CHANGES TO VARIOUS MEASURES OF A FISCAL NATURE

Transcription

1 CHANGES TO VARIOUS MEASURES OF A FISCAL NATURE This information bulletin is intended to make public the changes to various measures of a fiscal nature affecting individuals and businesses. These amendments are designed, among other things, to streamline the allocation rules of the solidarity tax credit, to postpone for a year the reduction in the rates of the refundable tax credit for resources and to ease the restriction applicable to the depreciation allowance of certain property for the purposes of mining tax regime. For information regarding the matters dealt with in this information bulletin, contact the secteur du droit fiscal et des politiques locales et autochtones at The French and English versions of this bulletin are available on the ministère des Finances et de l Économie website at :

2 CHANGES TO VARIOUS MEASURES OF A FISCAL NATURE 1. STREAMLINING OF THE ALLOCATION RULES OF THE SOLIDARITY TAX CREDIT CHANGES TO THE REFUNDABLE TAX CREDIT FOR RESOURCES CHANGES TO THE FLOW-THROUGH SHARE REGIME CHANGE TO THE REFUNDABLE TAX CREDIT FOR INTERNATIONAL FINANCIAL CENTRES EASING OF THE RESTRICTION APPLICABLE TO THE DEPRECIATION ALLOWANCE OF CLASS 4 PROPERTY AND CLASS 4A PROPERTY FOR THE MINING TAX REGIME RECOGNITION OF CERTAIN INVESTMENTS MADE BY CAPITAL RÉGIONAL ET COOPÉRATIF DESJARDINS UPDATING OF THE DEFINITION OF THE TERM PRACTITIONER USED IN THE PERSONAL TAX SYSTEM TECHNICAL CHANGES CONCERNING THE REDEMPTION OF SHARES ISSUED BY LABOUR FUNDS

3 1. STREAMLINING OF THE ALLOCATION RULES OF THE SOLIDARITY TAX CREDIT Under the Tax Administration Act, 1 where a person who is entitled to a refund pursuant to the application of a tax law also owes an amount under such a law or is on the point of owing such an amount, the Minister may allocate such refund to the payment of such person s debt, up to the amount of such debt, and notify him accordingly. This refund may also be allocated to the payment of any amount such person owes the state under various other laws. 2 To reflect the fact that the solidarity tax credit was designed for low and middle-income households to mitigate the costs related to the Québec sales tax and housing, while recognizing that people who live in northern villages must bear a higher cost of living than elsewhere, the tax legislation stipulates that only 50% of the amount determined on account of this tax credit, for a given month, in respect of an individual who is a recipient, for such month, of last-resort financial assistance 3 may be allocated to the payment of a debt of such individual to the state, provided his status as a recipient was brought to the attention of the Minister at least 21 days before the stipulated date for payment of such amount. So that all those who are most disadvantaged may receive an amount every month on account of the solidarity tax credit, the allocation rules of this tax credit will be streamlined as of the payment period beginning July 1, More specifically, the tax legislation will be amended to specify that only 50% of the amount determined on account of the solidarity tax credit, for a given month, for an individual may be allocated to the payment of an amount he owes the state if his family income is, according to the last notice of determination issued to him, equal to or less than $ For the purposes of this streamlining, as of January 1, 2015, the amount of $ will be automatically indexed each year according to the factor used to index the main parameters of the personal tax system. For greater clarity, if the result obtained by applying the indexing factor is not a multiple of 5, it will be rounded off to the nearest multiple of 5, or, where it is halfway between two such multiples, rounded up to the nearest multiple of 5. 1 CQLR, chapter A For example, the Individual and Family Assistance Act (CQLR, chapter A ), the Act respecting financial assistance for education expenses (CQLR, chapter A-13.3) and the Act respecting the Société d habitation du Québec (CQLR, chapter S-8). 3 For a given month, a person is a recipient of last-resort financial assistance if such person receives financial assistance granted under the Social Assistance Program or the Social Solidarity Program stipulated by the Individual and Family Assistance Act. 3

