2023 Quebec Economic Outlook and Fiscal Review

Finance Minister Éric Girard presented the Fall 2023 Update on Quebec's economic and financial situation on November 7, 2023. Here is a summary of the tax measures announced.

AMENDMENTS TO THE TAX CREDIT RELATING TO INVESTMENT AND INNOVATION

The Investment and Innovation Tax Credit (C3i) was introduced in 2020 to encourage productivity gains by businesses in all regions of Quebec. In view of the upcoming expiry of the tax credit, currently scheduled for December 31, 2024, and the end of the temporary rate enhancement, scheduled for December 31, 2023, the government wishes to make certain modifications to the credit.

Amendments Relating to the Extension and Enhancement of Certain Parameters of the Tax Credit

Main changes to the parameters of the renewed investment and innovation tax credit (C3i), as of January 1, 2024

Tax credit rate by territory	Basic parameters (1)	New parameters (2)
Montréal and Québec city metropolitan communities	10%	15%
Territories with low economic vitality	20%	25%
Other territories or regions	15%	20%
Refundability criterion	Refundable for businesses with assets and gross revenue not exceeding $50 million Non-refundable for businesses with assets and gross income of $100 million or more (3)	Fully refundable for all businesses
Cumulative limit on eligible expenditures	100 million of eligible expenditures over five years	100 million of eligible expenditures over four years
Time frame	Property acquired before January 1, 2025	Property acquired before January 1, 2030

(1) These rates are subject to a temporary increase until December 31, 2023, and may be as follows up to 40%.

(2) This enhancement will apply to specified expenses incurred:

After December 31, 2023; or
After March 25, 2021 and before January 1, 2024, for the acquisition of a specified property after December 31, 2023.

However, this enhancement will not apply to specified expenses incurred after March 25, 2021 and before January 1, 2024, for the acquisition of a specified property after December 31, 2023 and before April 1, 2024 if:

The property was acquired in accordance with a written obligation contracted before January 1, 2024; or
The construction of the property by or on behalf of the corporation or partnership began before January 1, 2024.

This enhancement will also not apply to property:

Acquired in accordance with a written obligation contracted before March 26, 2021; or
Whose construction by or on behalf of the corporation or partnership had started on March 25, 2021.

Amendments to ease certain conditions for claiming the tax credit

Amendment to the definition of “specified expenses”

In order to ease the conditions for claiming the tax credit relating to investment and innovation, the definition of “specified expenses” will be amended to provide that a qualified corporation may also claim this tax credit in respect of the taxation year in which the specified expenses are paid when they are paid after the end of the taxation year in which they were incurred, but no later than the end of the 18-month period following the end of such taxation year.

This amendment to the definition of “specified expenses” will apply in respect of expenses incurred by a corporation in a taxation year of the corporation that ends after the date of publication of this information bulletin.

Deadline extension in certain circumstances

Amendments will be made to the tax legislation to grant a corporation an extension of the deadline for submitting to the Minister of Revenue the prescribed form containing the prescribed information for claiming the tax credit relating to investment and innovation, in cases where such a claim has been submitted by the corporation but has been denied by the Minister in respect of all or part of the specified expenses incurred by the corporation on the grounds that the tax credit was not claimed for the taxation year in which the expenses were incurred.

To benefit from such an extension, a corporation must submit the prescribed application form for the tax credit relating to investment and innovation containing the prescribed information to the Minister of Revenue no later than the latest of the following dates:

The 183rd day following that of the mailing of the notice of assessment or notice of reassessment issued to the corporation and refusing in whole or in part the application for the tax credit on the grounds that the tax credit was not claimed for the taxation year in which the expenses were incurred;
June 30, 2024

ABOLITION OF THE ADDITIONAL CAPITAL COST ALLOWANCE OF 30%

As a result of the amendments to the tax credit relating to investment and innovation which essentially targets the same types of investment, the additional capital cost allowance of 30% will be abolished as of January 1, 2024. Accordingly, only property that meets the conditions otherwise set forth for claiming the additional capital cost allowance of 30% that is acquired not later than December 31, 2023, may give entitlement to the additional capital cost allowance for the remainder of the period applicable in respect of the property.

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