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As employers, road transport businesses need to be aware of the status of the truck drivers who perform work for them because an employer's tax obligations vary based on a truck driver's status. Furthermore, incorporated truck drivers need to be aware of the distinctive characteristics of personal services businesses.

A truck driver's status

A truck driver who performs work for a road transport business may be considered an employee or a self-employed person. The determination of a truck driver's status is based on a number of criteria, the most important of which is whether a relationship of subordination exists between the driver and the road transport business.

For example, where a truck driver is free to choose the means of performing a contract and no relationship of subordination exists with respect to the performance of the contract, the driver is considered a self-employed person. For more information about the tax obligations of a self-employed person, refer to the publication entitled Are You Self-Employed? Taxation Reference Tool (IN-300-V).

On the other hand, where a truck driver undertakes for a limited time to do work for remuneration, according to the instructions and under the direction or control of a road transport business, the driver is considered an employee.

Meal and lodging expenses: allowances and reimbursements

As an employer, a road transport business is responsible for withholding Québec income tax from all the remuneration (salaries, wages and any other remuneration) it pays to its employees.

Furthermore, if it pays an allowance to an employee or reimburses the employee for meal and lodging expenses paid by the employee, the business must determine whether or not the amount of the allowance or reimbursement is reasonable. If it is not, the employer must include it in the employee's income. For more information, refer to the publication entitled Taxable Benefits (IN-253-V).

If the employer does not pay an allowance or grant a reimbursement that covers all the meal and lodging expenses assumed by a truck driver, the driver can complete form TP-66-V, Employment Expenses of Transport Employees, to claim in his or her income tax return a deduction for the expenses not covered by the employer. In such a case, the employer must complete Part 2 of the form. For more information, refer to the publication entitled Employment Expenses (IN-118-V).

Personal services businesses

A road transport business may retain the services of a subcontractor. Where the subcontractor is an incorporated truck driver, the corporation formed by the driver may be considered to be carrying on a personal services business (PSB).

Such is the case where an analysis of the facts shows that, but for the existence of the corporation, the truck driver would be an employee of the road transport business receiving the services. The determination of whether a corporation formed by a truck driver should be considered to be carrying on a PSB is based on a number of criteria, the most important of which is the degree of subordination that exists between the corporation and the road transport business.

The tax obligations of a corporation formed by a truck driver as well as the tax consequences for such a corporation vary based on whether the corporation is, in fact, constituted as a corporation or whether it is considered to be carrying on a PSB. For example, a corporation carrying on a PSB is subject to restrictions regarding the expenses it can deduct and cannot claim the small business deduction. For more information, refer to interpretation bulletin IMP. 135.2-1/R1, Personal services business.

As employers, road transport businesses need to be aware of the status of the truck drivers who perform work for them because an employer's tax obligations vary based on a truck driver's status. Furthermore, incorporated truck drivers need to be aware of the distinctive characteristics of personal services businesses.

A truck driver's status

A truck driver who performs work for a road transport business may be considered an employee or a self-employed person. The determination of a truck driver's status is based on a number of criteria, the most important of which is whether a relationship of subordination exists between the driver and the road transport business.

For example, where a truck driver is free to choose the means of performing a contract and no relationship of subordination exists with respect to the performance of the contract, the driver is considered a self-employed person. For more information about the tax obligations of a self-employed person, refer to the publication entitled Are You Self-Employed? Taxation Reference Tool (IN-300-V).

On the other hand, where a truck driver undertakes for a limited time to do work for remuneration, according to the instructions and under the direction or control of a road transport business, the driver is considered an employee.

Meal and lodging expenses: allowances and reimbursements

As an employer, a road transport business is responsible for withholding Québec income tax from all the remuneration (salaries, wages and any other remuneration) it pays to its employees.

Furthermore, if it pays an allowance to an employee or reimburses the employee for meal and lodging expenses paid by the employee, the business must determine whether or not the amount of the allowance or reimbursement is reasonable. If it is not, the employer must include it in the employee's income. For more information, refer to the publication entitled Taxable Benefits (IN-253-V).

