What your SME needs to retain from the federal budget

What your SME needs to retain from the federal budget


By Liette Flanagan, President and CEO of PBPA

The February 27th federal budget will not go down in history for Quebec SMEs. Flexibilities for passive investment income, money to stimulate innovation and its commercialization, permanent program for Employment Insurance ... Nothing major, if not concrete measures to help entrepreneurship for women.

However, in a context of renegotiation of NAFTA and while US corporate taxes have just been reduced, Minister Morneau could certainly have done more to help our SMEs be more competitive.  

Passive investment income: progressive taxation

Concerning businesses, Ottawa initially considered raising the tax for all passive investment income (equity investments, rental income, etc.) exceeding $ 50,000. Instead, the budget provides for progressive taxation.

For example, suppose your organization, including its associated corporations, generates a total annual income of $ 500,000 or less. If the passive investment income portion is:

  • less than $ 50,000, your business will qualify for the small business tax rate;
  • between $ 50,000 and $ 150,000, income eligible for this SME tax rate will be gradually reduced as passive income increases between these two margins.

The problem with this kind of rule is that of course you have to draw lines somewhere, like $ 50,000 or $ 150,000. As a result, according to their passive investment income, companies will benefit from the measure, while others will no longer have access to the advantageous tax rate for SMEs. In addition, the rule will take into account past investments.

Industrial Research Assistance Program (IRAP)

This program supports companies that develop technologies and want to market them around the world. For IRAP to support more projects, the federal government plans to invest $ 700 million over 5 years starting in 2018-2019, then $ 150 million per year thereafter.

To find out about the services offered by this program and to find out if your company is eligible for funding, click here.

Support to women's entrepreneurship

Finally, if you are an entrepreneur, check to see if your business is eligible for funding from any of the following organizations, in which the federal budget has provided investments to support women-led businesses.

A now permanent program: Work during a benefit period

That's part of the good news. This program allows employees, such as workers returning to work gradually, to work while receiving Employment Insurance benefits. To learn more, click here.

And finally, as usual ... words, words, words!

As with any federal budget, the most recent one includes intentions, such as the desire to reduce regulation and paperwork for businesses, or to improve the customer service of certain federal agencies, including Revenue. But, of course, we will only believe when these beautiful projects will result in concrete and effective measures ...

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