Revenu Québec Infos

The amount of qualified expenditures included in calculating the tax credits in the cultural sector that a qualified corporation can claim must be reduced by the amount of any government assistance and any non-government assistance, other than an excluded amount of assistance, that the corporation received or is entitled to receive.

Fiscal legislation will be amended so that amounts of assistance granted by Québec City under its program entitled Soutien à la production cinématographique et télévisuelle and by the Société des célébrations du 375e anniversaire de Montréal constitute excluded amounts of assistance for the purposes of certain tax credits in the cultural sector.

For more information, see pages A.71 and A.72 of the document entitled Additional Information 2016-2017 (PDF – 2.88 MB), published by the Ministère des Finances.

The Mining Tax Act will be amended to take into account the following:

• An operator will be allowed to elect, in its mining tax return for its fiscal year ended immediately before the time at which it ceased, for an indeterminate period, all activities related to its mining operations, to calculate its profit margin for the fiscal year by replacing the amount corresponding to its annual profit by an amount corresponding to its adjusted annual profit.
• The transfer of depreciable property with no immediate tax impact between related persons will apply only where the purchaser is an operator within the meaning of the Mining Tax Act for the fiscal year in which the purchaser acquires the property.
• The proceeds of alienation of property deemed to have been alienated, where a person ceased all activities related to its mining operation, will be adjusted to allow for a transfer of the property with no immediate tax impact to a person that is related to the person and that is an operator within the meaning of the Mining Tax Act.
• An operator will no longer be required to reimburse the Minister of Revenue for expenses paid for the services of a valuator mandated by the Minister for the purpose of determining the gross value of the annual output of gemstones.
• An operator will be required to provide the facilities and equipment (other than computer equipment) enabling the valuator mandated by the Minister of Revenue to valuate the gemstones extracted from the mine. 

For more information, see pages A.92 to A.98 of the document entitled Additional Information 2016-2017 (PDF – 2.88 MB), published by the Ministère des Finances.

In the Budget Speech delivered on March 17, 2016, the Minister of Finance of Québec announced that the health contribution would be reduced gradually beginning in 2016 and ultimately eliminated in 2018. More specifically, for 2016, the maximum amount of the health contribution has been reduced as follows:

• from $100 to $50, for income greater than $18,570 but not greater than $41,265; and
• from $200 to $175, for income greater than $41,265 but not greater than $134,095.

Accordingly, you must take the reduction into account when calculating source deductions as of July 1, 2016. In addition, the amounts used to calculate the health contribution included in calculating source deductions of income tax have been reduced (from $50 to $0 and from $175 to $150) so that individuals can benefit from the reduction retroactively to January 1, 2016. The Source Deduction Table for Québec Income Tax (TP-1015.TI-V), the guide entitled Formulas to Calculate Source Deductions and Contributions (TP-1015.F-V) and the WinRAS application have all been updated to reflect the changes. As a result, be sure to use the 2016-07 version of the table, guide or application for any pay period beginning after June 30, 2016.

Instalment Payments

Individuals who are required to pay their income tax in instalments may adjust any instalment payment due after March 31, 2016, in accordance with the usual rules, to take into account the effects of the new reduction plan leading to the elimination of the health contribution.

As part of the budget speech of March 26, 2015, an easing of the tax provisions applicable to the disposition of qualified shares of corporations in the primary or manufacturing sectors carried out in conjunction with a transfer of a family business was announced. For the application of the easing, a transfer of a family business will be designated as qualifying, in respect of a taxpayer, where the following seven qualification criteria are met.

Criterion 1

The taxpayer disposing of the shares concerned is an individual other than a trust.

Criterion 2

The taxpayer (or the taxpayer's spouse), while he or she held the shares concerned, played an active role in a business carried on by the corporation in question, or by a corporation in which the corporation in question held a “substantial interest” according to the meaning given to this expression in the Income Tax Act, during the 24-month period immediately preceding the disposition of the shares concerned.

Criterion 3

The taxpayer (or the taxpayer's spouse) does not, after the disposition of the shares concerned, play an active role in a business actively carried on by the acquirer or by the corporation in question (or by a corporation in which the corporation in question holds a substantial interest), except for: 

• an active role aimed at fostering a harmonious transfer of the knowledge possessed by the taxpayer (or the taxpayer's spouse) of a business carried on by such a corporation to the other persons active in carrying on the business; or 
• an active role in a business carried on by such a corporation, if substantially all of the income of the business is not derived from the sale, rental or development, as applicable, of property similar to, or the providing of services similar to, those of a business carried on by the corporation in question, the acquirer or any corporation in which the corporation in question or the acquirer held an interest, directly or indirectly.

Criterion 4

The taxpayer (or the taxpayer's spouse) does not, during the period beginning one month after the disposition of the shares concerned and ending at the end of a series of operations including the disposition of the shares concerned, have de jure control of the corporation in question or of a corporation in which the corporation in question had a substantial interest, and neither the taxpayer nor the taxpayer's spouse belong to a group of persons having the de jure control of such a corporation, except for: 

• a corporation carrying on a business, if substantially all of the income of the business is not derived from the sale, rental or development, as applicable, of property similar to, or the providing of services similar to, those of a business carried on by the corporation in question, the acquirer or any corporation in which the corporation in question or the acquirer held an interest, directly or indirectly;
• a corporation that is not actively carrying on a business.

Criterion 5

The taxpayer (or the taxpayer's spouse) does not, during the period beginning one month after the disposition of the shares concerned and ending at the end of a series of operations including the disposition of the shares concerned, hold, directly or indirectly, common shares of the corporation in question or a corporation in which the corporation in question had a substantial interest, except for common shares in a corporation that is: 

• carrying on a business, if substantially all of the income of the business is not derived from the sale, rental or development, as applicable, of property similar to, or the providing of services similar to, those of a business carried on by the corporation in question, the acquirer or any corporation in which the corporation in question or the acquirer held an interest, directly or indirectly;
• not actively carrying on a business.

Criterion 6

The total fair market value of all the residual financial interests (in any form whatsoever) held, during the period beginning one month after the disposition of the shares concerned and ending at the end of a series of operations (excluding payment of those residual financial interests) including the disposition of the shares concerned, directly or indirectly, by all of the taxpayers benefiting from the easing (as well as their spouse, even if that spouse does not benefit from the easing) in a particular corporation must not be greater than 60% (80% in the case of a farming or fishing business) of the fair market value of the aggregate of the issued shares of a particular corporation.

Criterion 7

For the period beginning immediately after the disposition of the shares concerned and ending at the end of a series of operations including the disposition of the shares concerned, at least one person participating in the body of shareholders of the acquirer (or the spouse of such a person) plays an active role in carrying on the business carried on by the corporation in question or a business carried on by a corporation in which the corporation in question had an interest.

Application date

The easing will apply to dispositions of shares occurring after March 17, 2016.