4 2. CHANGES TO THE REFUNDABLE TAX CREDIT FOR RESOURCES The refundable tax credit for resources (the resources credit ) was set up as part of the March 29, Budget Speech. 4 Briefly, a qualified corporation that incurs eligible expenses in Québec during a taxation year can claim a resources credit, for such year, of up to 38.75% of eligible expenses. 5 Concisely, the expenses eligible for tax assistance include exploration expenses, development expenses and renewable and conservation expenses. To illustrate, eligible expenses may include the expenses for geological, geophysical or geochemical studies, clearing expenses, drilling expenses and expenses relating to the collection and analysis of data needed to determine energy, mass or water balances specific to a particular project. The rate of the tax credit a qualified corporation may claim in relation to the eligible expenses it incurs varies, among others, according to the type of project, the place where such expenses are incurred, as well as the type of corporation that incurs the expenses. In this regard, the rate of the tax credit is higher in the case of eligible expenses incurred by a corporation that does not operate a mineral resource or an oil or gas well. In addition, such a corporation must not be related to another corporation that operates a mineral resource or an oil or gas well. The following table shows the rates that currently apply depending on the various parameters of the resources credit. Rates of the resources credit (per cent) Tax credit regarding eligible expenses relating to mining resources, oil and gas Corporations not operating a mineral resource or oil or gas well (1) Other corporations in the Mid-North or Far North elsewhere in Québec relating to renewable and conservation expenses relating to other natural resources (cut stone) (1) Such corporations must not be related to a corporation that operates a mineral resource or an oil or gas well. In the March 20, 2012 Budget Speech, 6 rate reductions for the resources credit were announced regarding eligible expenses incurred after December 31, MINISTÈRE DES FINANCES DU QUÉBEC, Budget Additional Information on the Budgetary Measures, Section 1, March 29, 2001, p Taxation Act (CQLR, chapter I-3), sec to The same is true for such a corporation that is a member of a qualified partnership that incurs eligible expenses. 6 MINISTÈRE DES FINANCES DU QUÉBEC, Budget Additional Information on the Fiscal Measures of the Budget, March 20, 2012, p

5 It was also indicated that the rates of the resources credit applicable to eligible expenses relating to mining resources, oil or gas would be reduced by ten percentage points where such expenses are incurred by corporations that operate no mineral resource, oil or gas well 7 and by five percentage points where these same corporations incur eligible expenses relating to cut stones. In addition, it was stipulated that the rates of the resources credit applicable to eligible expenses relating to mining resources, oil or gas and to cut stones would also be reduced by five percentage points where such expenses are incurred by other qualified corporations. Moreover, the March 20, 2012 Budget Speech also announced that a conditional increase to the resources credit would be available for qualified corporations regarding eligible expenses relating to mining resources, oil or gas incurred after December 31, Accordingly, it was indicated that a qualified corporation planning to incur such expenses could claim the increase in the tax assistance in exchange for an option to the state to acquire an equity stake of five or 10 percentage points in the development of the resource relating to a claim or an oil and gas exploration permit. It was specified that the increase in the tax assistance would consist of a rise in the rate of the resources credit corresponding to 10 percentage points for corporations that operate no mineral resource, oil or gas well and five percentage points for other eligible corporations regarding the same resources. In view of the less favourable international context for investment in mining exploration stemming from a moderation of growth in demand for metals and an increase in world supply, changes will be made to this tax assistance to defer the reduction and enhancement of the resources credit for a calendar year. In addition, to ensure the integrity of this fiscal measure, changes will be made to certain definitions and certain concepts currently used in the tax legislation. Reduction and increase in the rates of the resources credit deferred for one year Since the resources credit can stimulate exploration activities in a particular way, it is appropriate to suspend, for one year, the application of the reduction in the rates of the resources credit, including the reduction related to cut stones, and consequently the implementation of the increase. Accordingly, the various rates of the resources credit currently stipulated in the tax legislation will continue to apply regarding eligible expenses incurred after December 31, 2013, but before January 1, Such corporations must not be related to a corporation that operates a mineral resource or an oil or gas well. 8 The rate of the tax credit a qualified corporation may benefit from in respect of eligible expenses incurred after December 31, 2013 that are related to natural resources relating to cut stone may not be increased in exchange for an option of the state to acquire an equity stake in the development. In this regard, see: MINISTÈRE DES FINANCES ET DE L ÉCONOMIE DU QUÉBEC, Information Bulletin , December 21, 2012, p

