Quebec’s Finance Minister, Eric Girard, tabled his latest budget on March 21. Many changes were presented, but I thought I would summarize some of the points that are most likely to impact you. This is of course a non-exhaustive summary that focuses on specific points and does not cover the entire budget presented.

Tax cuts

The 2023-2024 budget presents a 1% decrease in Quebec’s two bottom tax rates.

• Income under $49,275: Tax rate drops from 15% to 14%.
• Income above $49,275, but less than $98,540: The tax rate goes from 20% to 19%.

As a reminder, all workers who pay taxes in Quebec will benefit from this tax cut since we have a tiered tax system. The amount of savings will vary according to the income earned but will be subject to a maximum since there will be no tax savings for income earned above $98,540.

Labour-Sponsored Funds

Important changes have also been made to the tax credits for labour-sponsored funds (Fonds de solidarité FTQ and Fondaction CSN). In addition to implementing a new investment standard, the Quebec government is also changing certain tax measures.

• Minimum holding period: The holding period will gradually increase from a minimum of 2 years to a minimum of 5 years. The change will be made gradually between 2024 and 2026 at the rate of one more year of minimum holding period per year. Therefore, shares acquired on or after June 1, 2024 will have to be held for a minimum of 3 years, those acquired on or after June 1, 2025 for a minimum of 4 years and those acquired on or after June 1, 2026 for a minimum of 5 years. The minimum holding period will remain at 5 years thereafter, unless further changes are made in the future.
• Provincial Tax Credit: The current 15% provincial tax credit will no longer be available to individuals with an income above the maximum Quebec tax bracket, currently $119,910. This change will come into effect for shares acquired after December 31, 2023 and for taxation years after 2023. It will therefore still be possible to claim it this year for people with an income above $119,910. The federal tax credit of 15% will remain in effect for the time being as long as the Government of Canada does not make any changes.

Quebec Pension Plan (QPP)

The new budget will also provide more options for Quebec taxpayers in relation to the QPP and make changes to encourage workers 65 and older to remain in the workforce.

• Maximum eligibility age: As of January 1, 2024, the maximum age at which a contributor can apply for their QPP pension will be raised from 70 to 72. During this deferral, the lifetime pension will continue to be increased by a factor of 0.7% per month (8.4% per year), equal to the current deferral increase of the pension after age 65.
• QPP contributions: As of January 1, 2024, a worker aged 65 and over who is already receiving his or her retirement pension will be able to make the choice to stop contributing to the QPP. This election will apply to both the employee and the employer. Workers who continue to contribute to the QPP after age 65 will still be entitled to the supplement to their retirement pension as is currently the case. As a result of the increase in the maximum age, the requirement to stop contributing to the QPP will also be extended to age 72.
• Impact of working after age 65 on the QPP: New measures have also been introduced to encourage people over age 65 to remain at work. When calculating a QPP contributor’s retirement pension, the pension is based on the average employment earnings. People over 65 who continued to work part-time, for example, could suffer a negative impact on the amount of their pension because their average earnings were reduced. The Quebec government is introducing a mechanism to protect average earnings so that as of January 1, 2024, earnings after age 65 will not reduce the average employment earnings used to calculate the pension.

If you would like to consult the new Quebec Budget 2023-2024 in its entirety, you can do so by visiting the following address: http://www.finances.gouv.qc.ca/Budget_and_update/budget/index.asp

Do not hesitate if you have any questions.

This information was prepared by Mathieu Garand who is an investment advisor for iA Private Wealth Management Inc. and does not necessarily reflect the opinion of iA Private Wealth Management Inc. The information contained in this newsletter has been obtained from sources believed to be reliable, but we cannot guarantee its accuracy or reliability. The opinions expressed are based on analysis and interpretation as of the date of publication and are subject to change without notice. In addition, they do not constitute an offer or solicitation to buy or sell the securities mentioned. The information contained herein may not be suitable for all types of investors. The Investment Advisor may only open accounts in provinces where it is registered. iA Private Wealth Management Inc. is a member of the Canadian Investor Protection Fund and the Investment Industry Regulatory Organization of Canada. iA Private Wealth Management is a trademark and other name under which iA Private Wealth Management Inc. operates.