If the employer does not pay an allowance or grant a reimbursement that covers all the meal and lodging expenses assumed by a truck driver, the driver can complete form TP-66-V, Employment Expenses of Transport Employees, to claim in his or her income tax return a deduction for the expenses not covered by the employer. In such a case, the employer must complete Part 2 of the form. For more information, refer to the publication entitled Employment Expenses (IN-118-V).

Personal services businesses

A road transport business may retain the services of a subcontractor. Where the subcontractor is an incorporated truck driver, the corporation formed by the driver may be considered to be carrying on a personal services business (PSB).

Such is the case where an analysis of the facts shows that, but for the existence of the corporation, the truck driver would be an employee of the road transport business receiving the services. The determination of whether a corporation formed by a truck driver should be considered to be carrying on a PSB is based on a number of criteria, the most important of which is the degree of subordination that exists between the corporation and the road transport business.

The tax obligations of a corporation formed by a truck driver as well as the tax consequences for such a corporation vary based on whether the corporation is, in fact, constituted as a corporation or whether it is considered to be carrying on a PSB. For example, a corporation carrying on a PSB is subject to restrictions regarding the expenses it can deduct and cannot claim the small business deduction. For more information, refer to interpretation bulletin IMP. 135.2-1/R1, Personal services business.

As employers, road transport businesses need to be aware of the status of the truck drivers who perform work for them because an employer's tax obligations vary based on a truck driver's status. Furthermore, incorporated truck drivers need to be aware of the distinctive characteristics of personal services businesses.

A truck driver's status

A truck driver who performs work for a road transport business may be considered an employee or a self-employed person. The determination of a truck driver's status is based on a number of criteria, the most important of which is whether a relationship of subordination exists between the driver and the road transport business.

For example, where a truck driver is free to choose the means of performing a contract and no relationship of subordination exists with respect to the performance of the contract, the driver is considered a self-employed person. For more information about the tax obligations of a self-employed person, refer to the publication entitled Are You Self-Employed? Taxation Reference Tool (IN-300-V).

On the other hand, where a truck driver undertakes for a limited time to do work for remuneration, according to the instructions and under the direction or control of a road transport business, the driver is considered an employee.

Meal and lodging expenses: allowances and reimbursements

As an employer, a road transport business is responsible for withholding Québec income tax from all the remuneration (salaries, wages and any other remuneration) it pays to its employees.

Furthermore, if it pays an allowance to an employee or reimburses the employee for meal and lodging expenses paid by the employee, the business must determine whether or not the amount of the allowance or reimbursement is reasonable. If it is not, the employer must include it in the employee's income. For more information, refer to the publication entitled Taxable Benefits (IN-253-V).

If the employer does not pay an allowance or grant a reimbursement that covers all the meal and lodging expenses assumed by a truck driver, the driver can complete form TP-66-V, Employment Expenses of Transport Employees, to claim in his or her income tax return a deduction for the expenses not covered by the employer. In such a case, the employer must complete Part 2 of the form. For more information, refer to the publication entitled Employment Expenses (IN-118-V).

Personal services businesses

A road transport business may retain the services of a subcontractor. Where the subcontractor is an incorporated truck driver, the corporation formed by the driver may be considered to be carrying on a personal services business (PSB).

Such is the case where an analysis of the facts shows that, but for the existence of the corporation, the truck driver would be an employee of the road transport business receiving the services. The determination of whether a corporation formed by a truck driver should be considered to be carrying on a PSB is based on a number of criteria, the most important of which is the degree of subordination that exists between the corporation and the road transport business.

The tax obligations of a corporation formed by a truck driver as well as the tax consequences for such a corporation vary based on whether the corporation is, in fact, constituted as a corporation or whether it is considered to be carrying on a PSB. For example, a corporation carrying on a PSB is subject to restrictions regarding the expenses it can deduct and cannot claim the small business deduction. For more information, refer to interpretation bulletin IMP. 135.2-1/R1, Personal services business.

