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Wednesday, December 3, 2014

Québec Economic and Financial Update – December 2, 2014

Reduction of the HSF contribution rate for SMEs in the primary and manufacturing sectors

To foster job creation and stimulate investment by Québec SMEs, in particular to foster the adoption of greener, less carbon-intensive production methods, the government is announcing a reduction, effective January 1, 2015, of the HSF contribution rate for SMEs in the primary and manufacturing sectors whose payroll is less than $5 million.

— The contribution rate for SMEs with a total payroll equal to or less than $1 million will decrease from 2.7% to 1.6%.

— The contribution rate for SMEs with a total payroll between $1 million and $5 million will be subject to a linear increase from 1.6% to 4.26%.

If the ministry publishes the application rules soon, we could incorporate this measure in the December Payroll update. Refer to the SMB Portal for more details.

Adjustment of childcare funding

The government will make the legislative amendments required to implement the changes announced regarding the rate for childcare services.

An information campaign will be deployed to make parents aware that they will have to modify their source deductions in order to avoid having to pay a balance when they file their income tax return.

Revenu Québec will prepare an information guide for employers to enable them to assist employees who request changes to their source deductions.

You can already use your Payroll software to deduct additional taxes on the payroll of employees who request it.

Simply indicate the amount under: Payroll (Input) / Employees / File tab / Additional Income Tax Withheld field.

The employee must make a written request on the Source Deductions Return - TP-1015.3-v form for Québec income tax and on the Personal Tax Credits Return - TD1 form for federal income tax.

Reduction of the conversion rate for tax credits for union and professional dues

Individuals who pay dues to a union or a recognized professional association may currently claim non-refundable tax credits corresponding to 20% of the amounts paid as dues.

As part of the efforts to reduce tax expenditures, the December 2014 update provides for the reduction of the conversion rate for tax credits for union and professional dues from 20% to 10% as of 2015.

This measure does not impact the payroll calculation.

Elimination of the reduced rate of the tax on insurance premiums for automobile insurance

Insurance premiums are subject to a tax whose general rate is 9%.

However, some tax relief applies, such as the reduced rate of 5% for insurance premiums payable under an automobile insurance policy covering essentially material damage (property damage insurance).

The December 2014 update provides for the elimination of the reduced rate of the tax on insurance premiums for automobile insurance starting on January 1, 2015. Accordingly, as of that date, the general rate of 9% will apply to automobile insurance premiums covering essentially material damage.