6 Replacement of the notion of operation of a mineral resource or oil or gas well The rates of the resources credit depend, among others, on the place where eligible exploration expenses are incurred, the type of natural resource sought and the status of the qualified corporation. To benefit from the higher rates of this tax credit, a corporation must not operate a mineral resource or oil or gas well. Similarly, such a corporation must not be related to another corporation that operates a mineral resource or an oil or gas well. 9 Currently, for the purposes of Québec's tax legislation, the notion of operation of a mineral resource or oil or gas well means such operation carried out in reasonable commercial quantities. 10 The purpose of this criterion is to direct the tax incentives to corporations that do not receive revenue from the operation of a resource and that, consequently, do not have access to the funds needed to finance exploration activities. However, certain ambiguities remain, especially regarding whether or not corporations that can indirectly benefit from revenue from the operation of a resource, in particular through royalties, are eligible. To help achieve the objective of this measure, the notion of operation of a mineral resource or oil or gas well will be replaced with the requirement that no gross income be earned from the operation in reasonable commercial quantities of such a resource for the purposes of the definitions of qualified corporation that does not operate a mineral resource or an oil or gas well and qualified partnership that does not operate a mineral resource or an oil or gas well 11 used in the resources credit. This change will apply to taxation years of a qualified corporation and to fiscal years of a qualified partnership that begin after the day of publication of this information bulletin. Replacement of the notion of related corporation One of the necessary conditions for benefiting from the increased rates of the resources credit is that the corporation must not be related to another corporation that operates a mineral resource or an oil or gas well. To secure the integrity of this fiscal measure, other changes will be made to the definitions of qualified corporation that does not operate a mineral resource or an oil or gas well and qualified partnership that does not operate a mineral resource or an oil or gas well Taxation Act, sec and The same is true for such a corporation that is a member of a qualified partnership that incurs eligible expenses if such partnership does not operate a mineral resource or an oil or gas well. 10 Ibid., sec , par Ibid., sec and See note 9. 6

7 More specifically, the notion of related corporation will be replaced with the broader notion of association, i.e. that of associated group. 13 This change will apply to taxation years of a qualified corporation and to fiscal years of a qualified partnership that begin after the day of publication of this information bulletin. 3. CHANGES TO THE FLOW-THROUGH SHARE REGIME Briefly, the flow-through share regime allows a taxpayer who acquires a flow-through share to receive a basic deduction equal to 100% of his acquisition cost, insofar as the financing thus obtained by the issuing corporation is used to defray the cost of exploration or development work in Canada and the expenses incurred are renounced by the corporation in favour of the shareholder. The flow-through share regime also stipulates two additional deductions. Accordingly, where exploration expenses are incurred in Québec, the shareholder may claim an additional deduction of 25%. Furthermore, he may claim another additional deduction of 25% where the expenses incurred by the issuing corporation, from the proceeds obtained from issuing the flowthrough share, are surface exploration expenses incurred in Québec. For the shareholder to have access to these additional deductions, the issuing corporation must not, at the time it incurred the expenses and throughout all of the preceding 12 months, have operated a mineral resource or an oil or gas well. Similarly, throughout this period, it must not control nor have controlled another corporation that operates a mineral resource or an oil or gas well, or be controlled or have been controlled by such a corporation. 14 Change to the notion of operation of a mineral resource or oil or gas well Currently, the operation of a mineral resource or oil or gas well means such operation carried out in reasonable commercial quantities. 15 The purpose of this criterion is to direct the tax incentives to corporations that do not receive revenue from the operation of a resource and that, consequently, do not have access to the funds needed to finance exploration activities. 13 This notion of associated group will be similar to the one used in respect of the tax credit for investments relating to manufacturing and processing equipment, taking into account the necessary adaptations (Taxation Act, sec ). 14 Taxation Act (CQLR, chapter I-3), sec , , , and The same is true for such a corporation that is a member of a partnership that incurs eligible expenses if such partnership does not operate a mineral resource or an oil or gas well. 15 Ibid., sec , and

