime regions and in the Vallée de l'aluminium. For
example, an activity covered by the refundable tax credit for Gaspésie and certain
maritime regions of Québec, such as the manufacturing of wind-power generators, can not
be recognized as the activity of a certified business for the purposes of the refundable tax
credit for processing activities in resource regions.
•
Correlative change to the refundable tax credit for the Vallée de
l’aluminium
Like the change made to the refundable tax credit for the Vallée de l’aluminium, the
change to the application of the 40-kilometre criterion, in the case of a major unforeseen
event, will also apply in the case of the refundable tax credit for processing activities in the
resource regions.
•
Clarification to the notion of certified business
As a corollary to the clarification made to the refundable tax credit for Gaspésie and
certain maritime regions of Québec, a corporation carrying on a business whose activities
consist in manufacturing any of the main components of a wind-power generator, and for
which an application to obtain an eligibility certificate was made in writing to
Investissement Québec prior to the date of publication of this information bulletin may
claim the refundable tax credit for processing activities in the resource regions, for
calendar years 2001 to 2004, if it otherwise satisfies the other applicable conditions.
2.2
Refundable tax credit for R&D
A refundable tax credit of 35% is allowed a taxpayer in relation to scientific research and
experimental development (R&D) activities carried out either by an eligible public research
centre or a research consortium under an eligible research contract concluded by the
taxpayer with such a centre or consortium, or by an eligible university entity under a
university research contract concluded by the taxpayer with such entity, as the case may
be.
R Dual recognition of a research consortium
In the May 14, 1992 Budget Speech, the Consortium de recherche sur la forêt boréale
commerciale was recognized as an eligible university entity.
27
2004-9
November 12, 2004
On September 26, 2003, the ministère du Développement économique et régional et
Recherche (MDERR) issued a certificate recognizing the Consortium de recherche sur la
forêt boréale commerciale as an eligible research consortium as of January 1, 2003.
The MDERR’s recognition of the Consortium de recherche sur la forêt boréale
commerciale as an eligible research consortium makes the recognition of this centre as an
eligible university entity obsolete for the purposes of the refundable tax credits for R&D.
By being recognized as an eligible research consortium by the MDERR, a contract
concluded with the Consortium sur la forêt boréale may qualify as an eligible research
contract, provided all the other eligibility conditions are otherwise satisfied.
In this context, the recognition of the Consortium de recherche sur la forêt boréale
commerciale as an eligible university entity is revoked as of January 1, 2003, i.e. the
effective date of the recognition of the Consortium de recherche sur la forêt boréale
commerciale as an eligible research consortium.
For greater clarity, this revocation, by itself, has no impact on the eligibility of the research
contracts concluded with the Consortium de recherche sur la forêt boréale commerciale,
since the contracts may qualify as eligible research contracts for the purposes of the
refundable tax credits for R&D, as mentioned above.
R Designation of two new eligible public research centres
The Centre de recherche sur les biotechnologies marines (CRBM) will be recognized as
an eligible public research centre for the purposes of the refundable tax credits for R&D.
This recognition will apply regarding R&D carried out after July 13, 2004, under an eligible
research contract concluded after that date.
The Collège Maisonneuve, regarding its Centre d’études des procédés chimiques du
Québec (Céprocq), will be recognized as an eligible public research centre for the
purposes of the refundable tax credits for R&D.
In this case, a representative of Céprocq and another representative of the Collège
Maisonneuve must intervene in research contracts concluded with taxpayers and these
research contracts must in particular specify that the Collège Maisonneuve undertakes to
have the R&D work stipulated in the research contracts carried out by Céprocq.
This recognition will apply regarding R&D carried out after June 30, 2003, under an eligible
research contract concluded after that date.
2.3
Adjustment to the penalty for false statement or
omission
The Taxation Act stipulates a penalty applicable to any person who makes a false
statement or an omission, or who participates or acquiesces therein, if such action is taken
knowingly or under circumstances amounting to gross negligence.
28
2004-9
November 12, 2004
Briefly, the amount of this penalty is equal to the greater of $100 or 50% of the amount of
income tax avoided because of such false statement or omission, of the excess amount of
a deduction obtained because of such false statement or omission, or of the excess
amount of a refundable tax credit obtained because of such false statement or omission.
The penalty for false statement or omission is structured so as to impose a penalty only
regarding a net amount of undeclared income because it makes allowance, in the
calculation of the penalty, for the amount of a deduction allowed in the calculation of
income and that is fully applicable to the amount that was not indicated in the return but
