March 24, 2020
Canada: Quebec announces economic response measures
From 16 to 19 March 2020, each day Quebec has unveiled various economic response measures, totalling CA$11 billion1 so far, to provide assistance to individuals and businesses affected by the current situation. The response includes $8.3 billion in tax flexibility measures and $2.5 billion in financing support to Quebec businesses. These measures include:
Quebec’s response has taken into consideration, and for certain elements has been harmonized with, the Federal Government’s 18 March 2020 Economic Response Plan – see EY Global Tax Alert, Canada announces Economic Response Plan, dated 23 March 2020 for more details on the federal Economic Response Plan.
On 11 March 2020, the Quebec Premier announced the creation of an eight-minister economic vigilance team to prepare the Government to face the economic challenges that may arise from the current situation and determine the best actions to take to support the Quebec economy.
On 16 March 2020, the first economic action, the Temporary Aid for Workers Program, was jointly announced by the Premier and the Minister of Labour, Employment, and Social Solidarity (Travail, Emploi et Solidarité sociale). With an estimated cost of $150 million, this program, which has been designed to promote isolation, provides assistance for workers in isolation who are not eligible for any income replacement program.
The initial tax administrative flexibility measures were then announced on 17 March 2020. These measures were included in Finance Information Bulletin 2020-3, Postponement of the Personal Income Tax Return Filing-Due Date for the 2019 Tax Return and Other Postponement Measures, and an accompanying news release, Flexibility Measures for Individuals and Businesses. Following the release of the Federal Government’s own tax administrative flexibility measures on 18 March 2020, and to better harmonize the two sets of measures, the information bulletin was updated the same day by Information Bulletin 2020-4, which was released with an accompanying news release, Individuals and businesses can pay their taxes on September 1st, 2020. Both the information bulletins and the news release outline tax-related flexibility measures that the Government of Quebec is taking to enable businesses and individuals to benefit from their liquid assets in the coming weeks.
Additional measures were also announced by Revenu Québec on 18 March 2020, Revenu Québec Adapts its Approach to Support Individuals and Businesses, in relation to tax audits and collections.
Finally, on 19 March 2020, in a joint press conference, the Quebec Premier, the Finance Minister, and the Minister of the Economy and Innovation (Économie et Innovation) announced $2.5 billion in financing assistance to help businesses overcome liquidity problems. As summarized in an accompanying news release, the Minister of Finance also took the opportunity to announce the harmonization with the 18 March 2020 federal assistance measure for retirees in relation with RRIFs (a measure with an estimated cost of $100 million) and to reconfirm the harmonization of tax administrative flexibility measures.
The eight-minister economic vigilance team, presided over by the Finance Minister, continues to monitor the situation, and additional actions may be announced at a later date when warranted.
A summary of the key measures to support workers and businesses, as well as tax measures, is outlined below.
Financing support measures for businesses
Concerted temporary action program for businesses/Programme d’action concertée temporaire pour les entreprises (PACTE)
To shore up the working capital of businesses whose liquidity is affected by the current situation, Investissement Québec will provide loan guarantees through a new emergency concerted temporary action program for businesses (PACTE). Financing will also be available in the form of loans from Investissement Québec under the PACTE. The Minister of the Economy and Innovation indicated that this financing will be offered under advantageous conditions.
The minimum funding amount under the PACTE will be $50,000, and refinancing will be prohibited.
Aside from businesses operating in certain excluded industries (see below), the PACTE will be available to all businesses operating in Quebec, including cooperatives and other social economy enterprises with commercial activities. Eligible businesses will have to demonstrate that their financial structure offers realistic prospects for profitability, that their cash flow issues are temporary, and that the liquidity shortage stems from:
Applications will be reviewed on a case-by-case basis, according to the business’s circumstances and Investissement Québec’s management practices.
Businesses operating in the following industries will not be eligible under the PACTE:
To offer this program, Investissement Québec is aiming to work in close cooperation with financial institutions and federal authorities in order to share risks.
Flexibility measures respecting existing loans and loan guarantees
The Minister of the Economy and Innovation will suspend, for a period of three months, the reimbursement (principal and interest) of loans already granted through the Local Investment Fund/Fonds local d’investissement. The interest that will be accumulated over that period will be added to the loans’ balance.
It was also announced that Investissement Québec will loosen the terms for existing borrowers.
Tax flexibility measures
The following is a summary of measures pertaining to the postponement of tax filing and payment requirements aimed at providing individuals and businesses with more liquid assets flexibility. Any deferred payment will not be subject to interest.
Corporate income tax measures
Personal income tax measures
Income tax measures for trusts (other than specified investment flow-through (SIFT) trusts)
Income tax measures for SIFT trusts or SIFT partnerships
Additional administrative measures and information
Tax measures to support retirees
In line with the federal measure, the required minimum withdrawals from RRIFs will be reduced by 25% for 2020. This measure will reduce the amount of RRIF assets that an individual may need to liquidate to meet the minimum withdrawal requirements.
Temporary Aid for Workers Program/Programme d’aide temporaire aux travailleurs (PATT)
Quebec also announced assistance through a new Temporary Aid for Workers Program. This program offers financial assistance for workers who are in isolation, cannot earn their work income and are not eligible for other financial assistance. Workers can apply to PATT beginning 19 March 2020 by submitting the relevant application form.
To be eligible, the worker must be at least 18 years old, reside in Quebec, and be in isolation for one of the following reasons:
The self-isolation order must have been given by the Federal Government, the Quebec Government, or another responsible authority.
In addition to the above criteria, the worker must also meet the following conditions:
The amount granted to an eligible worker under PATT is a non-taxable $573 per week for a period of 14 days of isolation. In some health-related cases, the coverage period for an eligible worker could be extended to a maximum of 28 days.
A worker is no longer entitled to the PATT financial assistance when the financial assistance has been paid in full or where they have not respected their obligations.
For additional information with respect to this Alert, please contact the following:
Ernst & Young LLP (Canada), Montréal
Ernst & Young LLP (Canada), Québec