For more information, see pages A.38 to A.44 of the document entitled Additional Information 2016-2017 (PDF – 2.88 MB), published by the Ministère des Finances.

The tax legislation will be amended so that an expenditure will qualify for the tax credit for technological adaptation services only if it concerns an eligible liaison and transfer service provided in Québec or it concerns participation in training and information activities dispensed in Québec in connection with an eligible liaison and transfer service.

This change will apply regarding qualified expenditures incurred by a qualified corporation after March 17, 2016, in connection with services offered after that day by an eligible college centre for the transfer of technology (CCTT) or by an eligible liaison and transfer centre (LTC) under a contract entered into after that day with the CCTT or LTC, as applicable.

For more information, see page A.59 of the document entitled Additional Information 2016-2017 (PDF – 2.88 MB), published by the Ministère des Finances.

Tax regulations provide that, subject to the Minister's power to refuse or revoke a registration or modify a designation, any charitable organization, private foundation or public foundation that is registered as such under the Income Tax Act is deemed to be registered as such with the Minister, where the organization or foundation has provided to the Minister, within 30 days of its registration under federal tax legislation, a certified copy of the supporting documents filed with its application for registration and reasonable proof of registration.

Tax regulations will be amended to stipulate that, subject to the Minister's power to refuse, cancel, or revoke a registration or modify a designation, a charitable organization, a private foundation, a public foundation or a division (branch, section, parish, congregation or other division) of such an organization or foundation that is registered as a charitable organization, a private foundation or a public foundation under federal tax legislation will also be deemed registered as such with the Minister.

This amendment is effective January 1, 2016.

In addition, donations made before January 1, 2016, to an organization that, at the time of the donation, was a registered charity under federal tax legislation will be, for the purposes of the deduction for donations and gifts or the tax credit for donations and gifts provided for under the Québec income tax system, deemed to have been made to a registered charity, unless, at that time, the Minister had refused to register it as a charitable organization, private foundation or public foundation or had cancelled or revoked its registration.

For more information, see pages A.105 and A.106 of the document entitled Additional Information 2016-2017 (PDF – 2.88 MB), published by the Ministère des Finances.

As of March 27, 2015, the eligible amount of certain food donations made by a recognized farm producer can be increased by 50% if they are made to a registered charity that is either the Food Banks of Québec network or a Moisson member.

To take into account the fact that associate members of the Food Banks of Québec network can also solicit donations from local food suppliers, the increase in the eligible amount of donations of eligible agricultural products will cover any donation made after March 17, 2016, to a registered charity that is an associate member.

In addition, to ensure that the Food Banks of Québec network, a Moisson member or an associate member will receive quality food products in sufficient quantity throughout the year, the eligible amount of a food donation made, after March 17, 2016, by a corporation, partnership or individual carrying on a food processing business to a registered charity that is either the Food Banks of Québec, a Moisson member or an associate member may be increased by 50% for the purposes of calculating the deduction for donations and gifts or the non-refundable tax credit for donations and gifts, as applicable, if the donation consists of eligible food.

For more information, see pages A.73 to A.74 of the document entitled Additional Information 2016-2017 (PDF – 2.88 MB), published by the Ministère des Finances.

A new plan to reduce health services fund contribution rates for all small and medium-sized businesses will take effect in 2017.

Small and medium-sized businesses in the primary and manufacturing sectors

For employers in the primary and manufacturing sectors whose total payroll is less than or equal to $1 million, the health services fund contribution rate will gradually decrease from 1.6% to 1.45% over a five-year period beginning in 2017. Employers whose total payroll is between $1 million and $5 million will also see a gradual reduction in their contribution rate.

Total payroll up to $1M Current rate 1.6% Rate for 2017  1.55% Rate for 2018 to 2020 1.5% Rate as of 2021 1.45%

For more information, see pages A.29 to A.32 of the document entitled Additional Information 2016-2017 (PDF – 2.88 MB), published by the Ministère des Finances.

Small and medium-sized businesses in the service and construction sectors

For employers in sectors other than the primary and manufacturing sectors whose total payroll is less than or equal to $1 million, the health services fund contribution rate will gradually decrease from 2.7% to 2% over a five-year period beginning in 2017. Employers whose total payroll is between $1 million and $5 million will also see a gradual reduction in their contribution rate.

Total payroll up to $1M Current rate 2.70% Rate for 2017  2.50% Rate for 2018  2.30% Rate for 2019  2.15% Rate for 2020  2.05% Rate as of 2021 2.00%

For more information, see pages A.32 to A.34 of the document entitled Additional Information 2016-2017 (PDF – 2.88 MB), published by the Ministère des Finances.

Temporary reduction of the health services fund contribution for the hiring of specialized workers

For any year after 2016, the temporary reduction rate for the health services fund contribution for an employer whose total payroll is more than $1M will be equal to:

• for employers in the primary or manufacturing sector:
  • 1.55% for 2017
  • 1.50% for 2018 to 2020
• for employers in other sectors:
  • 2.50% for 2017
  • 2.30% for 2018
  • 2.15% for 2019
  • 2.05% for 2020

For more information, see pages A.34 to A.35 of the document entitled Additional Information 2016-2017 (PDF – 2.88 MB), published by the Ministère des Finances.

Below are the changes made to the guide entitled Formulas to Calculate Source Deductions and Contributions (TP-1015.F-V) for 2016. The formulas were updated further to the Budget Speech delivered on March 17, 2016, to take into account the maintenance of the rate of the tax credit for the purchase of shares issued by Fondaction and the reduction of the health contribution.

Variable E

The indexation factor used to calculate the value of personal tax credits for 2016 is 1.09%.

Variables H, H1 and H2 – Deduction for employment income

The maximum deduction for employment income has been increased from $1,120 to $1,130 for 2016. Consequently, the maximum amount of variables H, H1 and H2 has been increased from $1,120 to $1,130.

Variable K – The constant for adjusting the income tax rate

For 2016, the income tax rates applicable to the taxable income brackets remain unchanged and the income thresholds for these brackets have been indexed. Specifically,

• the 16% rate applies to taxable income of $42,390 or less (previously $41,935);
• the 20% rate applies to taxable income of more than $42,390, but not more than $84,780 (previously $83,865);
• the 24% rate applies to taxable income of more than $84,780, but not more than $103,150 (previously $102,040);
• the 25.75% rate applies to taxable income of more than $103,150.

The values of variable K are therefore $1,695 (increased from $1,677), $5,086 (increased from $5,032) and $6,891 (increased from $6,817).

Variable M – Québec Pension Plan

The QPP contribution rate has been increased from 10.50% to 10.65% for 2016, which corresponds to a contribution rate of 5.325% for the employee and 5.325% for the employer.

In addition, the maximum pensionable earnings for the purposes of the QPP have been increased from $53,600 to $54,900. Variable M has therefore been increased from $2,630.25 to $2,737.05.

