The recent Quebec Budget introduced significant revisions to the QST legislation to apply to the taxation of the digital economy and e-commerce in Quebec.
More specifically, effective January 1, 2019, non-residents of Canada will be required to register for QST and charge QST to specified Quebec consumers on sales of digital services and incorporeal moveable property. This change will likely require non-resident media companies such as Netflix and iTunes to register for QST and charge QST to many Quebec consumers on subscriptions and other fees.
Further, effective September 1, 2019, residents of Canada but non-residents of Quebec will be required to register for QST and charge QST to specified Quebec consumers on sales of corporeal moveable property (such as goods), as well as sales of digital services and incorporeal moveable property. As a result, a resident of Canada that is not resident in Quebec that sells goods to Quebec specified consumers through a website (or other means) may now be required to register for QST. Pursuant to the current rules however, QST registration (and thus the collection of QST) may not have been required for such sales of goods by a non-resident of Quebec on the basis that the non-resident did not have a significant presence in Quebec.
The term “Quebec specified consumers” refers to a person who is not registered for QST purposes and whose usual place of residence is in Quebec. Accordingly, suppliers that are only making sales to persons that are registered for QST purposes will not be required to register pursuant to the new rules.
Registration under the new rules will be pursuant to a different chapter of the QST legislation, with the result that any person registered pursuant to the new rules will not be entitled to claim any input tax refunds in respect to any QST paid in the course of their commercial activities. Accordingly, any persons required to register pursuant to the new rules may wish to consider voluntarily registering pursuant to the ‘old rules’ to thus allow ITRs to be claimed. However, registration and filing QST returns pursuant to the new rules will be streamlined and simplified.
In addition to the above changes, digital platforms will also be required to be registered for QST where the platform provide services to a non-resident supplier that enables the platform to make supplies of incorporeal movable property or services to specified Quebec consumers where the platform controls the key elements of transactions (such as billing, terms and conditions, and delivery). This will result in certain conduits or other parties that are not necessarily the vendor of the property or services being required to charge and collect QST on certain transactions.
Registration pursuant to the new rules will not be required where the total taxable supplies made to consumers are less than $30,000 in the 12 previous months. Further, all QST returns filed by registrants pursuant to the new rules are required to be filed quarterly. Lastly, the new rules provide that QST may be paid in certain currencies, including USD and Euro, provided the registrant is paid in that currency.
Vern Vipul, LL.B., M.Tax
Senior Associate, Commodity Tax