- enables another person who is an FSS or a CSS to make a taxable supply in Québec of an intangible product or service through the use of a digital platform; and
- controls the essential elements of the transaction between the non-resident supplier and the Québec customer such as billing, the terms and conditions of the transaction and the terms of delivery.
Published: October 10, 2018
Updated: October 10, 2018
In April of this year, we issued a Tax Alert explaining the new QST registration rules for non-resident businesses that sell into Québec, which was based on proposals announced in the Québec budget tabled on March 27, 2018.
Since then, updated legislation has been introduced that is now law. While Revenu Québec continues to make businesses aware of the new rules, we are providing you with a summary of the changes and the steps a non-resident business needs to take to be ready for the two implementation dates scheduled in 2019.
As background, the world of e-commerce has changed the buying habits of Québecers. Many are now able to purchase goods and services from non-resident businesses just as easily as they can from Québec-based businesses. Under the current QST legislation, businesses based in Québec must be registered for QST. This is different from non-residents of Québec, who are only required to register for QST when they have a permanent establishment or are carrying on business in Quebec. Many would argue that the separate and distinct rules for non-residents of Québec result in a competitive disadvantage for Québec-based suppliers and a potential revenue loss for the Québec government.
As a consequence, the Government of Québec has introduced a new QST regime that is effective on January 1, 2019 for suppliers who are non-residents of Canada and on September 1, 2019 for suppliers who are resident in Canada but not resident in Québec. The QST will generally apply to e-commerce transactions where the customers are resident in Québec and not registered for QST.
Are you subject to this new QST regime?
The new legislation will apply to three newly defined suppliers: Foreign Specified Suppliers ("FSS"), Canadian Specified Suppliers ("CSS") and the operator of a Specified Digital Platform ("SDP").
An FSS is a supplier who:
- does not carry on a business in Canada;
- does not have a permanent establishment in Canada;
- is not registered for GST/HST purposes; and
- is not registered for QST purposes under the regular QST system.
A CSS is a supplier who:
- does not carry on a business in Québec but does in other provinces;
- does not have a permanent establishment in Québec;
- is a GST/HST registrant; and
- is not registered for QST purposes under the regular QST system.
Please note that a non-resident supplier who is a GST/HST registrant is a CSS and not an FSS, since as a registrant it is considered to be carrying on business in Canada.
An SDP is a digital platform where an operator:
What type of transactions will be subject to QST under the new regime?
The timing to be set up for these new rules depends on the qualification of a non-resident business: FSS, CSS or SDP. In addition, an FSS, CSS or SDP will only be required to register under this new regime in cases where they are making supplies in Québec to a specified Québec consumer ("SQC").
| Supplier | Specified Supplies | Implementation Date |
|---|---|---|
| Foreign Specified Supplier |
| January 1, 2019 |
| Specified Digital Platform |
| January 1, 2019 |
| Canadian Specified Supplier |
| September 1, 2019 |
What is a Specified Québec Consumer ("SQC")
An SQC is a person who is NOT registered for QST and who resides in Québec. As such, a supplier will have to put procedures in place to determine if their customers in Québec are subject to the QST.
The legislation provides that the FSS, CSS or SDP will have to obtain in the ordinary course of their operations two of the following types of information:
- the customers' billing address;
- the customers' home or business address;
- the IP address of the device used by the customer at the time the agreement relating to the supply is entered into or similar data obtained at that time through another geolocation method;
- the customers' payment-related bank information or the billing address used by the bank;
- the information from a SIM card used by the customer;
- the place at which a landline telephone service is supplied to the customer; or
- any other relevant information.
Revenu Québec may allow an alternative method to determine the usual place of residence when, in the ordinary course of the supplier's operations, the supplier cannot obtain two corroborating pieces of information. In this case, it is recommended that these procedures be well documented.
How will it work?
An FSS and operators of an SDP will have to start collecting the QST starting on January 1, 2019, and a CSS will have to start collecting it on September 1, 2019.
An FSS or a CSS who deals directly with Québec consumers will have to collect the QST whereas those who deal through an SDP for the sale of intangibles and services will not. In this case, the responsibility to collect and remit the QST is with the operator of the SDP.
The reporting period for this new QST regime goes by calendar quarter and the filing deadline is the end of the month following the end of the calendar quarter. For example, in 2019, the first reporting period is January to March 2019, and as such, the QST return must be filed, and QST must be remitted by April 30, 2019. The QST return is filed online on the Revenu Québec web site and the payment can be made in Canadian dollars, US dollars or Euros.
Unlike the general QST system, registrants under this regime will not be entitled to recover any QST that they may pay on business purchases in Québec as the new system is strictly a QST collection system on sales made to consumers in Québec.
Do you need to register for this new specified QST system?
An FSS, a CSS or an operator of an SDP will be required to become a registrant under the new QST regime from the first day of a particular calendar month where they exceed the income threshold of $30,000. The threshold is based on sales made to individual consumers in Québec in the preceding 12-month period. Accordingly, where an FSS, a CSS or an SDP makes sales of these specified supplies to individual consumers in Québec that exceed $30,000, it will be required to become registered for the new QST regime. The QST registration process is available online through the Revenu Québec web site.
Time to start planning is now
If you believe you may be subject to this new QST registration regime, the time to start planning for it is now. Your accounting systems will need to be adjusted to be able to charge and collect the QST. As well, you will need to add procedures to the information that you gather to include the identification information about your Québec customers.
Learn more about our National Indirect Tax Team.
The information in this publication is current as of October 10, 2018.
This publication has been carefully prepared, but it has been written in general terms and should be seen as broad guidance only. The publication cannot be relied upon to cover specific situations and you should not act, or refrain from acting, upon the information contained therein without obtaining specific professional advice. Please contact BDO Canada LLP to discuss these matters in the context of your particular circumstances. BDO Canada LLP, its partners, employees and agents do not accept or assume any liability or duty of care for any loss arising from any action taken or not taken by anyone in reliance on the information in this publication or for any decision based on it.