Variables N and N1 – Québec parental insurance plan

The maximum insurable earnings subject to QPIP premiums have been increased from $70,000 to $71,500 for 2016. The employee premium rate is reduced from 0.559% to 0.548%, and the employer premium rate is reduced from 0.782% to 0.767%. As a result, variable N is $391.82 (instead of $391.30) and variable N1 is $548.41 (instead of $547.40).

Variables Y, Y1 to Y4, Q and Q1– Fondaction

Effective June 1, 2015, the rate of the tax credit for the acquisition of shares issued by Fondaction is 20% for any eligible share acquired after May 31, 2015, but before June 1, 2016.

In the Budget Speech delivered on March 17, 2016, the Minister of Finance of Quebec announced that the rate of this tax credit would be maintained at 20% for any eligible share acquired after May 31, 2016, but before June 1, 2018.

Accordingly, for 2016, if an employee has authorized you to withhold an amount from his or her pay for the purchase of shares issued by Fondaction, you must use the 20% rate to calculate the amount to withhold. See the table below.

Calculation of source deductions of income tax

Regular payments

Y = (T × I) − K − K1 − (0.20 × E) − (0.15 × P × Q) − (0.20 × P × Q1) + Z

Gratuities, retroactive pay or similar lump-sum payments

Y1 = [T × (I1 + B1)] − K − K1 − (0.20 × E) − (0.15 × P × Q) − (0.20 × P × Q1) + Z1

Y2 = [T × (I1 + B1 + B2)] − K − K1 − (0.20 × E) − (0.15 × P × Q) − (0.20 × P × Q1) + Z2

Cumulative average

First method

Y = (T × I) − K − K1 − (0.20 × E) − (0.15 × S1 × Q) − (0.20 × S1 × Q1) + Z

Second Method

Y3 = (T × I3) − K − K1 − (0.20 × E) − (0.15 × S1 × Q) − (0.20 × S1 × Q1) + Z3

Y4 = (T × I4) − K − K1 − (0.20 × E) − (0.15 × S1 × Q) − (0.20 × S1 × Q1) + Z4

Definitions

Q = amount withheld for a pay period for the purchase of class A shares in the Fonds de solidarité FTQ

Q1 = amount withheld for the pay period for the purchase, before June 1, 2016, of class A or class B shares in Fondaction

Note

The total value of variables Q and Q1 must not exceed $5,000 for the year. For the pay period in which the annual maximum is reached, the value of variables Q and Q1 must be zero.

Variable Z – Health contribution

In the Budget Speech delivered on March 17, 2016, the Minister of Finance of Quebec announced that the health contribution would be reduced gradually beginning in 2016 and ultimately eliminated in 2018. More specifically, for 2016, the maximum amount of the health contribution has been reduced as follows:

• from $100 to $50, for income greater than $18,570 but not greater than $41,265; and
• from $200 to $175, for income greater than $41,265 but not greater than $134,095.

Accordingly, you must take the reduction into account when calculating source deductions as of July 1, 2016. In addition, the amounts used to calculate the health contribution included in calculating source deductions of income tax have been reduced (from $50 to $0 and from $175 to $150) so that individuals can benefit from the reduction retroactively to January 1, 2016.

Be sure to use the reduced amounts when calculating source deductions of income tax for any pay period beginning after June 30, 2016.

Estimated annual net income (R)Health contribution (Z)

More than

Equal to or less than

$0

$41,265

$0

$41,265

$134,095

Whichever is less:

• $150; or
• 5% × (R − $41,265).

$134,095

Whichever is less:

• $1,000; or
• $150 + [4% × (R − $134,095)].

Below are the changes made to the guide entitled Formulas to Calculate Source Deductions and Contributions (TP-1015.F-V) for 2016. The formulas were updated further to the Budget Speech delivered on March 17, 2016, to take into account the maintenance of the rate of the tax credit for the purchase of shares issued by Fondaction and the reduction of the health contribution.

Variable E

The indexation factor used to calculate the value of personal tax credits for 2016 is 1.09%.

Variables H, H1 and H2 – Deduction for employment income

The maximum deduction for employment income has been increased from $1,120 to $1,130 for 2016. Consequently, the maximum amount of variables H, H1 and H2 has been increased from $1,120 to $1,130.

Variable K – The constant for adjusting the income tax rate

For 2016, the income tax rates applicable to the taxable income brackets remain unchanged and the income thresholds for these brackets have been indexed. Specifically,

• the 16% rate applies to taxable income of $42,390 or less (previously $41,935);
• the 20% rate applies to taxable income of more than $42,390, but not more than $84,780 (previously $83,865);
• the 24% rate applies to taxable income of more than $84,780, but not more than $103,150 (previously $102,040);
• the 25.75% rate applies to taxable income of more than $103,150.

The values of variable K are therefore $1,695 (increased from $1,677), $5,086 (increased from $5,032) and $6,891 (increased from $6,817).

Variable M – Québec Pension Plan

The QPP contribution rate has been increased from 10.50% to 10.65% for 2016, which corresponds to a contribution rate of 5.325% for the employee and 5.325% for the employer.

In addition, the maximum pensionable earnings for the purposes of the QPP have been increased from $53,600 to $54,900. Variable M has therefore been increased from $2,630.25 to $2,737.05.

Variables N and N1 – Québec parental insurance plan

The maximum insurable earnings subject to QPIP premiums have been increased from $70,000 to $71,500 for 2016. The employee premium rate is reduced from 0.559% to 0.548%, and the employer premium rate is reduced from 0.782% to 0.767%. As a result, variable N is $391.82 (instead of $391.30) and variable N1 is $548.41 (instead of $547.40).

Variables Y, Y1 to Y4, Q and Q1– Fondaction

Effective June 1, 2015, the rate of the tax credit for the acquisition of shares issued by Fondaction is 20% for any eligible share acquired after May 31, 2015, but before June 1, 2016.

In the Budget Speech delivered on March 17, 2016, the Minister of Finance of Quebec announced that the rate of this tax credit would be maintained at 20% for any eligible share acquired after May 31, 2016, but before June 1, 2018.

Accordingly, for 2016, if an employee has authorized you to withhold an amount from his or her pay for the purchase of shares issued by Fondaction, you must use the 20% rate to calculate the amount to withhold. See the table below.

