Tax Alerts - Québec Sales Tax Rate Increasing –
January 1, 2012
The government of Québec announced in the 2009-2010 Budget a 1% increase in the Québec Sales Tax (“QST”) rate of 7.5% to 8.5%, effective January 1, 2011. The government had then indicated that some more measures would be necessary to bring back the deficit to zero.
In its March 30, 2010 Budget speech, the government announced that, effective
January 1, 2012 the current QST rate of 8.5% will increase by an additional 1% to 9.5%. As we quickly approach the end of 2011, it is time to review your accounting systems and procedures to ensure that your business is ready for the next rate change.
The QST is computed on top of the Goods and Services Tax (“GST”) amount thereby resulting in an increase in the effective rate from 8.925% to 9.975%. The combined GST/QST rate as of January 1, 2012 will be 14.975%.
Here are some things to consider for specific transactions that straddle January 1, 2012.
Movable properties and services
QST at a rate of 9.5% will apply to all taxable supplies of goods and services where consideration becomes due after December 31, 2011 and is not paid before
January 1, 2012. In this regard, consideration generally becomes due on the date an invoice is issued.
Road vehicles
The QST rate of 9.5% will apply to the supply of a road vehicle for which a portion of the consideration will be payable after December 31, 2011 and will not be paid before
January 1, 2012. The QST rate of 8.5% will apply to the portion of the consideration that will be payable or paid before January 1, 2012.
If a road vehicle is purchased in 2011, but possession is transferred in 2012, the QST
rate of 8.5% will apply to the portion of the consideration payable or paid before
January 1, 2012, even if it is registered after December 31, 2011.
Immovable properties
QST at a rate of 9.5% will apply to sales of taxable property where the written agreement is concluded after December 31, 2011 and both ownership and possession are transferred after December 31, 2011. Immovable property generally includes land and buildings.
Construction or renovation contracts
QST at a rate of 9.5 % will apply to the construction, renovation, alteration or repair
of an immovable if it is made pursuant to a written agreement concluded after
December 31, 2011.
Exchanges of goods
Where a taxable good is acquired prior to January 1, 2012 and the good is exchanged after December 31, 2011 for another good with the same value, no sales tax consequences will result. However, if the taxable good is exchanged for another taxable good at a higher price, QST at a rate of 9.5% will apply to the additional amount charged.
Consequential amendments
The following chart will summarize the various rates changes resulting from the QST rate increase to 9.5% on January 1, 2012.
Prescribed Factors |
|
2011 Taxation
Year Rate |
|
2012 Taxation
Year Rate |
Taxable Benefit –operating cost of automobile |
|
5.4% |
|
6.0% |
|
|
|
8.5/108.5
|
|
9.5/109.5
|
Quick method for small businesses1 |
|
|
|
|
|
|
|
3.0% |
|
3.4% |
|
|
|
6.0% |
|
6.6% |
Quick method for certain public service bodies |
|
|
|
|
|
|
|
5.2% |
|
5.7% |
|
|
|
6.6% |
|
7.3% |
Simplified method for employee, partner or volunteer expense reimbursements |
|
|
|
|
- Small and medium sized businesses
|
|
8/108 |
|
9/109 |
|
|
|
4.5% |
|
5.0% |
1Certain small businesses whose revenues from taxable supplies do not exceed $219,000 ($217,000 – 2011) can elect to use a quick method to determine the net tax payable for a reporting period.
For more information on the rate change and how it will impact your business, contact your BDO advisor.
