On March 27, 2018, the Quebec budget introduced a specified registration system for Quebec Sales Tax (QST) purposes for non-resident suppliers that make taxable supplies through e-commerce channels to recipients located in Quebec. 

Under the current rules, taxable supplies of services, corporeal movable property1 and incorporeal moveable property2 – made to recipients in Quebec for consumption in Quebec – are subject to the QST for suppliers located inside or outside Quebec, whether located inside or outside Canada. Non-resident suppliers that do not have a physical or significant presence in Quebec are not considered to be carrying on business in Quebec and are not required to become registrants for QST purposes. Thus, they are not required to collect the QST on such taxable supplies. 

In transactions of this type, the Act Respecting the Quebec Sales Tax (ARQST) requires recipients of taxable supplies in Quebec to self-assess and remit the applicable QST to Revenue Quebec. However, few recipients in Quebec comply with this requirement, causing significant tax "leakage" from the perspective of the Quebec government. Under the proposed new rules, registration will be required for non-resident suppliers in Quebec with no physical or significant presence in the province. A specified registration system will require mandatory registration for the following suppliers:

  • Suppliers that have no physical or significant presence in Quebec and are non-residents of Canada. They will be required to collect and remit the QST on taxable supplies of incorporeal movable property and services they supply in Quebec.
  • Suppliers that have no physical or significant presence in Quebec, but are located within Canada. They will be required to collect and remit the QST on taxable supplies of services, corporeal movable property and incorporeal movable property they supply in Quebec.

Fine points

The introduction of the specified registration system for non-resident suppliers in Quebec also includes digital property and service distribution platforms relating to taxable supplies of incorporeal movable property or services. To the extent that the digital platform is a key element of the transaction, it will need to be registered under the specified registration system.

The specified registration system applies to non-residents of Quebec. They will be required to collect and remit the QST on their taxable supplies made to specified Quebec consumers. A specified Quebec consumer is a person who is not registered for QST purposes and whose usual place of residence is located in Quebec.

The specified registration system requires a non-resident to register, provided the value of the consideration for all taxable supplies made by the supplier in Quebec to a recipient in Quebec exceeds $30,000. Non-residents that will be registered under the specified registration system will not be considered registered under the ARQST and, as such, will not be entitled to input tax refunds on their QST-paid expenditures. Similarly, a specified Quebec consumer may not claim an input tax refund for the QST charged by the non-resident supplier. Non-residents of Quebec will also have the option to register under the general QST registration system, provided they meet the criteria for voluntary registration. 

The specified registration system rules come into effect on January 1, 2019 (for non-residents of Canada) and September 1, 2019 (for residents of Canada that are outside Quebec).

What does it all mean?

Non-residents of Quebec that make supplies for specified Quebec consumers using e-commerce platforms should contemplate the impact of these new rules. The requirement to register will trigger compliance requirements, as well as recognition of internal process adaptations to ensure that the QST is collected and remitted accordingly. 

On January 1, 2015, the rules regarding place of supply for e-commerce changed as they pertain to the value added tax (VAT) for the European Union (EU). Even non-EU businesses supplying e-commerce to EU consumers may be subject to the VAT. The implementation of these new rules by the Quebec government makes sense since the VAT for the EU also requires EU and non-EU vendors of certain supplies made through e-commerce platforms to register for the VAT. 

Footnotes

1. Also known as tangible personal property.

2. Also known as intangible personal property.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.