8 Consequently, like the changes made as part of the refundable tax credit for resources, 16 the notion of operation of a mineral resource or oil or gas well will be replaced with the requirement that no gross income be earned from the operation in reasonable commercial quantities of such a resource for the purposes of the definitions of qualified corporation and qualified partnership. 17 Change to the control criterion One of the conditions for receiving the additional deductions specific to the flow-through share regime is that the corporation must not control another corporation that operates a mineral resource or an oil or gas well, or be controlled by such a corporation. Currently, a corporation that concentrates on exploration work may issue flow-through shares that give rise to the additional deductions while a sister corporation carries out operating activities. To ensure the integrity of this measure, the notion of control will be replaced with the broader notion of association, i.e. that of associated group. 18 Application date These changes will apply to flow-through shares issued after December 31, CHANGE TO THE REFUNDABLE TAX CREDIT FOR INTERNATIONAL FINANCIAL CENTRES The refundable tax credit for international financial centres was introduced in the March 30, Budget Speech. 19 Its objective is to foster the establishment and development in the Montréal agglomeration of specialized businesses carrying out international financial transactions. The tax credit is part of an overall plan to make Montréal a major finance centre in North America. Briefly, an international financial centre (IFC) is a business or part of a business established in the Montréal agglomeration all of whose activities concern qualified international financial transactions (QIFT), as this expression is understood in the Act Respecting International Financial Centres In this regard, see section 2 of this information bulletin. 17 See note This notion of associated group will be similar to the one used in respect of the tax credit for investments relating to manufacturing and processing equipment, taking into account the necessary adaptations (Taxation Act, sec ). 19 MINISTÈRE DES FINANCES DU QUÉBEC, Budget Additional Information on the Budgetary Measures, March 30, 2010, p. A.53-A CQLR, chapter C

9 Concisely, a qualified corporation that carries on a business recognized as an IFC by the Minister of Finance and the Economy may claim a refundable tax credit for a taxation year representing 30% of the eligible salaries it incurs for such year regarding its eligible employees. However, the eligible salary of an eligible employee may not exceed $ annually. Accordingly, the tax credit can reach $ per eligible employee annually. To be eligible, an employee must work full-time for the IFC and allocate at least 75% of his work time to carrying out QIFTs. Currently, subject to certain conditions, back office activities may be considered as QIFTs. To illustrate, such activities, related to a financial transaction that takes place outside Canada, carried out by a Canadian subsidiary of a foreign bank established in the Montréal agglomeration, on behalf of a third party that is not resident in Canada, may qualify as QIFTs. 21 Back office activities remain QIFTs even if the third party is a branch of the foreign bank. It appears that foreign banks are increasingly less inclined to carry out banking activities by means of a subsidiary incorporated in Canada, such banks preferring to provide the same services by means of a branch. However, according to the Act Respecting International Financial Centres, a branch of a foreign bank is not considered a person separate from the said bank, as a subsidiary is. Accordingly, back office activities carried out by a Canadian branch on behalf of a foreign bank or on behalf of another branch of such bank cannot be recognized as QIFTs. Consequently, to help achieve the objectives of the tax credit and to better reflect the actual situation of the international banking sector, changes will be made to the Act Respecting International Financial Centres. More specifically, for the purposes of the qualification of back office activities as QIFTs, 22 a branch of a foreign bank will be deemed to be a corporation separate from the said bank and the other branches of the bank. In addition, for the purposes of this presumption, the Canadian branch of a foreign bank carrying out back office activities will be deemed to reside where the back office activities take place. This amendment will apply to certificates issued pursuant to the refundable tax credit for international financial centres after the day of publication of this information bulletin. 21 Act Respecting International Financial Centres, sec. 7, par 22, sub-par. b. 22 Ibid. 9

10 5. EASING OF THE RESTRICTION APPLICABLE TO THE DEPRECIATION ALLOWANCE OF CLASS 4 PROPERTY AND CLASS 4A PROPERTY FOR THE MINING TAX REGIME The Mining Tax Act 23 stipulates that the maximum amount an operator may deduct in calculating its annual earnings from a mine it operates, for a fiscal year, on account of depreciation allowance in respect of class 1 property, class 2 property or class 3 property corresponds to the portion that is reasonably attributable to the operation of the mine of the lesser of the following amounts: 24 the amount obtained by applying the stipulated percentage to the capital cost of property of such class, for such fiscal year; the undepreciated capital cost of property of such class at the end of the fiscal year. The stipulated percentage for determining the depreciation allowance relating to property of a given class that an operator may deduct is 15% for class 1 property, 30% for class 2 property and 100% for class 3 property. The maximum amount of the depreciation allowance relating to class 4 property that an operator may deduct in calculating its annual earnings from a mine it operates, for a fiscal year, corresponds to the portion that is reasonably attributable to the operation of the mine of an amount obtained by multiplying the undepreciated capital cost of the property of such class at the end of such fiscal year by 30%. 25 Moreover, the Mining Tax Act stipulates that an operator may not deduct an amount on account of depreciation allowance relating to class 4 property in calculating its annual earnings from a mine, for a fiscal year, if the undepreciated capital cost of its class 1 property, its class 2 property and its class 3 property, at the end of such fiscal year, reduced by the amount it deducts in respect of such property, for such fiscal year, is greater than zero. 26 This restriction on the deduction of the depreciation allowance in respect of class 4 property was put in place to limit over time the excessive flexibility offered by 100% depreciation of class 3 property. 27 As part of the revision of the mining tax regime released on May 6, 2013 in Information Bulletin , new classes of depreciable property were created, namely class 1A property, class 2A property, class 3A property and class 4A property. 23 CQLR, chapter I Where the operator no longer owns property of a class at the end of a fiscal year, the amount it may deduct on account of depreciation allowance in respect of the property of such class, for such fiscal year, is equal to zero. 25 See the preceding note. 26 Mining Tax Act, sec , 2 nd par. 27 MINISTÈRE DES FINANCES DU QUÉBEC, Budget Additional Information on the Budgetary Measures, March 30, 2010, p. A

