Tax Alerts
Québec Sales Tax Rate Increasing - January 1, 2011
The government of Québec announced in the 2009-2010 Budget a 1% increase in the Québec Sales Tax (“QST”) rate effective January 1, 2011. As we quickly approach the end of 2010, it is time to review your accounting systems and procedures to ensure that your business is ready for the rate change.
Effective January 1, 2011 the current QST rate of 7.5% will increase by 1% to 8.5%. The QST is computed on top of the Goods and Services Tax (“GST”) amount thereby resulting in an increase in the effective rate from 7.875% to 8.925%.This means that the combined GST/QST rate as of January 1, 2011 will be 13.925%. In certain circumstances where a business’ cash register cannot round to three decimal places, factors of 8.92% and 13.92% (combined GST/QST) may be used.
Here are some things to consider for specific transactions that straddle January 1, 2011.
Movable property and services
QST at 8.5% will apply to all taxable supplies of goods and services where consideration becomes due after December 31, 2010 and is not paid before January 1, 2011. In this regard consideration generally becomes due the date an invoice is issued.
Immovable property
QST at a rate of 8.5% will apply to sales of taxable immovable property where the written agreement is concluded after December 31, 2010 and ownership and possession is transferred after that date. Immovable property generally includes land and buildings.
Construction or renovation contracts
QST at a rate of 8.5 % will apply to the construction, renovation, alternation or repair of an immovable property if it is made pursuant to a contract concluded after December 31, 2010.
Exchanges of goods
Where a taxable good is acquired prior to January 1, 2011 and is exchanged after December 31, 2010 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 amount QST at a rate of 8.5% will apply to the additional amount charged.
Consequential amendments
The following chart summarizes the various rates changes resulting from the QST rate increase to 8.5% on January 1, 2011.
Prescribed Factors |
|
2010 Taxation
Year Rate |
|
2011 Taxation
Year Rate |
|
|
|
|
|
Taxable Benefit –operating cost of automobile |
– |
4.7% |
– |
5.4% |
| |
|
|
|
|
Quick method for small businesses* |
|
|
|
|
- Sale of goods
|
– |
2.7% |
– |
3.0% |
- Others (services)
|
– |
5.3% |
– |
6.0% |
|
|
|
|
|
Quick method for certain public service bodies |
|
|
|
|
- Municipalities
|
– |
4.6% |
– |
5.2% |
- Other bodies
|
– |
5.9% |
– |
6.6% |
|
|
|
|
|
Simplified method for employee, partner or volunteer expense reimbursements |
|
|
|
|
- Small and medium sized businesses
|
|
7/107 |
|
8/108 |
- Large businesses
|
|
4.1% |
|
4.5% |
For more information on the rate change and how it will impact your business contact your BDO advisor.
