Tax Alert | Québec Budget 2024

On March 12, 2024, Minister of Finance Éric Girard presented Québec’s 2024–2025 budget. Titled “Priorities: Health and Education”, the budget provides for significant investments in healthcare and education and includes investments designed to support Quebecers and their communities, develop economic growth, and expand support for strategic business sectors. This year’s budget projects a deficit of $11 billion, with $3.7 billion of this amount resulting from the creation of a contingency reserve and deposits to the Generation Fund.

Several interesting tax changes were announced in the budget, including commodity tax measures, tax fairness, and property tax initiatives, summarized below.

Commodity Tax Measures

Tobacco Tax Measure 

This year’s budget contains a proposal to increase the specific tax on tobacco two times during the budget year, which aims to reduce smoking in the province by 10% by 2025. The first increase, effective March 13, 2024, will be as follows: the rate of tax will increase by 1 cent to 19.9 cents per cigarette; the rate of tax on a gram of loose tobacco or leaf tobacco will increase by 1 cent to 19.9 cents per gram; and the rate of tax on any tobacco product other than cigarettes, loose tobacco, leaf tobacco, or cigars will increase from 29.07 cents per gram to 30.61 cents per gram. The minimum rate applicable to a tobacco stick will also be raised by 1 cent to 19.9 cents per stick. The second increase, effective January 6, 2025, will be as follows: the rate of tax will increase by 1 cent to 20.9 cents per cigarette; the rate of tax on a gram of loose tobacco or leaf tobacco will increase by 1 cent to 20.9 cents per gram; and the rate of tax on any tobacco product other than cigarettes, loose tobacco, leaf tobacco, or cigars will increase from 30.61 cents per gram to 32.15 cents per gram. The minimum rate applicable to a tobacco stick will also be raised by 1 cent to 20.9 cents per stick. Under both rate increases, the ad valorem tax on cigars will remain unchanged at 80% of a cigar’s taxable price.

Revenu Québec requires that an inventory of tobacco be undertaken by persons selling tobacco where the specific tax has been collected in advance for stocks on hand (including stocks in transit), as of the effective date of these changes, and the increased tax amounts owing to be remitted using inventory forms available on the Revenu Québec website. For the first increase, an inventory of tobacco should have been taken as of midnight on March 12, 2024, with the inventory form and any increased tax amount owing due no later than April 12, 2024. For the second increase, an inventory of tobacco should be taken as of midnight on January 5, 2025, with the inventory form and any increased tax amount owing due no later than February 7, 2025. 

Used Motor Vehicles 

The QST applicable to supplies of used road vehicles is determined based on the greater of the sale price agreed upon by the supplier and recipient, or the average wholesale price listed in the Guide d’Évaluation Hebdo (Automobiles et Camions Légers) published by Société Trader Corporation, less $500. This publication is known as the reference volume. 

Currently, the reference volume only reports average wholesale prices for a nine-year period, creating the potential for the under-reporting of sales values for vehicles more than nine years old. To remedy this situation, the number of years covered by the reference volume will be increased to 14 years commencing on January 1, 2025.

An anti-avoidance measure is in place for used road vehicle transactions between unrelated individuals, which determines the tax payable concerning the selling or bringing into Québec of these vehicles based on the greater of the price paid or the estimated value of the vehicle. This anti-avoidance measure was not intended to apply to used vehicle transactions between related individuals. However, the measure has been applied to used road vehicle transfers where the vehicle is brought into Québec following a transfer outside Québec between related individuals. To prevent this undesirable outcome, the QST legislation will be amended, effective March 13, 2024, to ensure the anti-avoidance measure is not applied in these situations.        

Tax Fairness Measures

The province reaffirmed its commitment to ensuring tax fairness and combating tax evasion and fraud by proposing many initiatives, including:

• Strengthening tax audit and collection activities;
• Preventing the under-valuation of used vehicle selling prices;
• Increasing the fight against smuggling activities and economic crime; and
• Following up on previously announced initiatives to combat tax evasion and fraud against the government.

Property Tax Measures

Since 2022, the Québec government has implemented several measures geared towards alleviating the tax burden on Québec residents. This trend persists into the 2024–2025 fiscal year concerning school taxes, with the provision of financial assistance totaling $180 million, part of an overall budget of $1 billion allocated over seven years until 2029. These measures aim to cap the rise in school taxes to an average of 3%.

Additionally, $264 million has been allocated to the Agricultural Property Tax Credit Program, enabling Québec farmers or agricultural property owners to reduce their tax burden, including municipal and school taxes, in response to the rapid increase in the value of farmland. 

More Information

For information on new and extended government funding initiatives included in the 2024 Québec budget, please navigate to our Mentor Works website here.

Further information on Québec’s 2024–2025 budget may be found on the province’s website here.

To read key updates from all of Canada’s 2024 provincial budgets, please visit our Key Changes | 2024 Canadian Federal and Provincial Budgets page.

If you have any questions about how these proposed changes might impact your organization, please do not hesitate to call the Ryan TaxDirect^® line at 1.800.667.1600.