Calculation of source deductions of income tax

Regular payments

Y = (T × I) − K − K1 − (0.20 × E) − (0.15 × P × Q) − (0.20 × P × Q1) + Z

Gratuities, retroactive pay or similar lump-sum payments

Y1 = [T × (I1 + B1)] − K − K1 − (0.20 × E) − (0.15 × P × Q) − (0.20 × P × Q1) + Z1

Y2 = [T × (I1 + B1 + B2)] − K − K1 − (0.20 × E) − (0.15 × P × Q) − (0.20 × P × Q1) + Z2

Cumulative average

First method

Y = (T × I) − K − K1 − (0.20 × E) − (0.15 × S1 × Q) − (0.20 × S1 × Q1) + Z

Second Method

Y3 = (T × I3) − K − K1 − (0.20 × E) − (0.15 × S1 × Q) − (0.20 × S1 × Q1) + Z3

Y4 = (T × I4) − K − K1 − (0.20 × E) − (0.15 × S1 × Q) − (0.20 × S1 × Q1) + Z4

Definitions

Q = amount withheld for a pay period for the purchase of class A shares in the Fonds de solidarité FTQ

Q1 = amount withheld for the pay period for the purchase, before June 1, 2016, of class A or class B shares in Fondaction

Note

The total value of variables Q and Q1 must not exceed $5,000 for the year. For the pay period in which the annual maximum is reached, the value of variables Q and Q1 must be zero.

Variable Z – Health contribution

In the Budget Speech delivered on March 17, 2016, the Minister of Finance of Quebec announced that the health contribution would be reduced gradually beginning in 2016 and ultimately eliminated in 2018. More specifically, for 2016, the maximum amount of the health contribution has been reduced as follows:

• from $100 to $50, for income greater than $18,570 but not greater than $41,265; and
• from $200 to $175, for income greater than $41,265 but not greater than $134,095.

Accordingly, you must take the reduction into account when calculating source deductions as of July 1, 2016. In addition, the amounts used to calculate the health contribution included in calculating source deductions of income tax have been reduced (from $50 to $0 and from $175 to $150) so that individuals can benefit from the reduction retroactively to January 1, 2016.

Be sure to use the reduced amounts when calculating source deductions of income tax for any pay period beginning after June 30, 2016.

Estimated annual net income (R)Health contribution (Z)

More than

Equal to or less than

$0

$41,265

$0

$41,265

$134,095

Whichever is less:

• $150; or
• 5% × (R − $41,265).

$134,095

Whichever is less:

• $1,000; or
• $150 + [4% × (R − $134,095)].

Below are the changes made to the guide entitled Formulas to Calculate Source Deductions and Contributions (TP-1015.F-V) for 2016. The formulas were updated further to the Budget Speech delivered on March 17, 2016, to take into account the maintenance of the rate of the tax credit for the purchase of shares issued by Fondaction and the reduction of the health contribution.

Variable E

The indexation factor used to calculate the value of personal tax credits for 2016 is 1.09%.

Variables H, H1 and H2 – Deduction for employment income

The maximum deduction for employment income has been increased from $1,120 to $1,130 for 2016. Consequently, the maximum amount of variables H, H1 and H2 has been increased from $1,120 to $1,130.

Variable K – The constant for adjusting the income tax rate

For 2016, the income tax rates applicable to the taxable income brackets remain unchanged and the income thresholds for these brackets have been indexed. Specifically,

• the 16% rate applies to taxable income of $42,390 or less (previously $41,935);
• the 20% rate applies to taxable income of more than $42,390, but not more than $84,780 (previously $83,865);
• the 24% rate applies to taxable income of more than $84,780, but not more than $103,150 (previously $102,040);
• the 25.75% rate applies to taxable income of more than $103,150.

The values of variable K are therefore $1,695 (increased from $1,677), $5,086 (increased from $5,032) and $6,891 (increased from $6,817).

Variable M – Québec Pension Plan

The QPP contribution rate has been increased from 10.50% to 10.65% for 2016, which corresponds to a contribution rate of 5.325% for the employee and 5.325% for the employer.

In addition, the maximum pensionable earnings for the purposes of the QPP have been increased from $53,600 to $54,900. Variable M has therefore been increased from $2,630.25 to $2,737.05.

Variables N and N1 – Québec parental insurance plan

The maximum insurable earnings subject to QPIP premiums have been increased from $70,000 to $71,500 for 2016. The employee premium rate is reduced from 0.559% to 0.548%, and the employer premium rate is reduced from 0.782% to 0.767%. As a result, variable N is $391.82 (instead of $391.30) and variable N1 is $548.41 (instead of $547.40).

Variables Y, Y1 to Y4, Q and Q1– Fondaction

Effective June 1, 2015, the rate of the tax credit for the acquisition of shares issued by Fondaction is 20% for any eligible share acquired after May 31, 2015, but before June 1, 2016.

In the Budget Speech delivered on March 17, 2016, the Minister of Finance of Quebec announced that the rate of this tax credit would be maintained at 20% for any eligible share acquired after May 31, 2016, but before June 1, 2018.

Accordingly, for 2016, if an employee has authorized you to withhold an amount from his or her pay for the purchase of shares issued by Fondaction, you must use the 20% rate to calculate the amount to withhold. See the table below.

Calculation of source deductions of income tax

Regular payments

Y = (T × I) − K − K1 − (0.20 × E) − (0.15 × P × Q) − (0.20 × P × Q1) + Z

Gratuities, retroactive pay or similar lump-sum payments

Y1 = [T × (I1 + B1)] − K − K1 − (0.20 × E) − (0.15 × P × Q) − (0.20 × P × Q1) + Z1

Y2 = [T × (I1 + B1 + B2)] − K − K1 − (0.20 × E) − (0.15 × P × Q) − (0.20 × P × Q1) + Z2

Cumulative average

First method

Y = (T × I) − K − K1 − (0.20 × E) − (0.15 × S1 × Q) − (0.20 × S1 × Q1) + Z

Second Method

Y3 = (T × I3) − K − K1 − (0.20 × E) − (0.15 × S1 × Q) − (0.20 × S1 × Q1) + Z3

Y4 = (T × I4) − K − K1 − (0.20 × E) − (0.15 × S1 × Q) − (0.20 × S1 × Q1) + Z4

Definitions

Q = amount withheld for a pay period for the purchase of class A shares in the Fonds de solidarité FTQ

Q1 = amount withheld for the pay period for the purchase, before June 1, 2016, of class A or class B shares in Fondaction

Note

The total value of variables Q and Q1 must not exceed $5,000 for the year. For the pay period in which the annual maximum is reached, the value of variables Q and Q1 must be zero.

Variable Z – Health contribution

In the Budget Speech delivered on March 17, 2016, the Minister of Finance of Quebec announced that the health contribution would be reduced gradually beginning in 2016 and ultimately eliminated in 2018. More specifically, for 2016, the maximum amount of the health contribution has been reduced as follows:

• from $100 to $50, for income greater than $18,570 but not greater than $41,265; and
• from $200 to $175, for income greater than $41,265 but not greater than $134,095.

Accordingly, you must take the reduction into account when calculating source deductions as of July 1, 2016. In addition, the amounts used to calculate the health contribution included in calculating source deductions of income tax have been reduced (from $50 to $0 and from $175 to $150) so that individuals can benefit from the reduction retroactively to January 1, 2016.