As employers, road transport businesses need to be aware of the status of the truck drivers who perform work for them because an employer's tax obligations vary based on a truck driver's status. Furthermore, incorporated truck drivers need to be aware of the distinctive characteristics of personal services businesses.

A truck driver's status

A truck driver who performs work for a road transport business may be considered an employee or a self-employed person. The determination of a truck driver's status is based on a number of criteria, the most important of which is whether a relationship of subordination exists between the driver and the road transport business.

For example, where a truck driver is free to choose the means of performing a contract and no relationship of subordination exists with respect to the performance of the contract, the driver is considered a self-employed person. For more information about the tax obligations of a self-employed person, refer to the publication entitled Are You Self-Employed? Taxation Reference Tool (IN-300-V).

On the other hand, where a truck driver undertakes for a limited time to do work for remuneration, according to the instructions and under the direction or control of a road transport business, the driver is considered an employee.

Meal and lodging expenses: allowances and reimbursements

As an employer, a road transport business is responsible for withholding Québec income tax from all the remuneration (salaries, wages and any other remuneration) it pays to its employees.

Furthermore, if it pays an allowance to an employee or reimburses the employee for meal and lodging expenses paid by the employee, the business must determine whether or not the amount of the allowance or reimbursement is reasonable. If it is not, the employer must include it in the employee's income. For more information, refer to the publication entitled Taxable Benefits (IN-253-V).

If the employer does not pay an allowance or grant a reimbursement that covers all the meal and lodging expenses assumed by a truck driver, the driver can complete form TP-66-V, Employment Expenses of Transport Employees, to claim in his or her income tax return a deduction for the expenses not covered by the employer. In such a case, the employer must complete Part 2 of the form. For more information, refer to the publication entitled Employment Expenses (IN-118-V).

Personal services businesses

A road transport business may retain the services of a subcontractor. Where the subcontractor is an incorporated truck driver, the corporation formed by the driver may be considered to be carrying on a personal services business (PSB).

Such is the case where an analysis of the facts shows that, but for the existence of the corporation, the truck driver would be an employee of the road transport business receiving the services. The determination of whether a corporation formed by a truck driver should be considered to be carrying on a PSB is based on a number of criteria, the most important of which is the degree of subordination that exists between the corporation and the road transport business.

The tax obligations of a corporation formed by a truck driver as well as the tax consequences for such a corporation vary based on whether the corporation is, in fact, constituted as a corporation or whether it is considered to be carrying on a PSB. For example, a corporation carrying on a PSB is subject to restrictions regarding the expenses it can deduct and cannot claim the small business deduction. For more information, refer to interpretation bulletin IMP. 135.2-1/R1, Personal services business.

Tax legislation will be amended to restore the former parameters of the tax credit. Thus, 

• the tax credit rates applicable to a qualified expenditure will be 35% and 27%, respectively; and
• the maximum tax credit in respect of an eligible work or a work that is part of an eligible group of works will be $437,500.

These amendments will apply to an eligible work and to a work that is part of an eligible group of works for which an application for an advance ruling or, where no such application was previously filed in respect of the work or group of works, for which an application for a certificate was filed with the Société de développement des entreprises culturelles (SODEC) after March 26, 2015.

For more information, see page A.93 of the document entitled Additional Information 2015-2016 (PDF – 1.96 MB), published by the Ministère des Finances.

Tax legislation will be amended to restore the former rate of 35% applicable to a qualified film dubbing expenditure.

This amendment will apply in respect of a qualified production the dubbing of which is completed after March 26, 2015.

For more information, see pages A.92 and A.93 of the document entitled Additional Information 2015-2016 (PDF – 1.96 MB), published by the Ministère des Finances.

Tax legislation will be amended to restore the former rates applicable to labour expenditures that qualify for the tax credit for multimedia titles and the tax credit for corporations specialized in the production of multimedia titles. As such, the rates will be 

• 30% in respect of a multimedia title intended to be commercialized that is not a vocational training title, with a 7.5% premium if such a title is available in a French version;
• 26.25% in respect of any other multimedia title, including a title that is a vocational training title.

