There have been some changes in the taxation of small businesses since the last federal budget (March 22, 2016) and the last provincial budget (March 17, 2016). Small businesses in Quebec benefit from a tax reduction on the first $ 500,000 of taxable income from an active business. This tax reduction, called the small business deduction, had the effect of reducing the federal and Quebec tax rates. So, in combination, a tax reduction to 18.5% (10.5% + 8.0%) for 2017.
Canada's Budget - March 22, 2016 - Effective January 1, 2017, the federal tax rate for the first $ 500,000 of taxable income is 10.5%.
The Budget of Québec - March 17, 2016 - As of January 1, 2017, the provincial tax rate applicable to the first $ 500,000 of taxable income is only 8% if the sum of the hours worked by the employees exceeds 5,500 hours, Equivalent to just over 3 full-time employees.
Small businesses in Quebec will not benefit from the small business deduction if the sum of hours worked by employees is less than 5,500 hours. Indeed, they will see their Quebec tax rate rise from 8 to 11.8%, an increase of 3.8% on the first $ 500,000 of taxable income. By the combined effect, new tax measures will see its tax rate rise from 18.5% to possibly 22.3% from 1 January 2017. (10.5% + 11.8%).
ELIMINATION OF HEALTH CONTRIBUTION
On October 25, 2016, the Minister of Finance of Québec announced the elimination of the health contribution as of 2017. Consequently, starting January 1, 2017, you will no longer be required to withhold the health contribution on the remuneration you pay to an employee or a beneficiary.
CONTRIBUTION TO THE LABOUR STANDARDS
Effective January 1, 2017, the rate applicable to remuneration subject to the contribution related to labour standards (formerly the “contribution to the financing of the CNT”) is reduced from 0.08% to 0.07%.
Also, for 2017, the portion of the remuneration in excess of $72,500 (instead of $71,500) is not subject to the contribution related to labour standards.