2019 marked the beginning of Quebec sales tax (“QST”) registration and collection requirements for companies without a physical or significant presence in Quebec and operators of certain digital platforms that supply services or digitals goods/services to consumers in the province.
The new rules took effect on Jan. 1, 2019 for "foreign specified suppliers", or persons who do not carry on a business in Canada, do not have a permanent establishment in Canada, and are not registered for GST/HST. If your company is a non-resident of Canada, and has not yet considered these changes, we also want to highlight that Quebec Revenue Agency (“QRA”) has been contacting several notable companies that are known to provide these types of taxable supplies to residents of Quebec. The QRA currently maintains a list on its website of non-resident companies who have registered under the new system.
On Sept. 1, 2019, similar rules will be extended to persons who are registered for GST/HST, do not conduct business in, or have a permanent establishment in Quebec and who are not registered under the regular QST regime. These persons are called “Canadian specified suppliers” where they make taxable supplies of intangible moveable property (i.e. digital goods) as well as taxable tangible goods or services to consumers in Quebec. As a result, such GST/HST registrants who are non-residents of Quebec (including suppliers of certain digital platforms) are required to register for QST purposes under the new specified system. The rules will apply if their sales to individuals who are resident in Quebec exceed $30,000 CAD a year, and where these individual purchasers are not registered for QST purposes under the regular rules (i.e. the person has a QST registration number that ends in TQ000X). The registration for QST for any GST/HST registrants that are non-residents of Quebec may be done under a new, simplified registration system, rather than the regular QST registration system.
Once registered under the simplified registration system, non-residents (including non-residents of Canada) of Quebec are required to charge and collect QST at the rate of 9.975 per cent on the above-noted taxable supplies, made to all persons resident in Quebec that are not registered for QST purposes. Operators of certain digital platforms are also affected by the new rules, and may be required to register for QST purposes and collect tax on the sales made through their platforms. Persons who are registered for QST under the simplified registration system are generally not entitled to claim input tax refunds to recover QST paid on property and services acquired by the person.
If a person who is registered for QST under the simplified registration system, makes a taxable supply to a person who is registered for QST, the supplier is not required to charge QST if certain conditions are met, including maintaining satisfactory evidence of such registration in the supplier’s records.
Note that while the new QST rules for “foreign specified suppliers” generally only apply to taxable supplies of services or intangible personal property (e.g., digital goods/services), the rules for “Canadian specified suppliers” apply to taxable supplies of services, intangible personal property, as well as tangible personal property.
- If required to register under these new rules, you may wish to consider registering under the general rules instead. This way, you would be entitled to ITRs (i.e. reimbursement of QST paid on inputs), and you would not be subject to the requirement to obtain and maintain the QST registration numbers of your customers. Otherwise, all persons required to register under the new regime, may encounter challenges in obtaining and tracking whether customers are currently registered for QST.
- Notwithstanding the above, non-residents of Canada without a Canadian bank account can benefit from registering under the new rules given that they can file simplified quarterly returns online, and remit the QST collected by international wire transfer in a foreign currency (currently USD or Euros only).
- Businesses registered under the general rules are required to remit the tax collected in CAD, and wire transfer is permitted only through a participating financial institution, most of which are Canadian banks.
- The QRA has already contacted many companies in 2019 to let them know that they might be subject to the new rules, and has been a success for the Agency. The 2019 grace period regarding penalties for not registering under the new rules is coming to an end and we expect that QRA will continue to contact other companies that may be required to register in the next few years. With QRA’s tax informant program, this could start with the names given by the public or even competitors.
- The QRA has published a list of the businesses that are now registered under the new rules and can be accessed here.