Tax Flash Bulletin
2023 Quebec Budget Highlights
On March 21, 2023, Quebec’s Finance Minister, Eric Girard, released the province’s 2023-2024 budget. We have highlighted selected tax measures that affect individuals and businesses in Quebec.
INDIVIDUALS
Personal Tax Rates
- The budget proposes to reduce personal tax rates in the two lowest tax brackets by 1 per cent, effective January 1, 2023.
- Individuals who are required to pay income tax instalments may adjust their amounts for instalment payments due after March 15, 2023 for the 2023 taxation year.
- Payroll adjustments will start July 1, 2023 and account for the rate reduction for the entire year.
- Quebec indexed the 2023 tax brackets at an inflation rate of 6.44%.
Quebec Income Tax Brackets and Rates
| 2022 Taxable Income | Tax Rate | 2023 Taxable Income | Tax Rate |
|---|---|---|---|
| $0 to $16,143 | 0.00% | $0 to $17,183 | 0.00% |
| $16,143 to $46,295 | 15.00% | $17,183 to $49,275 | 14.00% |
| $46,295 to $92,580 | 20.00% | $49,275 to $98,540 | 19.00% |
| $92,580 to $112,655 | 24.00% | $98,540 to $119,910 | 24.00% |
| Over $112,655 | 25.75% | Over $119,910 | 25.75% |
Top Combined Quebec and Federal Rates
| Income Type | 2022 | 2023 |
|---|---|---|
| Salary, interest, pension, foreign | 53.31% | 53.31% |
| Eligible dividends | 40.11% | 40.11% |
| Non-eligible dividends | 48.70% | 48.70% |
| Capital gains | 26.65% | 26.65% |
Top rates apply to taxable income over $235,675 ($221,708 for 2022) based on known federal and Quebec rates as of March 21, 2023
Consequential Changes Due to the 2023 Tax Rate Change
- The reduction to the first tax rate will cause the rate to calculate most personal tax credits to decrease from 15 per cent to 14 per cent, including the basic amount, age amount, and the first-time home buyers’ tax credit.
- To equalize the effect of the credit reduction, certain personal tax credit amounts will increase, such as the dependant amount and the amount for a child under 18 enrolled in vocational training or post-secondary studies.
- The RRIF and RRSP withholding tax rates will decrease from 15 per cent to 14 per cent for the $0 to $5,000 bracket and from 20% to 19% for the $5,000 to $15,000 bracket.
- The RDSP withholding tax rates will decrease from 15 per cent to 14 per cent for the taxable portion of assistance payments.
- The withholding tax rate on accumulated income payments from an RESP will remain at 20 per cent (12 per cent federal plus 8 per cent Quebec).
- The threshold for income earned by a child whose parent is deemed resident in Quebec (not resident at the end of the year) will be $12,628 and will be indexed each year as of January 1, 2024.
- The $12,628 income limit of a child will apply to determine eligibility for the refundable tax credit for childcare expenses. It will also be indexed each year.
- The alternative minimum tax rate will decrease from 15 per cent to 14 per cent.
Optional Quebec Pension Plan (QPP) Contributions
- Workers aged 65 or over may elect to stop contributing to QPP, provided they are collecting QPP or Canada Pension Plan (CPP) benefits.
- Workers over age 72 will have no obligation to contribute to QPP, so that all contributions will cease as of January 1 of the year in which a worker reaches age 73.
- This measure is effective January 1, 2024 for employees and self-employed workers.
Enhancements to the Solidarity Tax Credit
- Due to rising housing costs the budget doubles the solidarity tax credit index rate for the July 2022 to June 2023 period to 12.88 per cent instead of 6.44 per cent.
- The enhanced amounts will begin with the July 1, 2023 payment period.
Increase to Firefighters and Search and Rescue Volunteer Tax Credit
- The non-refundable amount will increase from $3,000 to $5,000, effective for the 2023 taxation year.
- The volunteer credit amount will be indexed every year as of 2024.
- The new 14 per cent tax credit rate will apply to the revised amounts.
Consumer Taxes
- The duty on new tires for road vehicles increases from $3 to $4.50 for small tires and to $6.00 for larger tires, effective June 30, 2023.
- The budget provides funding for the implementation of a computer system to manage the tax exemption of persons with Indian status to benefit from exemptions directly at the time of purchase.
BUSINESSES
Corporate Income Tax Rates
- The budget did not propose any changes to Quebec corporate income tax rates or the small business deduction calculation.
| Income Type | Quebec Rate | Federal Rate | 2023 Calendar Combined Rates |
|---|---|---|---|
| General corporate income | 11.50% | 15.00% | 26.50% |
| Small business income – federal and Quebec income eligible for the small business deduction | 3.20% | 9.00% | 12.20% |
| Small business income – only federal income eligible for the small business deduction | 11.50% | 9.00% | 20.50% |
| CCPC* investment income | 11.50% | 38.67% | 50.17% |
| Non-CCPC investment income | 11.50% | 15.00% | 26.50% |
| Manufacturing & processing | 11.50% | 15.00% | 26.50% |
*Canadian-controlled private corporation
Based on known federal and Quebec rates at March 21, 2023
Other Business Tax Measures
- The budget introduces a new 10-year tax holiday relating to the carrying out of a large investment project. The government will eliminate the former tax holiday on large investment projects and participants in the former program will continue to benefit from the tax holiday until it expires.
- The refundable tax credit for Quebec film or television production will be amended to recognize the contribution of certain market intermediaries in the online distribution of certain productions.
- The budget enhances the refundable tax credit for book publishing by increasing the limit on qualified labour expenditure attributable to preparation costs and digital publishing costs from 50 per cent to 65 per cent. The tax credit rate for printing and reprinting costs will increase from 27 per cent to 35 per cent.
- The tax credit for the production of multimedia event or environments presented outside Quebec will increase the limit on qualified labour expenditure from 50 per cent to 60 per cent.
Refer to the 2023 Quebec Budget documents for further details
This has been prepared by the Professional Wealth Advisory Group of Raymond James Ltd., (RJL). Statistics and factual data and other information are from sources RJL believes to be reliable but their accuracy cannot be guaranteed. It is for information purposes only and is not to be construed as an offer or solicitation for the sale or purchase of securities nor is it meant to replace legal, accounting, taxation or other professional advice. We are not tax advisors and we recommend that clients seek independent advice from a professional advisor on tax-related matters. The information is furnished on the basis and understanding that RJL is to be under no liability whatsoever in respect thereof. This is intended for distribution only in those jurisdictions where RJL and the author are registered. Securities-related products and services are offered through Raymond James Ltd., Member - Canadian Investor Protection Fund. Insurance products and services are offered through Raymond James Financial Planning Ltd., which is not a Member - Canadian Investor Protection Fund.