Quebec’s small business corporate tax rate has been aligned with Ontario’s. The new 20 per cent reduction for taxpayers eligible for the small business deduction — taking the rate down to 3.2 per cent on the first $500,000 of taxable earnings — was announced in the 2021 provincial budget last week.
“Small and medium-sized business play a key role in the economic fabric of all of Québec’s regions,” Finance Minister Éric Girard noted in the budget speech. “The government would like to see local small businesses become medium-sized businesses, and local medium-sized businesses become large businesses. We are lending businesses a helping hand in this regard.”
The Quebec government estimates the new measure, which went into effect as of budget day on March 25, will translate into about $70 million in collective annual tax savings for approximately 70,000 qualifying businesses. This is the second corporate tax reduction they’ve seen since January 1, when a 4 per cent rate on the first $500,000 of taxable earnings was introduced.
The 2021 budget also pledges a temporary doubling of the C3i tax credit for expenditures on computer hardware, management software or manufacturing and processing equipment. Introduced in the 2020 budget, small and medium-sized businesses are eligible for a refundable tax credit on costs greater than $5,000 when they purchase computer hardware and/or management software, or costs in excess of $12,500 for the purchase of manufacturing and processing equipment. Large corporations can claim non-refundable tax credits for the same expenditures.
The tax credit is prorated to regional economic vitality and will increase from 10 to 20 per cent for claimants in the Montreal and Quebec City metropolitan areas for purchases made between March 25 and December 31, 2022. Taxpayers in most other urban centres of the province will see the tax credit rise from 15 to 30 per cent, while it will jump from 20 to 40 per cent in a small number of more remote regions.
“This temporary increase will encourage more than 10,000 businesses in all sectors of activity to accelerate their plans for purchasing new technologies,” Girard maintained.
The Quebec government has budgeted about $290 million for the top-up measure. As of January 1, 2023, the tax credit will remain in place at the original rate scale for purchases made until December 31, 2024.