11 The maximum amount an operator may deduct in calculating the output value at the mine shaft head in respect of a mine it operates and in calculating its annual earnings from such mine, for a fiscal year beginning after December 31, 2013, on account of depreciation allowance in respect of class 1A property, class 2A property, class 3A property and class 4A property will be calculated according to the same parameters as those that apply for the calculation of the maximum amount of depreciation allowance regarding, respectively, class 1 property, class 2 property, class 3 property and class 4 property. A restriction was also stipulated concerning the depreciation allowance relating to class 4A property. Accordingly, an operator may not deduct an amount on account of depreciation allowance relating to class 4A property in calculating the output value at the mine shaft head in respect of a mine it operates and in calculating its annual earnings from the mine, for a fiscal year beginning after December 31, 2013, if the undepreciated capital cost of its class 1A property, its class 2A property and its class 3A property, at the end of such fiscal year, reduced by the amount it deducts in respect of such property, for such fiscal year, is greater than zero. 28 However, it appears that the restriction on the deduction of the depreciation allowance applicable to class 4 property and class 4A property may, in some cases, lead to undesirable results. It is therefore appropriate to ease this restriction. Consequently, the Mining Tax Act will be amended so that an operator may deduct, in calculating its annual earnings from a mine it operates, for a fiscal year, an amount on account of depreciation allowance in respect of class 4 property if it deducts, in calculating its annual earnings from the mine for the fiscal year, the maximum amount of the depreciation allowance relating to class 1 property, the maximum amount of the depreciation allowance relating to class 2 property and the maximum amount of the depreciation allowance relating to class 3 property attributable to the operation of the mine, for such year. Similarly, the Mining Tax Act will be amended so that an operator may deduct, in calculating its output value at the mine shaft head in respect of a mine it operates and in calculating its annual earnings from such mine, for a fiscal year, an amount on account of depreciation allowance in respect of class 4A property if it deducts, in calculating its output value at the mine shaft head in respect of the mine and in calculating its annual earnings from the mine for the fiscal year, the maximum amount of the depreciation allowance relating to class 1A property, the maximum amount of the depreciation allowance relating to class 2A property and the maximum amount of the depreciation allowance relating to class 3A property attributable to the operation of the mine, for such year. Application dates The amendment to the Mining Tax Act concerning the restriction on the deduction of the depreciation allowance relating to class 4 property will be declaratory. Concerning the amendment relating to the restriction on the deduction of the depreciation allowance in respect of property of class 4A, it will apply for the calculation of the output value at the mine shaft head of an operator in respect of a mine it operates and for the calculation of its annual earnings from the mine for a fiscal year beginning after December 31, MINISTÈRE DES FINANCES ET DE L ÉCONOMIE DU QUÉBEC, Information Bulletin , May 6, 2013, p

