Principal Changes for 2017
The total capital cost (100%) of property that was acquired on or after January 1, 2017, and that would have been considered incorporeal capital property if it had been acquired prior to this date, is included in new class 14.1 and is depreciable at the annual rate of 5%. The half-year rule (50% reduction of the amount of the net acquisitions) applies to the property in this class.
The partnership's eligible incorporeal capital amount (EICA) on January 1, 2017, is transferred to class 14.1 and becomes the undepreciated capital cost (UCC) of the property in this class on that date.
For a fiscal period ending before January 1, 2027, additional capital cost allowance may be granted with respect to the UCC of the property in class 14.1 on January 1, 2017.
If the balance of the EICA on January 1, 2017, is negative, the partnership is deemed to have disposed of capital property immediately before January 1, 2017, and to have realized a capital gain. However, the partnership can elect to not have the deemed disposition rule applied and to have an amount included in its business income rather than reported as a capital gain. Furthermore, if the partnership has acquired property in new class 14.1 during the fiscal period but after December 31, 2016, it can elect to reduce the capital cost of that property as well as the deemed capital gain (or the amount to be included in its business income, if it has elected to not have the deemed disposition rule applied) and thus defer the reporting of income. These elections made under federal legislation are automatically deemed to be made for the purposes of Québec legislation.
Schedule C has been modified and work charts have been added to account for the aforementioned changes. Moreover, the line on which the deduction for incorporeal capital property was entered (line 63 of Schedule F) has been removed.
For more information, see the instructions for Schedule C in section 4.3 of the Guide to Filing the Partnership Information Return (TP-600.G-V).
Since the 2017 taxation year, members of a partnership that holds one or more taxi owner's permits may, under certain conditions, claim the tax credit for taxi owners.
For more information, see the instructions for Schedule E in section 4.5 of the Guide to Filing the Partnership Information Return (TP-600.G-V).
SIFT partnerships that have an establishment in Québec must pay income tax on their taxable non-portfolio earnings.
The rate used to calculate the income tax will decrease gradually by 0.4%. The current applicable rate of 11.9% will therefore decrease to:
- 11.8% for the 2017 calendar year;
- 11.7% for the 2018 calendar year;
- 11.6% for the 2019 calendar year;
- 11.5% for the 2020 and subsequent calendar years.
A partnership that has acquired property constituting computer equipment or used for manufacturing or processing activities may, under certain conditions, claim a temporary additional allowance for the fiscal period that includes the date on which the property is first put to use and for the subsequent fiscal period. The temporary allowance corresponds to 35% of the capital cost allowance related to the property calculated in the partnership's business income. To give entitlement to the additional allowance, the property must have been acquired after March 28, 2017, but before April 1, 2019.
The partnership may have to pay a special tax if, during a period of 730 consecutive days following the day the property is first put to use, the property is not used primarily in the course of carrying on a business or is not used mainly in Québec.
For more information, see the instructions for Schedule F in section 4.6 of the Guide to Filing the Partnership Information Return (TP-600.G-V).
Qualified equipment related to geothermal energy
In the past, equipment that was primarily used to generate electricity using only geothermal energy was qualified equipment that was included in classes 43.1 and 43.2.
Now, the qualified equipment that is included in these classes also includes:
- related equipment for storing electricity; and
- equipment that is used primarily to generate heat or a combination of heat and electricity using only geothermal energy.
The cost of equipment that is included in these classes no longer includes the cost of drilling a geothermal production well. The latter is now included in Canadian renewable and conservation expenses.
Equipment used to heat a swimming pool is not qualified equipment.
These changes apply to qualified equipment acquired for use after March 21, 2017.
District energy equipment
Certain equipment that is part of a district energy system that uses a qualified energy source is included in class 43.1 or 43.2. Geothermal heat for use in a district energy system is now considered a qualified thermal energy source.
This measure applies to district energy equipment acquired for use after March 21, 2017.
Canadian renewable and conservation expenses
Where at least 50% of the capital cost of depreciable property used in a project relates to property in class 43.1 or 43.2, certain intangible project start-up expenses (for example, engineering and design work and feasibility studies) are considered Canadian renewable and conservation expenses. These expenses may be deducted in full in the year incurred, carried forward indefinitely for use in future years or transferred to investors using flow-through shares.
Expenses incurred after March 21, 2017, for the purpose of determining the extent and quality of a geothermal resource and the cost of all geothermal drilling (including geothermal production wells) for both electricity and heating projects, are considered Canadian renewable and conservation expenses.
