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Wednesday, March 29, 2017

Québec Budget – March 28, 2017

Elimination as of 2016 of the health contribution for low- and middle-income taxpayers

To further reduce the tax burden on low- and middle-income individuals, the health contribution will be eliminated retroactively, as of 2016, for all adults whose income for that year does not exceed $134,095.

Adults whose income for 2016 was greater than $134,095, other than exempt individuals, must pay for that year a health contribution equal to the lesser of $1,000 or 4% of the amount by which their income for the year exceeds $134,095.

Revenu Québec will be responsible for cancelling the health contribution amount that was payable by individuals with an income not exceeding $134,095 for 2016, and for recalculating the amount to be paid by individuals with an income greater than $134,095 for that year.

In addition, a new notice of assessment for 2016 will be sent, not later than June 30, 2017, to all taxpayers in respect of whom Revenu Québec has already determined, on the date of the budget speech, the amount of the health contribution payable for the year.

Impact on payroll: none.

General tax reduction

This general tax reduction will be in the form of an increase of the basic tax credit granted to all individuals.

For the 2017 taxation year, this tax reduction will be applied when individuals file their income tax returns. This tax reduction will allow individuals to deduct from their income tax payable an additional amount of slightly over $55.

As of the 2018 taxation year, it will be factored into the income tax to be deducted at source from wages and certain other amounts, such as retirement benefits.

Impact on payroll: A software update will be available in December to reflect the tax reduction for 2018 and subsequent years.

Simplification of the calculation of personal tax credits

To make it easier for the public to understand the basic rules of the Québec tax system, amendments will therefore be made to the tax legislation so that personal tax credits are calculated according to the rate applicable to the first taxable income bracket of the personal income tax table—16%—with no reduction in the value of the personal tax credits.

Moreover, changes will be made to the terms of calculation of certain personal tax credits so that there is no tax impact further to the reduction of the applicable conversion rate from 20% to 16%.

Clarifications concerning source deductions of income tax

For the 2017 taxation year, income tax must be deducted at source as if the amounts used to calculate personal tax credits had not been increased and the rate applicable to the first taxable income bracket of the personal income tax table had not been retained as the rate for converting these amounts into tax credits.

Impact on payroll: Major modifications will have to be made to the software in the December update to properly reflect these new measures. However, these modifications will be completely transparent for users.