Between the many current regulations, the subtleties of the instructions and the various changes, corporate taxation in Quebec is not always easy to understand.
Each year, new measures concerning business taxes in Quebec are implemented, raising many questions:
- Will we pay more taxes in 2021?
- What are the changes to corporate taxation in Quebec?
- Will SMEs benefit in 2021 compared to previous years?
Find out more about the changes in Quebec's corporate tax system for SMEs.
1. HSF contribution
The table below shows the Health Services Fund (HSF) contribution rates for the year 2021, applicable based on your total payroll.
|Total Payroll (TP)|
|$1,000,000 or less||$1,000,001 to $6,499,999||$6,500,000 or more|
|Rates for employers whose total payroll is more than 50% attributable to activities in the primary and manufacturing sectors||1.25%||0.7027 + (0.5473 × TP/1,000,000)1||4.26%|
|Rates for all employers other than public sector employers and employers whose total payroll is more than 50% attributable to activities in the primary and manufacturing sectors||1.65%||1.1755 + (0.4745 × TP/1,000,000)1||4.26%|
|Rate for public sector employers||4.26%|
2. QPIP premiums
In 2021, the Quebec Parental Insurance Plan (QPIP) data has changed.
This year, the maximum insurable earnings are $83,500 with an employee premium rate of 0.494% and an employer premium rate of 0.692%.
The maximum employee premium is $412.49 and the maximum employer premium is $577.82.
3. QPP contributions
As with the QPIP, the Quebec Pension Plan (QPP) data has been updated for 2021.
The maximum pensionable earnings are set at $61,600 with a basic exemption of $3,500. The maximum contributory earnings are therefore $58,100.
With a contribution rate of 5.90%, the maximum employee and employer contribution is $3,427.90.
4. Contribution related to labour standards
For the year 2021, any compensation above the defined threshold of $83,500 is not subject to the labour standards assessment.
5. Employment deduction
The maximum deduction for employment income is set at $1,205 for the year 2021.
6. Gratuities and retroactive pay
For the year 2021, $15,728 is the threshold for determining the method to be used to calculate source deduction of income tax on retroactive pay.
For 2021, the personal income tax system is indexed at 1.26%.
The indexation rate is very useful and applies to:
- Income thresholds
- Personal tax credit amounts
- Deduction code amounts
- Threshold for determining the method to be used to calculate the source deduction of income tax on a gratuity or retroactive pay
- Maximum deduction for employment income
- Maximum exemption that can be granted to an emergency services volunteer
- Maximum tax-exempt amount of a disability assistance payment from a registered disability savings plan (RDSP)
8. Personal tax credit amounts
The personal tax credit amounts on the Source Deductions Return are indexed for 2021.
The basic personal and spousal transfer amounts are $15,728, $4,403 for other dependents, $3,021 per term for a child under 18 in post-secondary education, an additional $2,225 for a single parent family, $3,492 for severe and prolonged impairment in mental or physical functions, $1,802 for a person living alone, $3,308 granted for age, and $2,939 for retirement income.
Finally, the threshold of the age amount, the amount for a person living alone, the amount for retirement income and the amount for career extension is set at $35,650.
9. Disability assistance payments from an RDSP
For 2021, a 15% withholding tax is required on the portion of the disability assistance payment from a registered disability savings plan (RDSP) in excess of $19,220.
10. Income thresholds and tax rates
For 2021, the thresholds for the taxable income brackets are indexed, and the rates applicable to those brackets remain the same.
Note that the constants used to adjust the tax rates are indexed.
|Taxable income||Tax Rate||Constant|
|More than||Less than or equal to|
11. Tax credit for the acquisition of Fondaction shares
Effective June 1, 2015, the acquisition of Fondaction shares allowed for a tax credit rate of 20%. As of June 1, 2021, this same rate is now 15%.
Effective May 31, 2021, if an employee authorizes you to withhold a portion of the employee's compensation for the purchase of Fondaction Class A or B shares, you are required to amend the amount withheld for the purchase from the employee's gross remuneration.
12. Emergency services volunteer
The cap on the exemption for an emergency service volunteer is $1,205.
13. Increase in the basic corporate income tax rate reduction in 2021
There are no major changes to the corporate income tax in 2021.
However, the Legault government has announced a series of measures to support Quebec businesses. Among them, the reduction of the tax rate on the first $500,000 of taxable income of small businesses in Quebec eligible for the small business deduction (SBD).
Any business eligible for the SBD, whose taxation year ends after March 25, 2021, will see the maximum SBD rate applicable to the first $500,000 of its annual revenues increase from 7.5% to 8.3%.
The minimum tax rate of 3.2% remains applicable to this company's income, making it eligible for the SBD. The general tax rate remains similar in 2021 to last year's rate of 11.5%.
For assistance with your Quebec tax returns, consider consulting a tax specialist in 2021.
14. Lowering of the applicable tax rate to qualify for the SBD in Quebec
The small business deduction (SBD) is highly beneficial for eligible Quebec companies.
Among the changes in Quebec's corporate tax system is a decrease in the tax rate applicable to income eligible for the SBD. There is a one point decrease for the year 2021, i.e. 4% compared to 5% previously in 2020.
These changes apply to any tax year that begins after December 30, 2020. They are therefore applicable now.
As a reminder, as of December 31, 2016, two sine qua non conditions are in place to qualify for SBD:
- Must be a corporation that employs more than three full-time employees throughout the tax year.
- Be a primary and manufacturing company.
Hire experts to help with Quebec's corporate tax changes
Corporate taxation in Quebec is complex and the changes that occur each year make it difficult to keep up with. It is equally difficult to keep up to date with the latest tax legislation at all times.
This article only deals with the Quebec tax system related to Revenu Québec and not with the Canadian tax system. T2inc's experts are at your disposal to help you with your Quebec and Canadian corporate taxation needs and to answer all your questions.
Contact the T2inc team to learn more about our services and get advice from our experts.