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Friday, March 18, 2016

Quebec Budget – March 17, 2016

Acceleration of the plan to reduce the health contribution

This plan to reduce the health contribution and ultimately eliminate it in 2019 will be replaced by a reduction plan that will provide tax relief as of 2016 for almost all taxpayers liable for payment of the health contribution and lead to the elimination of the contribution in 2017 for lower-income taxpayers and in 2018 for all other taxpayers.

Moreover, the Québec income tax source deduction table and the formulas for calculating source deductions will be changed as of July 1, 2016, in order to reflect the reduction of the health contribution granted as of 2016.

Impact on payroll: Changes are to be expected for July 1, 2016. We will advise you as soon as the Minister provides details on the application of this measure.

Lower age of eligibility for the tax credit for experienced workers

To further encourage experienced workers to remain in the labour market, the age of eligibility for the tax credit will be lowered, as of the 2018 taxation year, to 62 years of age, the average retirement age of Quebecers. For this new category of workers, the maximum amount of eligible work income on which the tax credit will be calculated is $4,000.

Impact on payroll: None.

Reduction of the Health Services Fund contribution rate for all small and medium-sized businesses

A new plan to reduce the Health Services Fund contribution rates for all SMBs will be implemented as of 2017.

The Health Services Fund contribution rate for eligible specified employers having a total payroll of $1 million or less will gradually decrease from 1.6% to 1.45% for SMBs in the primary and manufacturing sectors and from 2.7% to 2% for SMBs in the service and construction sectors over a five-year period beginning in 2017.

Employers having a total payroll between $1 million and $5 million will also see a gradual reduction in their contribution rate.

Impact on payroll: Changes are to be expected for January 2017.

Changes to government assistance for capitalization of Capital régional et coopératif Desjardins

The tax credit rate for the acquisition of CRCD shares will be reduced from 45% to 40% for any share acquired after February 29, 2016.

Accordingly, the maximum amount individuals may deduct in calculating their income tax will decline from $2,250 to $2,000.

Impact on payroll: None.

Temporary maintenance of the increased rate of the tax credit for the acquisition of shares in Fondaction

Initially, the rate of the tax credit was to be lowered to 15% starting June 1, 2016. However, to enable Fondaction to invest more in Québec businesses, the rate of the tax credit will be maintained at 20% for any eligible share acquired during Fondaction’s next two fiscal years.

Impact on payroll: None.