Tax legislation will also be amended to provide that a qualified labour expenditure in respect of an eligible employee may not exceed $100,000, calculated on an annual basis. Consequently, the maximum tax credit for a taxation year cannot exceed $37,500, $30,000 or $26,250 annually, as the case may be, per eligible employee. 

Subject to the exception below, this limit will apply to the tax credit for multimedia titles and the tax credit for corporations specialized in the production of multimedia titles, for a taxation year, in respect of each eligible employee of a corporation or of a subcontractor with which the corporation was not dealing at arm's length at the time the subcontract was entered into.

For a taxation year of a corporation, the $100,000 limit will not apply to a qualified labour expenditure incurred in the year and paid in respect of an eligible employee of the corporation or of the subcontractor with which the corporation was not dealing at arm's length, up to the number of such eligible employees to whom the highest qualified labour expenditures, corresponding to 20% of the total number of eligible employees, will be attributable.

The amendments to the tax legislation will apply to both the tax credit for multimedia titles and the tax credit for corporations specialized in the production of multimedia titles in respect of a qualified labour expenditure incurred after March 26, 2015, or in respect of a qualified labour expenditure incurred under a contract entered into after March 26, 2015, as the case may be. 

For a corporation's taxation year that includes March 26, 2015, the $100,000 limit will be calculated, according to the usual rules, in proportion to the number of days in the taxation year that follow that date.

For more information, see pages A.77 to A.80 of the document entitled Additional Information 2015-2016 (PDF – 1.96 MB), published by the Ministère des Finances.

The Regulation respecting the determination of total payroll will be amended to provide that, as of 2015, only employers whose total payroll for a year exceeds $2 million will be required to participate in the development of workforce skills for that year.

For more information, see page A.118 of the document entitled Additional Information 2015-2016 (PDF – 1.96 MB), published by the Ministère des Finances.

Starting July 1, 2015, the GST and QST will no longer apply to products marketed exclusively for feminine hygiene purposes. The supply of sanitary napkins, tampons, sanitary belts, menstrual cups or other similar products will be zero-rated. The GST and QST will continue to apply, however, to the supply of deodorants, douches, sprays, syringes and feminine wipes.

Starting July 1, 2015, the GST and QST will no longer apply to products marketed exclusively for feminine hygiene purposes. The supply of sanitary napkins, tampons, sanitary belts, menstrual cups or other similar products will be zero-rated. The GST and QST will continue to apply, however, to the supply of deodorants, douches, sprays, syringes and feminine wipes.

Starting July 1, 2015, the GST and QST will no longer apply to products marketed exclusively for feminine hygiene purposes. The supply of sanitary napkins, tampons, sanitary belts, menstrual cups or other similar products will be zero-rated. The GST and QST will continue to apply, however, to the supply of deodorants, douches, sprays, syringes and feminine wipes.

Starting July 1, 2015, the GST and QST will no longer apply to products marketed exclusively for feminine hygiene purposes. The supply of sanitary napkins, tampons, sanitary belts, menstrual cups or other similar products will be zero-rated. The GST and QST will continue to apply, however, to the supply of deodorants, douches, sprays, syringes and feminine wipes.

The Act respecting the sectoral parameters of certain fiscal measures will be amended to provide that, in order to obtain a qualification certificate for purposes of the refundable tax credits designed to promote the creation of new financial services corporations, a corporation must show that none of its activities is the continuation, in whole or in part, of an activity previously engaged in by another person or a partnership.

Also, a corporation that has a valid qualification certificate for purposes of the above-mentioned tax credits will have to show the Minister of Finance that all the activities it carried on throughout the taxation year or the part of the taxation year (as applicable) for which an application for a certificate is made constitute activities that were not previously engaged in by another person or a partnership. Otherwise, an annual certificate will not be issued.