12 6. RECOGNITION OF CERTAIN INVESTMENTS MADE BY CAPITAL RÉGIONAL ET COOPÉRATIF DESJARDINS Capital régional et coopératif Desjardins is an investment corporation whose mission is to marshal venture capital for Québec s resource regions and the cooperative movement. In just a few years, this corporation has carved out a place in Québec s venture capital industry, especially among small and medium-size enterprises in the regions. Capital régional et coopératif Desjardins, through its sustained presence in the resource regions, helps stimulate regional economic development. As a result, over the years, it has become a valuable tool for small and medium-size enterprises in the regions that need capital to achieve financial selfsufficiency and maturity. Since Capital régional et coopératif Desjardins was formed, the government has supported its mission by allowing individuals who acquire its shares to claim a tax benefit. This benefit, which consists of a non-refundable tax credit equal to 50% of the issue price of the shares, is designed to encourage individuals to participate in Québec s economic development. Since Capital régional et coopératif Desjardins s financing is facilitated by granting a tax benefit, an investment requirement was included in its statute of incorporation 29 to ensure, in particular, that the funds collected are used as a financing tool contributing to the development of Québec entities. This requirement stipulates that, for each fiscal year, the eligible investments of Capital régional et coopératif Desjardins that include no security bond or hypothec must represent, on average, at least 60% of its average net assets for the preceding fiscal year, and that a portion, hereunder called regional component, representing at least 35% of such percentage must be made in eligible cooperatives or in entities located in Québec s resource regions. 30 If any component of the investment requirement is not satisfied for a given fiscal year, Capital régional et coopératif Desjardins becomes subject to a special tax. Over the years, the investment requirement has been changed to better adapt it to the capital requirements of Québec companies and to enable Capital régional et coopératif Desjardins to play a larger role in the economy. Currently, for the purposes of this requirement, eligible investments include, among others, investments in small and medium-size Québec enterprises, investments in major projects with a structuring effect on the economy, investments made in certain local venture capital funds created and managed in Québec as well as participations in certain investment funds constituted as limited partnerships. To better recognize the participation of Capital régional et coopératif Desjardins in the development of Québec's economy, its statute of incorporation will be amended. 29 Act constituting Capital régional et coopératif Desjardins (CQLR, chapter C-6.1). 30 For the purposes of the regional component, the regions of Abitibi-Témiscamingue, Bas-Saint-Laurent, Côte-Nord, Gaspésie Îles-de-la-Madeleine, Mauricie, Nord-du-Québec and Saguenay Lac-Saint-Jean are resource regions. 12

13 Participation in Société en commandite Essor et Coopération In December 2012, Capital régional et coopératif Desjardins formed Société en commandite Essor et Coopération, known as the Fonds Essor et Coopération, to enrich the supply of capital available for the creation and development of Québec cooperatives. A portion of the funds invested in the limited partnership will be used to carry out, jointly with other financial partners, 31 financing projects consisting of loans or other subordinated debt securities, for a minimum of $ and at flexible terms and conditions. The limited partnership s mission also includes carrying out various investment projects, for a minimum of $ each, to support the growth of cooperatives and federations of cooperatives that have reached a certain stage of maturity and that seek more capital for their operations to ensure their longer-term development. To recognize the participation of Capital régional et coopératif Desjardins in working towards the objectives of Société en commandite Essor et Coopération, the investments 32 made in this limited partnership as well as agreed investments for which funds are committed but not yet disbursed 33 at the end of a given fiscal year, will be considered, up to $40 million, as eligible investments for the purposes of calculating the investment requirement applicable to it. In addition, in view of the objectives of Société en commandite Essor et Coopération, an investment made by Capital régional et coopératif Desjardins in that entity, including agreed investments, will be considered an investment made in an eligible cooperative for the purposes of the regional component of the investment requirement. These amendments will apply to any fiscal year of Capital régional et coopératif Desjardins beginning after December 31, Investments in a development capital fund In 2010, Capital régional et coopératif Desjardins and the Caisse de dépôt et placement du Québec formed a $200-million development capital fund known as Capital Croissance PME to support the growth and development of small enterprises in every region of Québec. With both partners contributing equally to the fund s capital, its purpose is to support small enterprises in carrying out expansion, research and development, business acquisition and productivity optimization projects. It also intervenes to maintain Québec ownership of enterprises when their owners retire. Investments in such enterprises consist chiefly of subordinated loans of less than $5 million. Given the success of Capital Croissance PME, the partners announced, in the spring of 2013, that they intended to invest a further $115 million each to support the development and growth of small businesses in Québec. To do so, a new entity, Capital croissance PME II S.E.C., was formed on December 12, These partners include the Business Development Bank of Canada and the Réseau des SADC (Community Futures Development Corporation) et des CAE (Community Business Development Corporation). 32 Such investments must include no security bond or hypothec. 33 For greater clarity, these investments will not be included in the calculation of the 12% authorized limit applicable to non-disbursed investments. 13