Be sure to use the reduced amounts when calculating source deductions of income tax for any pay period beginning after June 30, 2016.

Estimated annual net income (R)Health contribution (Z)

More than

Equal to or less than

$0

$41,265

$0

$41,265

$134,095

Whichever is less:

• $150; or
• 5% × (R − $41,265).

$134,095

Whichever is less:

• $1,000; or
• $150 + [4% × (R − $134,095)].

Below are the changes made to the guide entitled Formulas to Calculate Source Deductions and Contributions (TP-1015.F-V) for 2016. The formulas were updated further to the Budget Speech delivered on March 17, 2016, to take into account the maintenance of the rate of the tax credit for the purchase of shares issued by Fondaction and the reduction of the health contribution.

Variable E

The indexation factor used to calculate the value of personal tax credits for 2016 is 1.09%.

Variables H, H1 and H2 – Deduction for employment income

The maximum deduction for employment income has been increased from $1,120 to $1,130 for 2016. Consequently, the maximum amount of variables H, H1 and H2 has been increased from $1,120 to $1,130.

Variable K – The constant for adjusting the income tax rate

For 2016, the income tax rates applicable to the taxable income brackets remain unchanged and the income thresholds for these brackets have been indexed. Specifically,

• the 16% rate applies to taxable income of $42,390 or less (previously $41,935);
• the 20% rate applies to taxable income of more than $42,390, but not more than $84,780 (previously $83,865);
• the 24% rate applies to taxable income of more than $84,780, but not more than $103,150 (previously $102,040);
• the 25.75% rate applies to taxable income of more than $103,150.

The values of variable K are therefore $1,695 (increased from $1,677), $5,086 (increased from $5,032) and $6,891 (increased from $6,817).

Variable M – Québec Pension Plan

The QPP contribution rate has been increased from 10.50% to 10.65% for 2016, which corresponds to a contribution rate of 5.325% for the employee and 5.325% for the employer.

In addition, the maximum pensionable earnings for the purposes of the QPP have been increased from $53,600 to $54,900. Variable M has therefore been increased from $2,630.25 to $2,737.05.

Variables N and N1 – Québec parental insurance plan

The maximum insurable earnings subject to QPIP premiums have been increased from $70,000 to $71,500 for 2016. The employee premium rate is reduced from 0.559% to 0.548%, and the employer premium rate is reduced from 0.782% to 0.767%. As a result, variable N is $391.82 (instead of $391.30) and variable N1 is $548.41 (instead of $547.40).

Variables Y, Y1 to Y4, Q and Q1– Fondaction

Effective June 1, 2015, the rate of the tax credit for the acquisition of shares issued by Fondaction is 20% for any eligible share acquired after May 31, 2015, but before June 1, 2016.

In the Budget Speech delivered on March 17, 2016, the Minister of Finance of Quebec announced that the rate of this tax credit would be maintained at 20% for any eligible share acquired after May 31, 2016, but before June 1, 2018.

Accordingly, for 2016, if an employee has authorized you to withhold an amount from his or her pay for the purchase of shares issued by Fondaction, you must use the 20% rate to calculate the amount to withhold. See the table below.

Calculation of source deductions of income tax

Regular payments

Y = (T × I) − K − K1 − (0.20 × E) − (0.15 × P × Q) − (0.20 × P × Q1) + Z

Gratuities, retroactive pay or similar lump-sum payments

Y1 = [T × (I1 + B1)] − K − K1 − (0.20 × E) − (0.15 × P × Q) − (0.20 × P × Q1) + Z1

Y2 = [T × (I1 + B1 + B2)] − K − K1 − (0.20 × E) − (0.15 × P × Q) − (0.20 × P × Q1) + Z2

Cumulative average

First method

Y = (T × I) − K − K1 − (0.20 × E) − (0.15 × S1 × Q) − (0.20 × S1 × Q1) + Z

Second Method

Y3 = (T × I3) − K − K1 − (0.20 × E) − (0.15 × S1 × Q) − (0.20 × S1 × Q1) + Z3

Y4 = (T × I4) − K − K1 − (0.20 × E) − (0.15 × S1 × Q) − (0.20 × S1 × Q1) + Z4

Definitions

Q = amount withheld for a pay period for the purchase of class A shares in the Fonds de solidarité FTQ

Q1 = amount withheld for the pay period for the purchase, before June 1, 2016, of class A or class B shares in Fondaction

Note

The total value of variables Q and Q1 must not exceed $5,000 for the year. For the pay period in which the annual maximum is reached, the value of variables Q and Q1 must be zero.

Variable Z – Health contribution

In the Budget Speech delivered on March 17, 2016, the Minister of Finance of Quebec announced that the health contribution would be reduced gradually beginning in 2016 and ultimately eliminated in 2018. More specifically, for 2016, the maximum amount of the health contribution has been reduced as follows:

• from $100 to $50, for income greater than $18,570 but not greater than $41,265; and
• from $200 to $175, for income greater than $41,265 but not greater than $134,095.

Accordingly, you must take the reduction into account when calculating source deductions as of July 1, 2016. In addition, the amounts used to calculate the health contribution included in calculating source deductions of income tax have been reduced (from $50 to $0 and from $175 to $150) so that individuals can benefit from the reduction retroactively to January 1, 2016.

Be sure to use the reduced amounts when calculating source deductions of income tax for any pay period beginning after June 30, 2016.

Estimated annual net income (R) Health contribution (Z)

More than

Equal to or less than

$0

$41,265

$0

$41,265

$134,095

Whichever is less:

• $150; or
• 5% × (R − $41,265).

$134,095

Whichever is less:

• $1,000; or
• $150 + [4% × (R − $134,095)].

An income-averaging mechanism will be introduced on a temporary basis. This mechanism will, for the purposes of income tax and the individual contribution to the health services fund, make it possible to average a portion of the income generated by non-retail sales of timber produced in a private forest for a period not exceeding seven years.

This mechanism will apply to an eligible individual or a qualified corporation which, at the end of a particular taxation year ending after March 17, 2016, but before January 1, 2021, is either a certified forest producer in respect of a private forest or a member of a qualified partnership that is a certified forest producer in respect of a private forest at the end of the partnership's fiscal period ending in the year.

Income-averaging mechanism for the purposes of calculating income tax

The tax legislation will be amended to stipulate that an eligible individual or a qualified corporation may deduct, in calculating taxable income for the year, an amount not exceeding 85% of the lesser of the following amounts: $200,000 or the amount determined according to the formula (A − B) + (C − D), that is, the income earned from certified commercial activities minus the losses resulting from these activities.

