Between the many rules already in place, the subtlety of instructions and various changes that can occur, corporate taxes in Quebec are not always easy to understand.
As 2017 slowly begins to advance, we all find ourselves asking the same questions:
Will we have to pay more taxes in 2017?
What changes will affect the corporate tax system in Quebec?
Will SMBs benefit from tax breaks in 2017, compared to previous years?
Discover a short overview of the changes to expect regarding corporate taxes in Quebec for SMBs in 2017.
The general corporate income tax rate reduction of 2017
Corporate taxation is not expected to undergo major changes in 2017. However, it has been announced that the general tax rate will be gradually reduced between 2017 and 2020.
The total expected reduction is estimated at being around 0.4%. That is why this rate will be lowered to 11.8% in 2017 compared to 11.9% last year. From now until 2020, the general tax rate will lose 0.1% each year. To help you with all your income tax returns needs in Quebec, consider going through a tax expert in 2017.
Stricter qualification criteria for SBDs in Quebec
SBDs, or small business deductions are very advantageous for Quebec companies that have access to them. Among the changes in corporate taxation in Quebec, changes to the qualifications of receiving SBDs are among the most important for SMBs.
These changes are to be taken into account for any taxation year that begins after December 31, 2016. This means that they are already applicable to some businesses.
The minimum tax rate for small business income will be maintained at 8% in 2017, but the criteria for accessing these reduced rates will change. Previously, there were two requirements to be eligible for SBDs:
- You had to be a company that employs more than three full-time employees throughout the taxation year.
- You had to be a company doing business in the primary and manufacturing sectors.
Taxation changes: wage costs
The real change impacting corporate taxes in Quebec is the change regarding the criteria of 3 minimum full-time employees, which is replaced by some criteria regarding number of hours worked per year.
To be eligible for SBDs, employees must have completed at least 5,500 hours of work during the tax year. A maximum of 40 hours per week per worker will be imposed.
Companies in the primary and manufacturing sectors will benefit from the highest rate of SBDs, which will be obtained either due to the ‘minimum number of hours worked per year’ qualification or for the qualification based on sector of activity: the primary sector or the manufacturing sector.
For example, if your company does not employ workers for at least 5,500 hours in 2017, the 8% tax rate will not apply. If you own an incorporated company and work 80 hours a week, you can only include 40 hours into the calculation…
2017 is already here, so get ready!
Corporate taxes in Quebec can be complex and the changes made in 2017 don’t make things easier. For more information and advice, do not hesitate to contact us. Our experts will be happy to answer any questions you may have.