14 To recognize the participation of Capital régional et coopératif Desjardins in working towards the objectives of Capital croissance PME II S.E.C., the investments 34 it makes in this limited partnership as well as agreed investments for which funds are committed but not yet disbursed 35 at the end of a given fiscal year, will be considered as eligible investments for the purposes of calculating the investment requirement applicable to it. In addition, in view of the investment policy that Capital croissance PME II S.E.C. intends to follow, a proportion equal to 35% of an investment made by Capital régional et coopératif Desjardins in this fund, including agreed investments, will be considered an investment made in an entity located in a resource region of Québec for the purposes of the regional component of the investment requirement. These amendments will apply to a fiscal year of Capital régional et coopératif Desjardins beginning after December 31, UPDATING OF THE DEFINITION OF THE TERM PRACTITIONER USED IN THE PERSONAL TAX SYSTEM The tax legislation defines, for the purposes of the deduction for support services and products for a handicapped person and the tax credit for medical expenses, the meaning of the term practitioner. 36 Subject to certain conditions, a practitioner means a person practising a profession recognized by the Professional Code 37 within the scope of which health-related care and treatments are provided to individuals, unless the person is practising the profession of psychologist, social worker, vocational guidance counsellor or psychoeducator, in which case such person is considered a practitioner solely regarding certain eligible services. The term practitioner also means a person practising the profession of homeopath, naturopath, osteopath or phytotherapist in respect of services the person provides in that capacity as well a person practising the profession of psychoanalyst, psychotherapist or sexologist essentially in respect of therapy services. Currently, concerning the professions recognized by the Professional Code regarding which only certain services are eligible, it is stipulated that a person practising the profession of vocational guidance counsellor or psychoeducator may be considered a practitioner in respect of psychotherapy services if such person is duly certified as a psychotherapist by the Ordre des conseillers et conseillères d orientation et des psychoéducateurs et psychoéducatrices du Québec See note See note This definition is given in section of the Taxation Act (CQLR, chapter I-3). 37 CQLR, chapter C Since December 8, 2010, the Ordre des conseillers et conseillères d'orientation et des psychoéducateurs et psychoéducatrices du Québec is known as the Ordre des conseillers et conseillères d'orientation du Québec (CQLR, chapter C-26, r. 77), while, on the same date, a professional order called the Ordre des psychoéducateurs et psychoéducatrices du Québec was formed by letters patent (CQLR, chapter C-26, r. 208). 14

15 However, since June 21, 2012 with the exception of a physician or psychologist, no one may practise psychotherapy, or use the title psychotherapist or a title or abbreviation that may give the impression that he is a psychotherapist, unless he is a member of a recognized professional order whose members may hold a psychotherapist's permit issued by the board of directors of the Ordre professionnel des psychologues du Québec. To reflect the fact that the practice of psychotherapy is now legally regulated in Québec, 39 the tax legislation will be updated to stipulate that a person practising the profession of vocational guidance counsellor or psychoeducator may be considered a practitioner in respect of psychotherapy services. Similarly, the tax legislation will be amended to remove, from the definition of the term practitioner, the mention of a person practising the profession of psychotherapist in respect of therapy and rehabilitation services, given that the title psychotherapist, since June 21, 2012, can only be used by physicians, psychologists and certain members of recognized professional orders. Moreover, given that, on September 25, 2013, the Ordre professionnel des sexologues du Québec was formed by letters patent, 40 the definition of the expression practitioner will be changed so that a person practising the profession of sexologist in respect of therapy services is subject to the same conditions as a person practising a profession recognized by the Professional Code in respect of which only certain services are eligible. 8. TECHNICAL CHANGES CONCERNING THE REDEMPTION OF SHARES ISSUED BY LABOUR FUNDS In addition to fostering investment in Québec enterprises to create or maintain jobs, the objective of the Fonds de solidarité FTQ and Fondaction 41 is to make workers aware of the importance of and encourage saving for retirement by inviting them to purchase shares they issue. The government supports the efforts of labour funds to achieve their broad objectives by granting a non-refundable tax credit to individuals who become their shareholders. Given that, in essence, shares acquired from labour funds must be considered as a retirement investment, they are redeemable only in the cases stipulated in the statutes of incorporation of these funds This legal framework was introduced by the Act to amend the Professional Code and other legislative provisions in the field of mental health and human relations (S.Q. 2009, chapter 28). 40 Order-in-Council concerning the constitution by letters patent of the Ordre professionnel des sexologues du Québec was published on September 25, 2013 in the Gazette officielle du Québec ((2013) 145 G.O. 2, 2729). 41 Fondaction is the Fonds de développement de la Confédération des syndicats nationaux pour la coopération et l'emploi. 42 The statutes of incorporation of labour funds are the Act to establish the Fonds de solidarité des travailleurs du Québec (F.T.Q.) (CQLR, chapter F-3.2.1) and the Act to establish Fondaction, le Fonds de développement de la Confédération des syndicats nationaux pour la coopération et l'emploi (CQLR, chapter F-3.1.2). 15