that should have been included in the calculation of income. Accordingly, under this
calculation method, no penalty is payable, subject to the minimum amount of $100
otherwise stipulated, where the omission or false statement produced no tax benefit to the
person required to provide information.
However, many deductions are allowed only in the calculation of taxable income.30 Such
deductions are not considered in the calculation of the penalty for false statement or
omission. Consequently, a person who omits to declare income otherwise exempt from tax
because of a deduction stipulated in the calculation of taxable income and applicable to
such income could have a penalty imposed, although the omission would not have
produced a tax benefit for him.
This possibility does not appear consistent with the objective of the penalty for false
statement or omission. The purpose of this section is to penalize a person who omits to
declare income in his tax return when he derives a tax benefit thereby. Consequently,
where no tax benefit results from the omission, no penalty should be imposed, subject to
the imposition of the minimum amount of $100 otherwise stipulated.
Accordingly, the tax legislation will be amended. More specifically, the penalty for false
statement or omission will be amended to make allowance, in the calculation of the
penalty, for the amount of a deduction stipulated in the calculation of taxable income and
that is directly applicable to the undeclared income.
This amendment will apply regarding a penalty for omission or false statement imposed
after the date of publication of this information bulletin.
30
In particular, the tax holidays for foreign researchers, foreign specialists or foreign experts.
29
2004-9
November 12, 2004
3.
OTHER MEASURES
3.1
Limitation on estimates eligible for the purposes of the
calculation of the Québec sales tax regarding the sale of
road vehicles
To limit the incidence of tax avoidance with respect to transactions relating to used road
vehicles, the Québec sales tax (QST) system includes a measure to determine the value
of such vehicles for the purposes of calculating the tax payable on their sale. According to
this anti-avoidance measure, the QST payable must generally be calculated on the greater
of the sale price the parties agreed to in the transaction, or a base price corresponding to
the average wholesale price indicated in certain reference volumes less $500.
However, when the agreed selling price is less than the base price because the road
vehicle that is sold is damaged or shows unusual wear, the purchaser can have the value
on which the QST must be calculated reduced.
To that end, the purchaser must submit to the Société de l’assurance automobile du
Québec, the seller of the road vehicle or the ministère du Revenu du Québec, as the case
may be, a written estimate of the vehicle or of the repairs to be carried out in respect of the
vehicle, made by an estimator of automobile damage who holds an attestation of
professional qualification issued by the Groupement des assureurs automobiles (GAA).
Estimators who are thus qualified can practice their profession at appraisal centres
approved by the GAA, firms accredited by the GAA or businesses independent of the
GAA.
In recent years, it appears that many estimators qualified by the GAA concentrate
exclusively on producing estimates of road vehicles for the purpose of calculating the QST,
and that these estimates are often well below the true value of these vehicles. These
estimators generally practice their profession in businesses that are not approved or
accredited by the GAA, so that the latter is not able to monitor the estimates produced by
these businesses.
In this context, the QST system will be changed to limit estimates eligible for the purposes
of calculating the tax payable on the sale of road vehicles to those made by qualified
estimators in the course of practicing their profession in businesses approved or
accredited by the GAA.
This measure will apply to road vehicles regarding which the QST is payable after
November 30, 2004. In addition, for the purposes of calculating the QST payable regarding
such sales, no appraisal made before December 1, 2004 other than by a qualified
estimator in the course of practicing his profession in a business approved or accredited
by the GAA will be eligible after January 31, 2005.
30
2004-9
November 12, 2004
3.2
Increase in the exemptions granted for determining
premiums under the prescription drug insurance plan
The basic prescription drug insurance plan introduced by the Québec government ensures
all Quebecers fair access to the medication required by their state of health. Coverage
under this plan is provided by the Régie de l'assurance maladie du Québec (RAMQ), or by
insurers transacting group insurance or administrators of private-sector employee benefit
plans.
As a rule, all persons whose coverage is provided by RAMQ in a given year must, in filing
their income tax return for that year, pay a premium to finance the Québec prescription
drug insurance plan, of which they are beneficiaries. However, to take each person's ability
to pay into account, deductions are granted in calculating this annual premium. The level
of these deductions is set, notably, to exempt from paying the annual premium a person or
a couple who receives the maximum amount of guaranteed income supplement from the
federal government.
To adhere to the principle of taking each person's ability to pay into account in determining
the amount of the premiums that must be paid to finance the Québec prescription drug
