Dividend tax changes outrage Que.

By Conseiller.ca Staff | September 27, 2013 | Last updated on September 15, 2023
2 min read

This article originally appeared on Conseiller.ca.

A Quebec group, Le Centre québécois de formation en fiscalité (CQFF), has claimed it’s found “serious flaws” in how ordinary dividends are taxed in the province.

Thanks to amendments in the last federal budget tabled March 21, 2013, the CQFF says, “Over the next five years, $875 million to $1 billion may be levied unfairly by the federal government and will not be injected into the Quebec economy.”

According to CQFF’s CEO Yves Chartrand, more than 650,000 Quebec taxpayers will be taxed unfairly, and “none of this applies in other provinces.”

Read: Quebec group accuses CRA of “gross incompetence”

The Ministery of Finance has said the purpose of these 2013 Budget changes was to correct undertaxation, explains Chartrand. The CQFF conducted a study to check if Quebecers were undertaxed. It also checked how residents of Ontario, Alberta and British Columbia were taxed.

The CQFF’s calculations show Quebecers were not, in fact, undertaxed, while other provinces had been.

The 2013 tax rates showed it was less tax efficient by 0.2% to earn active business income through a corporation in Quebec.

Benefit and cost of earning active business income through a corporation (2013)*:

B.C. Alta Sask. MB Ont. Qc N. B. N. S. P.E.I. NFLD
Tax Savings/(Cost) 1.0% 1.2% 2.0% 0.6% 3.4% (0.2%) 1.7% 4.5% (0.9%) 1.8%

*We assume active business income is earned within the corporation and flowed to shareholders as a non-eligible dividend, at maximum personal marginal tax rates. Based on tax rates as of January 1st, 2013. Courtesy François Bernier, Mackenzie Investments

Read: How new dividend tax rules affect biz owners

The group says, “If nothing is done [to correct this error], hundreds of thousands of Quebecers will be affected by this problem [and they will be overtaxed] an estimated $150 million to $200 million annually. In addition, this amount will increase over the years.”

Chartrand adds, “In the case of eligible dividends (paid by listed companies), the federal [harmonization] problem has existed since 2006 for Quebec residents. In the case of SMEs, which often pay more ordinary than eligible dividends, the problem starts in 2014.”

Read: CRA apologizes to taxpayers affected by CCTB error

These changes will create too high a tax burden for Quebecers, says CQFF. The actual value of the dividend tax credit would be only $ 8.79 compared to a federal tax of $11 for the company for every $100 earned by the company.

To view the full document CQFF, go here (in French only).

Read: Watch your clients get taxed to the bone!

Quebec advisors with business-owner clients should communicate this important information.

Conseiller.ca staff

Conseiller.ca Staff

The staff of Conseiller.ca have been covering news for Quebec financial advisors since 2000.