Mineral, oil and gas exploration expenses incurred in the Near North
The term “Near North” now designates the territory located in Québec north of 49° north latitude and north of the St. Lawrence River and the Gulf of St. Lawrence, and south of the territory of the Far North. This change applies in respect of mining, oil and gas exploration expenses incurred after March 28, 2017.
An ecological gift made to an eligible donee may entitle the donor to a tax benefit (either a deduction or a tax credit, depending on whether the donor is an individual or a corporation). An eligible donee may be:
- a municipality;
- a municipal or public body performing a function of government;
- a registered charity whose primary mission, in the opinion of the Ministère du Développement durable, de l'Environnement et de la Lutte contre les changements climatiques (MDDELCC), is the conservation of Canada's ecological heritage and is thus eligible to receive an ecological gift.
Note that municipalities and municipal or public bodies performing a function of government that receive ecological gifts after March 21, 2017, must be approved by the MDDELCC to be considered eligible donees.
Furthermore, as of March 22, 2017, a registered charity that is a private foundation is no longer considered an eligible donee for the purpose of the tax benefit related to eligible gifts. A gift made after March 21, 2017, to a private foundation therefore no longer entitles the donor to a tax benefit.
New qualified property
A measure has been implemented to increase the number of ecological gifts made in Québec.
As of March 22, 2017, personal servitudes encumbering land located in Québec that have a term of not less than 100 years may be considered ecological gifts. A donor that is an individual or a corporation may therefore claim a tax benefit for making gifts of such servitudes on or after March 22, 2017.
Any corporation that holds a significant interest in a partnership at the end of the partnership's fiscal period must comply with certain rules that seek to limit the deferral of income tax on the corporation's partnership income where the corporation's taxation year ends after the end of the partnership's fiscal period.
With the introduction of these rules, partnerships in a tiered partnership structure that were not required to have their fiscal period end on December 31 could elect to have a common fiscal period ending on a date other than December 31 if they made a multi-tier alignment election (referred to hereinafter as the “election”) before February 1, 2012. Partnerships that did not make the election have a common fiscal period ending on December 31.
The election made by partnerships ceases to apply if a partnership that is not part of the tiered structure (referred to hereinafter as the “new partnership”) either:
- becomes a member of a partnership that is part of the tiered structure; or
- has a partnership that is part of the tiered structure as a new member.
However, a change has been made to this rule. According to this change, even if one of the events described in the previous paragraph occurs, the election will continue to apply if both of the following conditions are met:
- the fiscal period of the new partnership ends on the same day as the fiscal period of the partnerships that made the election;
- each member (that is not itself a partnership) of each partnership that made the election was a member of the partnership at the end of the last fiscal period ending in the calendar year preceding the year of the event and until the time at which the event occurs.
This change applies to fiscal periods ending after March 2014.
Partnership stop-loss rules
Certain amounts reduce the adjusted cost base (ACB) of a taxpayer's interest in a partnership. This includes the taxpayer's share of the partnership's losses from all sources that are not included in the taxpayer's limited partnership losses.
In this context, certain rules intended to minimize the amount of the losses, including the rule set out in section 741.2 of the Taxation Act, under which certain dividends received by the taxpayer must be subtracted from the taxpayer's share of any loss resulting from the disposition of a share held by the partnership, must not be taken into account to determine the partnership's losses.
Similar rules set out in sections 743 and 744.6 of the Taxation Act had to be taken into account to determine partnership losses for the purposes of calculating the ACB. However, as of September 16, 2016, these rules no longer need to be taken into account.
Reduction of the cost of an interest in a partnership
As of September 16, 2016, new tax rules apply to the calculation of the cost to a taxpayer of an interest in a partnership that is property other than capital property of the taxpayer. The purpose of these rules is to avoid losses created, under certain circumstances, when the cost of the interest in a partnership fluctuates depending on the shares held or disposed of by the partnership.
In general, one of these rules ensures that the cost of the interest is reduced by an amount equal to the taxpayer's share of any loss of the partnership from the disposition by the partnership (or another partnership of which the partnership is directly or indirectly a member) of a share of the capital stock of a corporation.
Other rules apply if a member of a partnership disposes of its interest in the partnership and the cost of this interest was reduced following the application of the rule mentioned in the previous paragraph.
These new rules, as well as those mentioned in the “Partnership stop-loss rules” section, were introduced to stop taxpayers from circumventing the stop-loss rules by holding shares through a partnership, instead of holding them directly.