The amendments to the Act will be declaratory in nature.

For more information, see pages A.110 to A.112 of the document entitled Additional Information 2015-2016 (PDF – 1.96 MB), published by the Ministère des Finances.

The tax credit for Québec film productions (referred to in the Budget Speech as the refundable tax credit for Québec film and television production) will be reorganized so that a higher basic rate will apply in respect of a film, including a television program, that is not developed from a foreign concept or a foreign format.

New class of eligible films

The Act respecting the sectoral parameters of certain fiscal measures (hereinafter the "sectoral act") will be amended to introduce a new class of films. That class will include any film that is already eligible for the basic tax credit under the current rules and that is developed from a foreign concept or a foreign format.

This amendment will apply to film and television productions for which an application for an advance ruling or, where no such application has previously been filed in respect of the production, for which an application for a certificate is filed with the Société de développement des entreprises culturelles (SODEC) after March 26, 2015.

Increase in the basic rates

In addition, tax legislation will be amended to provide for an increase in the basic rates of the tax credit for Québec film productions in respect of eligible films that are not adapted from a foreign format.

Moreover, the current basic rates will continue to apply in respect of eligible films that are adapted from a foreign format. The various increases will remain the same in respect of all eligible films.

This amendment will apply to film and television productions for which an application for an advance ruling or, where no such application has previously been filed in respect of the production, for which an application for a certificate is filed with SODEC after March 26, 2015.

Other amendments

Furthermore, tax legislation and the sectoral act will be amended to restore the former rules pertaining to the criterion of "non-arm's length," thereby replacing the rules pertaining to the criterion of "associated corporations." Consequential amendments relating to the tax credit for film production services will also be made to tax legislation and the sectoral act.

With regard to corporations, the amendments to tax legislation will apply to labour expenditures or production costs, as the case may be, incurred in a taxation year that begins after March 26, 2015.

Also with regard to corporations, the amendments to the sectoral act will apply to taxation years that begin after March 26, 2015.

For more information, see pages A.84 to A.90 of the document entitled Additional Information 2015-2016 (PDF – 1.96 MB), published by the Ministère des Finances.

Tax legislation will be amended to restore the former parameters and eliminate the end date of the tax credit for the production of multimedia events or environments presented outside Québec (referred to in the Budget Speech as the tax credit for the production of multimedia environments or events staged outside Québec):

• The tax credit rate applicable to qualified labour expenditures will be 35%.
• The maximum tax credit in respect of a qualified production will be $350,000.
• The tax credit will also apply to qualified labour expenditures incurred after December 31, 2015.

The amendments relating to the tax credit rate and the maximum tax credit will apply to qualified productions for which an application for an advance ruling or, where no such application has previously been filed in respect of the production, for which an application for a certificate is filed with the Société de développement des entreprises culturelles (SODEC) after March 26, 2015.

For more information, see page A.94 of the document entitled Additional Information 2015-2016 (PDF – 1.96 MB), published by the Ministère des Finances.

Tax legislation will be amended to restore the former rate of 35% applicable to labour expenditures that qualify for the tax credit for the production of sound recordings (referred to in the Budget Speech as the refundable tax credit for sound recording production).

This amendment will apply to qualified property for which an application for an advance ruling or, where no such application has previously been filed in respect of the property, for which an application for a certificate is filed with the Société de développement des entreprises culturelles (SODEC) after March 26, 2015.

For more information, see pages A.90 and A.91 of the document entitled Additional Information 2015-2016 (PDF – 1.96 MB), published by the Ministère des Finances.

A number of changes will be made to the tax credit for the development of e-business (hereinafter the "TCEB") and a new non-refundable tax credit will be established.

Elimination of the end date of the TCEB

Tax legislation will be amended to eliminate the end date of the TCEB, which was supposed to be December 31, 2025. Consequently, a qualified corporation will still be able to claim the TCEB in respect of qualified wages it incurs after December 31, 2025, subject to the other conditions that apply.