An individual or a corporation, as applicable, that has deducted, in calculating the taxable income for a particular taxation year, an amount from certified commercial activities in respect of a private forest will be required to include in calculating taxable income:

• for each of the six taxation years following the particular taxation year, an amount that cannot be less than 10% of the amount so deducted, up to the amount by which the amount so deducted exceeds the aggregate of the amounts each of which is an amount included in the calculation of the taxable income for a previous taxation year in respect of the amount so deducted;
• for the seventh year following the particular year, an amount equal to the amount by which the amount so deducted exceeds the aggregate of the amounts each of which is an amount included in the calculation of the taxable income for a previous taxation year in respect of the amount so deducted.

An individual will be considered an eligible individual for a particular taxation year if the individual resides in Québec at the end of that year. A qualified corporation for a particular taxation year is a Canadian-controlled private corporation with paid-up capital, taking into account the paid-up capital of any corporations with which it is associated in the taxation year, is at least $15 million for its previous taxation year.

An individual, corporation or partnership, as applicable, will be considered to be a certified forest producer at any time in respect of a private forest if the individual, corporation or partnership at that time holds a certificate as a certified forest producer issued under the Sustainable Forest Development Act in respect of that private forest.

The certified commercial activities in respect of a private forest mean the non-retail sales of timber produced in that private forest to a buyer having an establishment in Québec.

For more information, see pages A.44 to A.48 of the document entitled Additional Information 2016-2017 (PDF – 2.88 MB), published by the Ministère des Finances.

Income-averaging mechanism for the purposes of calculating the individual contribution to the health services fund

An individual who so chooses may deduct, in calculating his or her total income for a particular year, an amount equal to the amount that he or she deducted for the purposes of the tax system in calculating his or her taxable income for the year under the income-averaging mechanism for forest producers.

However, an individual who makes such a choice for a particular year will be required to include, in calculating his or her total income for each of the seven years following the particular year, an amount equal to the amount that, for the purposes of the tax system, was included in calculating his or her taxable income for that year under the income-averaging mechanism for forest producers.

For more information, see pages A.48 and A.49 of the document entitled Additional Information 2016-2017 (PDF – 2.88 MB), published by the Ministère des Finances.

The builder's rights and obligations vary according to whether the builder sells, leases or lives in a residential complex that he or she built or substantially renovated. Applicable rights and obligations likewise vary according to whether the builder sells, rents or lives in an addition to a multi-unit residential complex that he or she built.

Construction of a residential complex for the purpose of leasing it or living in it

In general, a builder that builds or substantially renovates a residential complex, or that builds an addition to a multi-unit residential complex, in order to lease it (in whole or in part) or to live in it, is considered to be both the seller and the purchaser of the residential complex or the addition to the multi-unit residential complex.

The builder is deemed to have made a self-supply of the residential complex or of the addition to the multi-unit residential complex. In this case, the builder must, as a rule, remit the taxes deemed collected and calculated on the fair market value of the complex or the addition.

The taxes paid on the construction or substantial renovations, as well as any un-recovered taxes paid on the acquisition of the land included in the residential complex, may give entitlement to an ITC and ITR, provided the builder is a registrant. If the builder is not a registrant, a tax rebate may be granted under certain conditions.

In addition, to recover a portion of the taxes paid on the self-supply, the builder can claim a new residential rental property rebate for the GST and the QST paid using form FP-524-V, New Residential Rental Property GST Rebate Application, and form VD-370.67-V, New Residential Rental Property QST Rebate.

For more information, see Construction or Renovation of Residential Complexes, Residential Complexes and New or Substantially Renovated Residential Rental Property.

Sale of a new residential complex or new residential rental property 

A builder who sells a new residential complex or a residential complex to which the builder has made substantial renovations, other than new residential rental property, to an individual can usually pay or credit the amount of the GST and QST rebate granted for a new residential complex to the individual. In these cases, the individual and the builder must complete form FP-2190.C-V, GST-QST New Housing Rebate Application: Rebate Granted by a Builder. The builder must then send it to Revenu Québec along with the GST and QST returns for the reporting period in which the builder paid or credited the rebate to the individual.

In the case of new residential rental property, the builder cannot pay or credit the individual the amount of the GST and QST rebate. The individuals can claim this rebate using form FP-524-V, New Residential Rental Property GST Rebate Application, and form VD-370.67-V, New Residential Rental Property QST Rebate.

For more information, see Residential Complexes, New or Substantially Renovated Housing and New or Substantially Renovated Residential Rental Property.

Lease of a residential complex built for the purpose of being sold

A builder registered for the QST that leases for residential purposes a single-unit residential complex or a residential unit held in co-ownership that he or she built in order to sell is deemed to have made a self-supply of the complex.

The builder can elect not to include the QST deemed collected in his or her net tax for the period in which the self-supply was made. To make this election, the builder must file form VD-224.1-V, Election Respecting the Self-Supply of a Residential Complex, with Revenu Québec. Payment of the QST can be deferred for a period of up to 12 months.

Note there is no such election under the GST system.

The builder's rights and obligations vary according to whether the builder sells, leases or lives in a residential complex that he or she built or substantially renovated. Applicable rights and obligations likewise vary according to whether the builder sells, rents or lives in an addition to a multi-unit residential complex that he or she built.

Construction of a residential complex for the purpose of leasing it or living in it

In general, a builder that builds or substantially renovates a residential complex, or that builds an addition to a multi-unit residential complex, in order to lease it (in whole or in part) or to live in it, is considered to be both the seller and the purchaser of the residential complex or the addition to the multi-unit residential complex.

The builder is deemed to have made a self-supply of the residential complex or of the addition to the multi-unit residential complex. In this case, the builder must, as a rule, remit the taxes deemed collected and calculated on the fair market value of the complex or the addition.

The taxes paid on the construction or substantial renovations, as well as any un-recovered taxes paid on the acquisition of the land included in the residential complex, may give entitlement to an ITC and ITR, provided the builder is a registrant. If the builder is not a registrant, a tax rebate may be granted under certain conditions.

In addition, to recover a portion of the taxes paid on the self-supply, the builder can claim a new residential rental property rebate for the GST and the QST paid using form FP-524-V, New Residential Rental Property GST Rebate Application, and form VD-370.67-V, New Residential Rental Property QST Rebate.

For more information, see Construction or Renovation of Residential Complexes, Residential Complexes and New or Substantially Renovated Residential Rental Property.

Sale of a new residential complex or new residential rental property 

A builder who sells a new residential complex or a residential complex to which the builder has made substantial renovations, other than new residential rental property, to an individual can usually pay or credit the amount of the GST and QST rebate granted for a new residential complex to the individual. In these cases, the individual and the builder must complete form FP-2190.C-V, GST-QST New Housing Rebate Application: Rebate Granted by a Builder. The builder must then send it to Revenu Québec along with the GST and QST returns for the reporting period in which the builder paid or credited the rebate to the individual.

In the case of new residential rental property, the builder cannot pay or credit the individual the amount of the GST and QST rebate. The individuals can claim this rebate using form FP-524-V, New Residential Rental Property GST Rebate Application, and form VD-370.67-V, New Residential Rental Property QST Rebate.