insurance plan, adjustments must be made to the amounts of the deductions used to
calculate the premiums payable for 2004.
The following table shows the deductions that will be granted in calculating the premiums
payable by persons whose coverage is provided by RAMQ in 2004.
Deductions according to family situation
Québec prescription drug insurance plan (2004)
(in dollars)
Family situation
Deduction
1 adult, no children
12 240
1 adult, 1 child
19 850
1 adult, 2 children or more
22 615
2 adults, no children
19 850
2 adults, 1 child
22 615
2 adults, 2 children or more
25 165
31
2004-9
November 12, 2004
3.3
Harmonization with federal measures relating to the
regularoty reform respecting registered charities
In the federal Budget Speech of March 23, 2004, the Minister of Finance of Canada tabled,
in the House of Commons, Supplementary Information as well as a Notice of Ways and
Means Motion to Amend the Income Tax Act, introducing measures concerning the
regulatory reform respecting registered charities (BR 25).31
On September 16, 2004, the Department of Finance Canada issued a news release32
accompanied by a draft amendment to the Income Tax Act and related legislation
containing, with certain changes, the measures relating to the regulatory reform respecting
registered charities announced as part of the March 23, 2004 Budget Speech.
In this regard, Québec's tax legislation will be amended to incorporate some of these
measures. However, these measures will be adopted only after the approval of any federal
law arising from this notice of motion, taking into account technical amendments that might
be made prior to its approval. In general, they will apply on the same dates as for federal
income tax purposes.
R Measures retained
Subject to the clarifications mentioned below, Québec's tax legislation will be amended to
incorporate, with adaptations based on its general principles, the measures regarding:
—
the implementation of an intermediate penalty regime, but only concerning
penalties consisting of a temporary suspension of authorization to issue official tax
receipts;
—
the annulment of registration and refusal to grant registration;
—
the introduction of a more accessible appeal mechanism enabling the appellant to
contest certain decisions using the objections process rather than turning directly to
the courts;
—
rules on disbursement quota.
R Measures not retained
Some measures have not been retained, either because Québec’s tax system is
satisfactory in that regard or because it does not contain corresponding provisions. The
measures in question are those relating to the communication of additional information
regarding charities and the ones relating the special tax payable by charities whose
registration has been revoked.
31
The reference in parentheses corresponds to the number of the budget resolution in the Notice of Ways and Means
Motion to Amend the Income Tax Act tabled on March 23, 2004.
32
Department of Finance Canada news release 2004-051.
32
2004-9
November 12, 2004
R Clarifications in respect of some of the measures retained
The measures retained concerning the implementation of an intermediate penalty regime,
i.e. those dealing with penalties consisting of a temporary suspension of the authority to
issue official tax receipts, will be adapted to:
—
grant the Minister of Revenue the capacity to suspend the authority held by a
registered charity, including a registered national arts service organization, to issue
receipts for donations and gifts, bearing the mention that they are Québec income
tax receipts, where such organization has contravened the requirements in terms of
registers and supporting documents or where it has acted in concert with another
organization under such suspension to accept, on the latter’s behalf, a gift;
—
extend the scope of such suspension to recognized arts and political education
organizations;
—
stipulate that, where the authority to issue official income tax receipts held by a
registered charity, including a registered national arts service organization, is, for a
given period, suspended for the purposes of federal tax legislation and regulation,
the authority of such organization to issue receipts for donations and gifts, bearing
the mention that they are Québec income tax receipts shall be deemed, for the
same period, suspended for the purposes of Québec’s tax legislation and
regulation, it being understood that, in relation to the period of suspension, any
postponement granted by the Tax Court of Canada must be taken into account.
Moreover, the measures retained regarding the annulment of registration and the refusal
to grant registration will also be adapted to:
—
grant the Minister of Revenue the authority to refuse to register a charity or a
registered national arts service organization as well as the authority to annul the
registration of such organization;
—
in the case of a charity, including a registered national arts service organization,
that, because of its registration with the Minister of National Revenue, is deemed
registered in Québec:
–
retain, for the purposes of Québec’s tax system, the measure relating to the
annulment, by the Minister of National Revenue, of the registration of such
organization, even if such measure requires no legislative amendment;
–
stipulate a rule such that any receipt for donations and gifts bearing the
mention that it is a receipt for Québec income tax and that was issued by
the organization before its registration was annuled by the Minister of
National Revenue is deemed a valid receipt for the purposes of Québec’s
