On March 22, the Quebec government released their 2022 budget. The following are highlights of the key tax measures.

Personal tax measures

No personal income tax rate changes were announced in this year’s budget. The current personal combined income tax rates for 2022 are outlined below:

Refundable tax credit due to cost of living

A one-time cost of living support payment of up to $500 will be made to all eligible individuals who have filed their income tax return for the 2021 calendar year with Revenue Quebec. Eligible individuals are Quebec residents that meet the following conditions:

• 18 years old, an emancipated minor or a minor who is the father or mother of a child with whom he or she resides;
• a Canadian citizen, a permanent resident, a temporary resident or temporary resident permit holder, a protected person or a person on whom refugee protection is conferred in Canada; and
• Not exempt from tax under certain provisions of the Taxation Act nor detained in a prison or similar institution.

The one-time payment of $500 is reduced by $1 for every $10 of net income, as reported on the 2021 tax return, in excess of $100,000. No application is necessary for the one-time payment. An eligible individual only needs to file their 2021 tax return and Revenue Quebec will add the refundable tax credit.

Tax credit for a major cultural gift

The additional tax credit of 25 per cent for a major cultural gift is available to eligible donations of at least $5,000 and up to $25,000 as long as the donation was made to an eligible cultural donee before January 1, 2023. The budget proposes removing the deadline for donating major cultural gifts to eligible donees making the tax credit permanent.

Corporate tax measures

No corporate income tax rate changes were announced in this year’s budget. The current corporate income tax rates for 2022 are outlined below:

Extension of tax credits

Upgrading of residential wastewater treatment systems

The refundable tax credit will be extended by five years, until March 31, 2027 for work carried out by a qualified contractor under a service agreement entered into after March 31, 2022 and before April 1, 2027. With this extension comes modifications to the determination of the tax credit to ensure that the previous limits remain intact.

Investment and innovation

The temporary increase in the tax credit relating to investment and innovation announced in the March 25, 2021 budget will be extended by one year until December 31, 2023. See the table below for rates of the tax credit relating to investment and innovation:

Production of pyrolysis oil

As of April 1, 2023, the refundable tax credit for the production of pyrolysis oil will be extended for a period of ten years, until March 31, 2033 and the maximum number of litres will be increased to 300 million litres per year. Changes will be made to some of the qualifying criteria as part of the Quebec government’s redesign of the tax credit for the production of pyrolysis oil, such as changes to the calculation of the rate of the tax credit and the requirement to obtain a qualification certificate issued by the Minister of Energy and Natural Resources for the purposes of the tax credit.

For further details, please refer to the budget document

Refundable tax credit for the production of biofuel

Introduction of a new tax credit for the production of biofuel. A qualified corporation will be able to claim a refundable tax credit in respect of eligible biofuels that it produces in Quebec for sale and use in Quebec, up to a maximum of 300 million litres per year. The tax credit will be available from April 1, 2023 to March 31, 2033.

With the introduction of this new tax credit, the following tax credits set to expire on March 31, 2023 will not be renewed:

• the refundable tax credit for the production of ethanol in Quebec;
• the refundable tax credit for cellulosic ethanol production in Quebec; and
• the refundable tax credit for the production of biodiesel fuel in Quebec.

Eligible biofuel refers to a low-carbon-intensity fuel that is a liquid fuel under standard conditions, is produced from eligible materials (see below) and can be blended with gasoline or diesel fuel.

If a biofuel is produced from one or more of the following materials, it is eligible:

• an organic material;
• residual materials within the meaning of section 1 of the Environment Quality Act;
• carbon monoxide (CO) or carbon dioxide (CO2).

For the purposes of the tax credit, a corporation must have an establishment in Quebec where it carries on a business engaged in the production of biofuel and hold a qualification certificate issued by the Minister of Energy and Natural Resources. The tax credit rate will be determined based on various factors as outlined in the budget document.

For further details, please refer to the budget document

Other measures

Extension of the Roulez vert program and Revision of the maximum rebate according to the evolution of the market

The maximum rebate granted for the acquisition of electric vehicles under the Roulez vert program will be, as of 1 April 2022:

• $7,000 for new fully electric vehicles;
• $5,000 for new plug‑in hybrid vehicles;
• $3,500 for used fully electric vehicles.

Prescription period interruption

Under the Tax Administration Act (TAA), the recovery of an amount owed to the Minister of Revenue is prescribed by 10 years after the day on which the notice of assessment was sent. During this prescribed period, the minister is legally entitled to collect its tax claim against the debtor. Certain situations can arise interrupting this prescription period resulting in the resetting of the period back to zero and thus lengthening the period beyond 10 years and, in some reoccurring situations, indefinitely. One of those situations is the allocation of up to 50 per cent of an individual’s solidarity tax credit as compensation for a tax debt. The TAA will be amended to remove compensation as a reason for interrupting the prescription period when a taxpayer entitled to a refund is also a debtor.

The effective date is yet to be determined.

Next steps

Contact your Baker Tilly advisor to learn more about how we can help you navigate the complexities of the Canadian tax system.