Exclusion of wages relating to certain government contracts

Tax legislation will be amended to exclude from an employee's qualified wages, for purposes of the TCEB, any portion of the wages attributable to the employee's duties in carrying out work under an agreement entered into by the employer and a government entity.

This amendment will apply to wages that are incurred after September 30, 2015, by a qualified corporation in respect of an eligible employee and that are attributable to the employee's duties in carrying out work under an agreement with a government entity that is entered into, renewed or extended after that date.

Changes made to the concept of e-business related activities and to the criterion of "services supplied"

The Act respecting the sectoral parameters of certain fiscal measures (hereinafter the "sectoral act") will be amended to add the following particulars:

• Activities must be primarily related to e-business to be eligible for the TCEB.
• Activities carried out by a qualified corporation's employees are not to be considered related to e-business where the results of the activities are integrated into property intended for sale or are used to operate such property.
• Where the results of activities carried out by a qualified corporation's employees are integrated into property intended for sale or are used to operate such property, the gross income from such activities is not to be considered for purposes of the criterion relating to "services supplied," which must be met by the corporation to qualify for the TCEB.

With regard to qualified corporations, these amendments will apply to taxation years that begin after March 26, 2015.

Establishment of a non-refundable tax credit for the development of e-business

The overall level of tax assistance for e-business development activities will be restored to 30%, by adding to the current rate of 24% for the TCEB a new non-refundable tax credit whose rate will be 6%.

All the conditions in the sectoral act that apply to the TCEB will apply to the non-refundable tax credit. Also, for a taxation year, the certificates used for purposes of the TCEB will also be used for purposes of the new non-refundable tax credit.

Similarly, all the conditions in tax legislation that apply to the TCEB will apply to the non-refundable tax credit, subject to the rules for determining the amount of the new tax credit, which cannot be greater than $5,000 per employee, calculated on an annual basis.

Furthermore, a qualified corporation will be able to carry back over the three preceding taxation years or carry forward over the following 20 taxation years the portion of the tax credit that did not reduce its income tax payable for the taxation year to which the tax credit relates. However, no carry-over is possible in respect of either a taxation year for which the corporation is not entitled to the TCEB or a taxation year ending before March 27, 2015.

These amendments will apply to wages incurred after March 26, 2015, by a qualified corporation in respect of an eligible employee.

For more information, see pages A.80 to A.84 of the document entitled Additional Information 2015-2016 (PDF – 1.96 MB), published by the Ministère des Finances.

Various amendments will be made to the legislation establishing the following tax-advantaged funds:

• Fonds de solidarité FTQ
• Fondaction
• Capital régional et coopératif Desjardins

For more information, see pages A.62 to A.72 of the document entitled Additional Information 2015-2016 (PDF – 1.96 MB), published by the Ministère des Finances.

To encourage individuals to join or remain in the workforce, a new refundable tax credit, called the tax shield, has been created. This new tax credit will be implemented as of the 2016 taxation year. 

The purpose of the tax shield is to offset, further to an increase in work income, a part of the loss of the socio-fiscal transfers designed specifically to incentivize work, specifically the refundable tax credit attributing a work premium (the work premium or the adapted work premium) and the tax credit for childcare expenses.

The part of the tax shield respecting the work premium tax credit could reach $375 for a couple. The part of the tax shield respecting the tax credit for childcare expenses could represent an increase of a few percentage points in the rate of this tax credit. 

For more information, see pages A.12 to A.16 of the document Additional Information 2015-2016 (PDF – 1.96 MB) as well as pages B.19 to B.24 of the The Québec Economic Plan (PDF – 10,7 MB) published by the Ministère des Finances.

On June 1, 2015, the tax on lodging increases from $2 to $3 per overnight stay in the Chaudière-Appalaches tourism region. The tax on lodging applies at a rate of $3 per overnight stay if the accommodation unit supplied is billed and occupied after May 31, 2015. 

For more information, see the transitional rules that apply in the Chaudière-Appalaches tourism region.