tax system, provided it would have been so if the organization was, at the
time the receipt was issued, a registered charity or, as the case may be, a
registered national arts service organization.
33
2004-9
November 12, 2004
Concerning the measures retained regarding the introduction of a more accessible appeal
mechanism, they will be extended to recognized arts and political education organizations.
Lastly, the measures retained regarding the disbursement quota will also be extended to
recognized arts and political education organizations, by applying to the latter the same
rules as for charitable organizations.
These measures will apply as of the same dates as the federal measures they arise from,
except that, for arts and political education organizations:
—
the measure granting the Minister of Revenue the capacity to suspend, in certain
circumstances, the authority to issue receipts for donations and gifts, bearing the
mention that they are Québec income tax receipts will apply regarding a taxation
year that begins after the date of publication of this information bulletin;
—
the measures relating to the introduction of a more accessible appeal mechanism
will apply regarding a notice issued after the 30th day following the date on which
the bill giving effect to them is assented to;
—
the measures relating to the rules on disbursement quota will apply regarding a
taxation year that begins after the date of publication of this information bulletin.
However, to give arts and political education organizations that were recognized
before the day following the day of publication of this information bulletin enough
time to adapt to the requirement to pay 3.5% in relation to their capital assets, this
measure will apply regarding a taxation year of a recognized arts or political
education organization beginning after December 31, 2008.
3.4
News releases 99-111 of December 16, 1999, 00-101 of
December 21, 2000 and 2003-032 of June 23, 2003
On December 16, 1999, the Minister of Finance of Canada announced that the Canadian
Venture Exchange or CDNX, resulting from the merger of the Vancouver and Alberta stock
exchanges, would be added to the list of securities exchanges in Canada covered by the
Income Tax Regulations. This decision was based on the fact that the Vancouver and
Alberta stock exchanges were on that list.
On December 21, 2000, a further announcement adding to that of December 16, 1999,
stipulated that the Canadian Venture Exchange had initiated a new class of shares, tier 3,
to enable the transfer of shares from the Canadian Dealing Network, which was formerly
the over-the-counter market in Canada. However, since the Network was not on the list of
securities exchanges in Canada, tier 3 was not added to this list.
On November 27, 2000, the Winnipeg Exchange was also incorporated into the Canadian
Venture Exchange which, in May 2002, changed its official name to TSX Venture
Exchange.
34
2004-9
November 12, 2004
As a result of all these changes, the list of securities exchanges in Canada now consists of
tiers 1 and 2 of the TSX Venture Exchange, the Montréal Exchange and the Toronto Stock
Exchange.
On June 23, 2003, the Minister of Finance of Canada announced the addition of the
Luxembourg and Warsaw stock exchanges (principal and parallel markets) to the list of
securities exchanges outside Canada. This change became effective on June 24, 2003.
The notions of “Canadian stock exchange” and “foreign stock exchange” which are the
Québec counterparts of “securities exchanges in Canada” and “securities exchanges
outside Canada” are useful in particular for the purposes of provisions relating to a
securities loan arrangement and those concerning the calculation of income earned in
Québec by persons who do not reside there. Historically, the Québec and federal lists
have always been identical.
Accordingly, Québec’s tax legislation will be amended to incorporate the changes
described above, which will be applicable as of the time they are for federal tax purposes.
More specifically, since there is no reason for the Québec lists of Canadian stock
exchanges and foreign stock exchanges to differ from the corresponding federal lists,
Québec’s tax legislation will be amended so that the Québec notions are defined with
reference to the corresponding lists established as part of the federal tax regulations.
Accordingly, any change made to the federal definitions will henceforth automatically be
incorporated into Québec’s tax legislation.
Concerning the Québec list of Canadian stock exchanges, the effect of the reference will
be retroactive to the federal change applied at the earliest of the dates, namely
November 29, 1999, the date when the Canadian Venture Exchange was added to the
federal list of securities exchanges in Canada.
Lastly, in the case of the Québec list of foreign stock exchanges, the reference will be
retroactive to June 24, 2003, the date when the federal recognition of the Luxembourg and
Warsaw stock exchanges (principal and parallel markets) as securities markets outside
Canada became effective.
35

November 12, 2004 - Ministère des Finances

Transcription

Documents pareils

MLWP Women Schedule for January, 2016

Policy Pricing Chart

a successful move remembering the important - Hydro

travel agent workshops 2012

Declaration of intent to settle in Québec – Businesspeople Investors

Door 44 mm (1 ¾``) Leaded

Bonnes Idées! - Minnesota Chapter, American Association of

Welcome to Montreal / Bienvenue à Montréal Weather / Météo

Pathways for admission to a medical residency program