On March 27th, Québec’s Finance Minister Carlos Leitao released the budget for 2018-2019, which included plans aimed at increasing the population’s standard of living through sustainable economic initiatives.
Québec recently experienced its strongest economic growth in 20 years, with GDP growth rising from 1.4% in 2016 to 3.0% in 2017.
To help the province continue its strong development, several initiatives are established or sustained in the 2017-2018 budget, including tax cuts for SMBs, a focus on the development of Québec’s labour force, investment in applied technologies, the implementation of a biofood policy, and ongoing support for the 2030 Energy Policy.
The following are the budget highlights that will have a direct impact on Québec’s workforce and business sector:
Focus on Québec’s Workforce Strategy
To meet the growing needs of both employees and companies, the government will soon be releasing its workforce strategy which includes an investment of more than $800M over five years toward:
• Improving on-the-job training;
• Facilitating the integration of immigrants into the labour market;
• Promoting lifelong learning.
• Helping small and medium businesses remain competitive
Strong Support for SMBs
Since the success of SMBs is so critical to Québec’s overall growth, the government will introduce tax cuts equivalent to $2.2 billion over the next five years to help them remain competitive in the global marketplace. This will be achieved by:
• Reducing the contribution by SMBs to the Health Services Fund;
• Gradually reducing income tax for SMBs in the service and construction sectors education, from 8% to 4%, by 2022-2023 so that, on full implementation of the reduction, their rates will be the same as those of SMBs in the primary and manufacturing sectors;
• Supporting the marketing of innovations by businesses
Investment in Applied Technologies
Québec is slated to make a significant mark on the world stage with advances in applied technologies such as artificial intelligence. The Québec Economic Plan is therefore budgeting $172 million within five years toward marketing of innovations by businesses, including $120 million within two years to support two initiatives that are strategic for Québec’s economy:
• Projects for supply chains optimized by artificial intelligence in Québec;
• The launch of a call for mobilizing projects in other sectors that are strategic for Québec.
Incentives for Private Investment
Innovation is the cornerstone of development, especially when it comes to remaining competitive across industries and borders. To accelerate private investment in all regions of Québec, the government is budgeting over $270 million within five years toward:
• Increasing and extending the additional capital cost allowance to support acquisition of cutting-edge technologies;
• Broadening the tax holiday for large investment projects to include development of digital platforms;
• Better electricity discounts for major projects;
• Additional investments for carrying out large tourism projects.
Growth Across Regions and Industries
To promote the growth of various industries across many regions of Québec, the government will invest more than $617 million within five years in key sectors of the economy, leading to:
• The implementation of a new biofood policy;
• Growth in the clean technologies sector;
• Support for digital transition in the construction sector;
• Continuation of Québec’s Maritime Strategy;
• Support for Québec’s financial, life sciences, aluminum and alcoholic beverage sectors.
• Encouraging economic development in all regions
In addition, the 2018-2019 Economic Plan will allocate $417 million to promote the economic development of all regions by:
• Strengthening Québec’s forestry sector;
• Financially supporting projects to extend the natural gas distribution network in the regions;
• Developing the mining sector;
• Developing Northern Québec.
Reduction in Property Tax for Agricultural Land
The value of agricultural land has increased in recent years, raising the property tax paid by agricultural producers. The government is therefore allocating $20 million in short-term compensation to soften the impact of this increase on agricultural producers.
Ongoing Support of 2030 Energy Policy
The 2030 Energy Policy has outlined several targets for completing Québec’s energy transition, including the reduction of greenhouse gas emissions and petroleum product consumption. Therefore, the new budget includes investments of more than $260 million over the next five years for:
• Promoting the acquisition and use of electric vehicles;
• Supporting innovation in energy efficiency and the reduction of GHG emissions;
• Developing the use of residual forest biomass;
• Developing the hydrogen sector in Québec;
• Encouraging the development of biofuels in Québec.
New Budget Creates New Opportunities
In conclusion, the 2018-2019 Québec budget creates new and interesting financial incentives for companies to invest in innovation, business development and the integration of updated technology across many industries and regions. Following cuts and limitations introduced in recent years, R&D tax credits are left untouched in 2018-2019.
Ayming’s experts can explain how the overall budgetary changes may relate to your business and can provide you with a deeper understanding of how they could be applied in conjunction with your SR&ED claim. We can also help you uncover how other tax credits and government grant opportunities are linked to the initiatives introduced in this year’s budget, and help you assess the overall impact on your business.
For further information on how we can help, please reach out to your Ayming consultant, email us, or call us at 514-931-0166.