For more information, see Residential Complexes, New or Substantially Renovated Housing and New or Substantially Renovated Residential Rental Property.

Lease of a residential complex built for the purpose of being sold

A builder registered for the QST that leases for residential purposes a single-unit residential complex or a residential unit held in co-ownership that he or she built in order to sell is deemed to have made a self-supply of the complex.

The builder can elect not to include the QST deemed collected in his or her net tax for the period in which the self-supply was made. To make this election, the builder must file form VD-224.1-V, Election Respecting the Self-Supply of a Residential Complex, with Revenu Québec. Payment of the QST can be deferred for a period of up to 12 months.

Note there is no such election under the GST system.

The builder's rights and obligations vary according to whether the builder sells, leases or lives in a residential complex that he or she built or substantially renovated. Applicable rights and obligations likewise vary according to whether the builder sells, rents or lives in an addition to a multi-unit residential complex that he or she built.

Construction of a residential complex for the purpose of leasing it or living in it

In general, a builder that builds or substantially renovates a residential complex, or that builds an addition to a multi-unit residential complex, in order to lease it (in whole or in part) or to live in it, is considered to be both the seller and the purchaser of the residential complex or the addition to the multi-unit residential complex.

The builder is deemed to have made a self-supply of the residential complex or of the addition to the multi-unit residential complex. In this case, the builder must, as a rule, remit the taxes deemed collected and calculated on the fair market value of the complex or the addition.

The taxes paid on the construction or substantial renovations, as well as any un-recovered taxes paid on the acquisition of the land included in the residential complex, may give entitlement to an ITC and ITR, provided the builder is a registrant. If the builder is not a registrant, a tax rebate may be granted under certain conditions.

In addition, to recover a portion of the taxes paid on the self-supply, the builder can claim a new residential rental property rebate for the GST and the QST paid using form FP-524-V, New Residential Rental Property GST Rebate Application, and form VD-370.67-V, New Residential Rental Property QST Rebate.

For more information, see Construction or Renovation of Residential Complexes, Residential Complexes and New or Substantially Renovated Residential Rental Property.

Sale of a new residential complex or new residential rental property 

A builder who sells a new residential complex or a residential complex to which the builder has made substantial renovations, other than new residential rental property, to an individual can usually pay or credit the amount of the GST and QST rebate granted for a new residential complex to the individual. In these cases, the individual and the builder must complete form FP-2190.C-V, GST-QST New Housing Rebate Application: Rebate Granted by a Builder. The builder must then send it to Revenu Québec along with the GST and QST returns for the reporting period in which the builder paid or credited the rebate to the individual.

In the case of new residential rental property, the builder cannot pay or credit the individual the amount of the GST and QST rebate. The individuals can claim this rebate using form FP-524-V, New Residential Rental Property GST Rebate Application, and form VD-370.67-V, New Residential Rental Property QST Rebate.

For more information, see Residential Complexes, New or Substantially Renovated Housing and New or Substantially Renovated Residential Rental Property.

Lease of a residential complex built for the purpose of being sold

A builder registered for the QST that leases for residential purposes a single-unit residential complex or a residential unit held in co-ownership that he or she built in order to sell is deemed to have made a self-supply of the complex.

The builder can elect not to include the QST deemed collected in his or her net tax for the period in which the self-supply was made. To make this election, the builder must file form VD-224.1-V, Election Respecting the Self-Supply of a Residential Complex, with Revenu Québec. Payment of the QST can be deferred for a period of up to 12 months.

Note there is no such election under the GST system.

The builder's rights and obligations vary according to whether the builder sells, leases or lives in a residential complex that he or she built or substantially renovated. Applicable rights and obligations likewise vary according to whether the builder sells, rents or lives in an addition to a multi-unit residential complex that he or she built.

Construction of a residential complex for the purpose of leasing it or living in it

In general, a builder that builds or substantially renovates a residential complex, or that builds an addition to a multi-unit residential complex, in order to lease it (in whole or in part) or to live in it, is considered to be both the seller and the purchaser of the residential complex or the addition to the multi-unit residential complex.

The builder is deemed to have made a self-supply of the residential complex or of the addition to the multi-unit residential complex. In this case, the builder must, as a rule, remit the taxes deemed collected and calculated on the fair market value of the complex or the addition.

The taxes paid on the construction or substantial renovations, as well as any un-recovered taxes paid on the acquisition of the land included in the residential complex, may give entitlement to an ITC and ITR, provided the builder is a registrant. If the builder is not a registrant, a tax rebate may be granted under certain conditions.

In addition, to recover a portion of the taxes paid on the self-supply, the builder can claim a new residential rental property rebate for the GST and the QST paid using form FP-524-V, New Residential Rental Property GST Rebate Application, and form VD-370.67-V, New Residential Rental Property QST Rebate.

For more information, see Construction or Renovation of Residential Complexes, Residential Complexes and New or Substantially Renovated Residential Rental Property.

Sale of a new residential complex or new residential rental property 

A builder who sells a new residential complex or a residential complex to which the builder has made substantial renovations, other than new residential rental property, to an individual can usually pay or credit the amount of the GST and QST rebate granted for a new residential complex to the individual. In these cases, the individual and the builder must complete form FP-2190.C-V, GST-QST New Housing Rebate Application: Rebate Granted by a Builder. The builder must then send it to Revenu Québec along with the GST and QST returns for the reporting period in which the builder paid or credited the rebate to the individual.

In the case of new residential rental property, the builder cannot pay or credit the individual the amount of the GST and QST rebate. The individuals can claim this rebate using form FP-524-V, New Residential Rental Property GST Rebate Application, and form VD-370.67-V, New Residential Rental Property QST Rebate.

For more information, see Residential Complexes, New or Substantially Renovated Housing and New or Substantially Renovated Residential Rental Property.

Lease of a residential complex built for the purpose of being sold

A builder registered for the QST that leases for residential purposes a single-unit residential complex or a residential unit held in co-ownership that he or she built in order to sell is deemed to have made a self-supply of the complex.

The builder can elect not to include the QST deemed collected in his or her net tax for the period in which the self-supply was made. To make this election, the builder must file form VD-224.1-V, Election Respecting the Self-Supply of a Residential Complex, with Revenu Québec. Payment of the QST can be deferred for a period of up to 12 months.

Note there is no such election under the GST system.

The builder's rights and obligations vary according to whether the builder sells, leases or lives in a residential complex that he or she built or substantially renovated. Applicable rights and obligations likewise vary according to whether the builder sells, rents or lives in an addition to a multi-unit residential complex that he or she built.

Construction of a residential complex for the purpose of leasing it or living in it

In general, a builder (This link will open a new window) that builds or substantially renovates a residential complex, or that builds an addition to a multi-unit residential complex, in order to lease it (in whole or in part) or to live in it, is considered to be both the seller and the purchaser of the residential complex or the addition to the multi-unit residential complex. 

