As announced in the Quebec Budget tabled on March 30, 2010, the Quebec Government will increase the QST rate from 8.5% to 9.5%, effective January 1, 2012.
We have prepared the following summary of the transitional rules.
- If QST becomes payable, or is paid without having become payable in 2011, the rate of 8.5% will apply.
- If QST becomes payable on or after January 1, 2012 without having been paid before that day, the rate of 9.5% will apply.
- If QST is paid on or after January 1, 2012 without having become payable before that day, the rate of 9.5% will apply.
When an invoice is made in January for services rendered prior to January, the rate of 9.5% will apply unless payment is made prior to January 1, 2012.
Allowances (mileage, etc.)
- QST deemed to have been paid: 8.5/108.5 if paid before January 1, 2012.
- QST deemed to have been paid: 9.5/109.5 if paid after December 31, 2011.
Reimbursements (expense reports)
Registrants may use the actual QST method or the following factors:
- QST deemed to have been paid (2011):
- 8/108 of total reimbursed in 2011 for small- and medium-sized businesses.
- 4.5% for large businesses*.
- QST deemed to have been paid (2012):
- 9/109 of total reimbursed after December 31, 2011 for small- and medium-sized businesses.
- 5% for large businesses*.
Taxable Benefits (QST to be remitted)
Note: QST is not required to be remitted on the standby charge and operating benefits for a large business.
Employee and Partner Rebate (form VD-358)
Leases and Items Where No Invoice is Issued
QST becomes payable on the earlier of the day the payment is made and the day it is required to be made under the lease agreement (find and review your lease agreements). Therefore, if the lease payment is made on January 1, 2012, the 9.5% QST rate will apply.
Deposits are not treated as a payment for a supply until such time as the supplier applies the deposit against the amount payable for the supply.
- Combined GST/QST rate equals 14.975% fur 2012.
- Quebec HST rate will be 9.975% on January 1, 2013.
- Quebec harmonized rate equals 14.975% for 2013
Holdbacks (construction or otherwise mandated)
If holdback is provided for under a written agreement or is legislatively sanctioned, QST is calculated on the earlier of the day on which holdback is paid or on the day on which the holdback period expires.
Volume Rebates (price adjustments)
If the supplier chooses to credit a recipient an amount of QST on a price adjustment, the rate of tax to be used will be the rate of tax initially charged.
Commercial Imports from Foreign Countries
No effect since customs brokers charge GST only.
Returned Goods and Credit Notes (no exchange)
Suppliers will refund customers at the rate of QST originally paid.
Exchanges of Merchandise
If merchandise is purchased before January 1, 2012 where the QST rate paid was 8.5%, and then the merchandise is exchanged for other merchandise of the same value after December 31, 2011 where the QST rate is 9.5%, there will be no tax consequence either for the recipient or the supplier – the QST at the 8.5% rate will not be refunded regarding the returned merchandise, and no QST at the 9.5% rate will apply regarding the new merchandise.
However, if the exchange involves the payment of an additional amount by the recipient, the QST rate of 9.5% will apply to the additional amount only.
*A large business is defined as a business where the value of taxable supplies, other than supplies of financial services, made in Canada by the registrant, and by any person with whom it is associated, exceeds $10 million during its last taxation year.
Taxable supply: Includes a zero-rated supply.
Made in Canada: This includes the value of all exports along with supplies deemed to be made outside of Canada.
The matters highlighted in this tax memo are presented in broad general terms and, of course, cannot be applied without consideration of all circumstances. The firm will be pleased to discuss with readers the possible effects in specific situations.