16 At the top of the list of redemption cases stipulated in the law are events inherent in early retirement or retirement. In this regard, it is stipulated that a class A share or fraction of a share is redeemable at the request of the person who acquired it 43 from the fund at least 730 days previously if, after having reached age 45, he has availed himself of his right to early retirement or retirement or if he has reached age 65. The various situations in which a person may be considered to have availed himself of his right to early retirement or retirement are also described in the statutes of incorporation of the labour funds. Two such situations involve the retirement pension of the Québec Pension Plan. Indeed, it is stipulated that a person is considered to have availed himself of his right to early retirement or retirement if, at the time of the redemption application, he is in one of the following situations: he has reached age 60 and receives, or will receive within three months following the day of the application, a retirement pension under the Act respecting the Québec Pension Plan 44 or a similar plan within the meaning of such act; he has reached age 50 and could receive, at the time of the application or within three months following such time, a retirement pension under the Act respecting the Québec Pension Plan were it not, if he has not yet reached age 60, for his age. Currently, the Act respecting the Québec Pension Plan stipulates that a contributor is eligible for a retirement pension as of age 65 or, in the following cases, as of age 60: the contributor has ceased working within the meaning of section of such act; 45 the contributor s remuneration is reduced by at least 20% by reason of progressive retirement pursuant to an agreement entered into with his employer. However, as of January 1, 2014, further to an amendment to the Act respecting the Québec Pension Plan, a contributor will be eligible unconditionally for a retirement pension as of age However, while this amendment seeks in particular to facilitate phased retirement for experienced workers, it will distort the situation in which it can be considered that a person who is at least age 50 has availed himself of his right to early retirement or retirement For the purposes of this redemption criterion, a person is deemed to have acquired any share that his or her spouse transferred into a registered retirement savings plan of which he or she is the annuitant. 44 CQLR, chapter R Briefly, section of the Act respecting the Québec Pension Plan provides that a contributor is deemed to have ceased working where his estimated pensionable salary and pensionable earnings for the twelve months following his application for a retirement pension, or at a later retirement date indicated in his application, do not exceed 25% of the maximum pensionable earnings for the year during which the retirement pension would become payable. 46 Sections 8 and 31 of An Act to amend the Act respecting the Québec Pension Plan and other legislative provisions (S.Q. 2011, chapter 36). 47 That situation is actually provides by paragraph 3 of section of the Act to establish the Fonds de solidarité des travailleurs du Québec (F.T.Q.) and paragraph 3 of section 11.1 of the Act to establish Fondaction, le Fonds de développement de la Confédération des syndicats nationaux pour la coopération et l'emploi. 16

17 Accordingly, to neutralize the effect on this situation of abandoning the conditions that a contributor who is at least age 60 and less than age 65 must satisfy to be eligible for a retirement pension from the Québec Pension Plan, the statutes of incorporation of labour funds will be amended to stipulate that a person who has reached age 50 at the time of the application for redemption will be considered to have availed himself of his right to early retirement or retirement if he has ceased working or if he entered into an agreement with his employer to reduce his regular work time by at least 20% until his retirement. To this end, a person shall be deemed to have ceased working where his estimated earned income for the 12 months following the day of the application does not exceed 25% of the maximum pensionable earnings set for the year of the application under the Act respecting the Québec Pension Plan. For greater clarity, where a redemption application is submitted by a person who is less than age 60 and is based on the reason that he has entered into an agreement with his employer to reduce his regular work time by at least 20% until retirement, the amount of the redemption may not exceed, for a year, the lesser of the reduction in pay for such year and the amount representing the balance of his share or fractions of share account at the time of his first redemption application based on such reason divided by the lesser of 11 or the number of years the agreement is to cover. These amendments will apply regarding a redemption application submitted after the day of publication of this information bulletin. They will also apply to a redemption application submitted, before the day following that of the publication of this information bulletin, by a person who is at least age 50 and who, in support of his application, invokes the fact that he could receive, were it not for his age, a retirement pension under the Act respecting the Québec Pension Plan that would become payable after December 31,