The builder is deemed to have made a self-supply of the residential complex or of the addition to the multi-unit residential complex. In this case, the builder must, as a rule, remit the taxes deemed collected and calculated on the fair market value (This link will open a new window) of the complex or the addition.

The taxes paid on the construction or substantial renovations, as well as any un-recovered taxes paid on the acquisition of the land included in the residential complex, may give entitlement to an ITC and ITR, provided the builder is a registrant (This link will open a new window). If the builder is not a registrant, a tax rebate may be granted under certain conditions. 

In addition, to recover a portion of the taxes paid on the self-supply, the builder can claim a new residential rental property rebate for the GST and the QST paid using form FP-524-V, New Residential Rental Property GST Rebate Application, and form VD-370.67-V, New Residential Rental Property QST Rebate.

For more information, see Construction or Renovation of Residential Complexes, Residential Complexes and New or Substantially Renovated Residential Rental Property.

Sale of a new residential complex or new residential rental property 

A builder who sells a new residential complex or a residential complex to which the builder has made substantial renovations, other than new residential rental property, to an individual can usually pay or credit the amount of the GST and QST rebate granted for a new residential complex to the individual. In these cases, the individual and the builder must complete form FP-2190.C-V, GST-QST New Housing Rebate Application: Rebate Granted by a Builder. The builder must then send it to Revenu Québec along with the GST and QST returns for the reporting period in which the builder paid or credited the rebate to the individual.

In the case of new residential rental property, the builder cannot pay or credit the individual the amount of the GST and QST rebate. The individuals can claim this rebate using form FP-524-V, New Residential Rental Property GST Rebate Application, and form VD-370.67-V, New Residential Rental Property QST Rebate.

For more information, see Residential Complexes, New or Substantially Renovated Housing and New or Substantially Renovated Residential Rental Property.

Lease of a residential complex built for the purpose of being sold

A builder registered for the QST that leases for residential purposes a single-unit residential complex or a residential unit held in co-ownership that he or she built in order to sell is deemed to have made a self-supply of the complex. 

The builder can elect not to include the QST deemed collected in his or her net tax for the period in which the self-supply was made. To make this election, the builder must file form VD-224.1-V, Election Respecting the Self-Supply of a Residential Complex, with Revenu Québec. Payment of the QST can be deferred for a period of up to 12 months.

Note there is no such election under the GST system.

The deduction for qualified innovative manufacturing corporations (hereinafter referred to as the "DIMC") is particularly intended for corporations in the manufacturing and processing sector that cannot claim the small business deduction.

The purpose of the DIMC is to encourage a qualified innovative manufacturing corporation to profit in Québec from a patent it has been granted as the result of scientific research and experimental development (R&D) work that it carried out in Québec. The DIMC will enable such a corporation to reduce its taxable income for a taxation year by an amount equal to a portion of the value of a qualified patented part integrated into qualified property that the corporation sold, leased or rented that year.

Calculation of the DIMC

Fiscal legislation will be amended so that a qualified innovative manufacturing corporation can deduct, in calculating its taxable income for a taxation year, a specified annual percentage of the lesser of:

• the total value of all qualified patented parts incorporated into qualified property that the corporation sold, leased or rented in the year; and
• the DIMC ceiling.

The following table shows the specified annual percentages for 2017 to 2020 and subsequent years.

Specified annual percentages Year(s) Percentage 2017 66.1 2018 65.8 2019 65.5 2020 and subsequent years 65.2

For a particular taxation year, the DIMC ceiling will correspond to 50% of the net income derived from the sale, lease or rental of the qualified property shown in the separate accounts that a qualified innovative manufacturing corporation will be required to keep in that regard for the year.

The term "qualified innovative manufacturing corporation" refers to a corporation of which at least 50% of the activities, for a particular taxation year, consist of activities in the manufacturing and processing sector carried out in Québec.

The proportion of a corporation's activities in the manufacturing and processing sector will be determined using the following formula: the labour cost for activities in the manufacturing and processing sector carried out in Québec divided by the labour cost for all activities carried out in Québec.

For a particular taxation year, a qualified innovative manufacturing corporation will be required to have at least $15 million in paid-up capital calculated either for its previous taxation year or, if the corporation is in its first fiscal period, on the basis of its financial statements prepared at the beginning of the fiscal period in accordance with generally accepted accounting principles.

The term "qualified property" of a qualified innovative manufacturing corporation, for a particular taxation year, refers to property:

• that incorporates at least one qualified patented part for which the patent did not expire in the year;
• that the corporation sold, leased or rented in the year;
• in respect of which the corporation derived, for the year, gross income reasonably attributable to an establishment of the corporation located in Québec; and
• in respect of which the corporation kept separate accounts.

The term "qualified patented part" of a qualified innovative manufacturing corporation, for a particular taxation year, refers to an invention for which the corporation owns or co-owns a patent under the Patent Act or any other legislation of a jurisdiction other than Canada having the same effect.

Also, for the five-year period preceding the year in which an application for a patent for the invention was filed under the Patent Act or any other legislation of a jurisdiction other than Canada having the same effect, the total qualified R&D expenditures paid by the qualified innovative manufacturing corporation and any corporation associated with it in the year in which the R&D work was carried out will have to have been at least $500,000.

Furthermore, the corporation or associated corporation, where applicable, will have to have benefited from a refundable tax credit for R&D in respect of those R&D expenditures.

In addition, the only patents that will qualify for the DIMC are those for which an application was properly filed with the competent authorities after March 17, 2016, under the Patent Act or any other legislation of a jurisdiction other than Canada having the same effect.

Effective date

This new deduction for innovative manufacturing corporations will apply in respect of a taxation year of a corporation beginning after December 31, 2016.

For more information, see pages A.49 to A.56 of the document entitled Additional Information 2016-2017 (PDF – 2.88 MB), published by the Ministère des Finances.

On June 1, 2015, the rate of the tax credit for the acquisition of shares issued by Fondaction was set at 20% for any eligible share acquired after May 31, 2015, and before June 1, 2016.

In the Budget Speech delivered on March 17, 2016, the Minister of Finance of Québec announced that the rate of the tax credit would be maintained at 20% for any eligible share acquired after May 31, 2016, and before June 1, 2018. Accordingly, for 2016, if an employee has authorized you to withhold an amount from his or her pay for the purchase of shares issued by Fondaction, you must use the 20% rate to calculate the amount of income tax to withhold.

If you use the source deduction table to determine the amount of income tax to withhold, you must, for any pay period during which Fondaction shares were purchased, subtract, from the remuneration paid to the employee, 100% of the amount deducted from the employee's remuneration for the purchase of such shares.

If you use the formulas, you must, for any pay period during which Fondaction shares were purchased, subtract, from the income tax payable for the year, 20% of the amount deducted from the employee's remuneration for the purchase of such shares.