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July 12, 2018 Canada: Québec's Bill on QST and e-commerce receives Royal Assent Executive summary On 12 June 2018, Québec Bill 150 of 17 May 2018 (Bill 150) received Royal Assent. In particular, it contains the legislative changes following the measures announced in the Québec budget tabled on 27 March 2018 (the Budget) relating to the application of the Québec Sales Tax (the QST) to supplies made by suppliers with no significant presence in Québec through the implementation of a new "specified registration system." See EY Global Tax Alert, Canada: Québec announces QST and e-commerce measures, dated 5 April 2018.1 The new legislative provisions amend the Act respecting the Québec Sales Tax Act (the AQST) to incorporate all the e-commerce measures set out in the budget. New sections 477.2 to 477.19 of the AQST are introduced. They provide for the collection and remittance of QST for nonresident suppliers registered in Québec under the new specified registration system. Section 1 of the AQST is also amended to include the definitions set out in new section 477.2 of the Act for the expressions "specified Québec consumer," "specified supplier," "Canadian specified supplier" and "specified digital platform." Section 23 of the AQST relating to supplies made in Québec by a nonresident is also amended, as announced, to reflect the new measures. Aside from these additions, the new legislative provisions also provide the clarifications summarized below. Detailed discussion Threshold for the purposes of the specified registration requirement New section 477.2 of the AQST introduces the concept of a "specified threshold" to determine whether a non-Québec resident supplier is required to register in the specified registration system. Although this threshold is also set at CA$30,000, this concept differs from the small supplier threshold provided for in section 294 of the AQST. For "specified threshold" purposes, suppliers that are not resident in Québec must determine, over a 12 month period, the amount of their sales made in Québec to individuals who can reasonably be considered consumers for AQST purposes. QST collection New section 477.6 of the AQST includes the provisions announced in the budget relating to the QST collection obligations of nonresident suppliers or operators of digital platforms that control the key elements of transactions, depending on the nature of the supplies made and the non-Québec resident suppliers' place of residence. The wording of the new section confirms the lack of solidarity between suppliers and digital platform operators when the latter are required to collect QST under the third paragraph. This section also stipulates (in the fourth paragraph) the obligation for nonresident suppliers or digital platform operators to collect QST from any person unable to provide a QST registration number, who is thereby considered to be a "specified Québec consumer." Unlike the criterion used to determine the specified threshold mentioned above, the new provisions extend the obligation for nonresident suppliers or digital platform operators to collect QST from Québec residents not registered for QST, beyond cases involving Québec resident individuals only. Rebate of tax paid under section 16 of the AQST As confirmed in the budget, specified suppliers are not considered registrants for QST purposes, although they have certain billing obligations under new section 477.7 of the AQST, including clearly indicating the tax payable or confirmation that the amount payable includes the tax and the name of the tax. If the rate of tax is indicated, it must be indicated separately from the rate of any other applicable tax. Specified Québec consumers would therefore not be entitled to any input tax refund (ITF) in respect of supplies made by specified suppliers. New section 477.17 of the AQST provides an exception mechanism for the rebate of the QST paid under section 16 of the AQST. However, the right to a rebate is limited to supplies of services or incorporeal movable property made remotely and invoiced with an amount of QST acquired by a person resident in Canada for consumption, use or supply in a participating province and for which tax under section 218.1 of the Excise Tax Act was paid. Conversely, section 477.17 of the AQST therefore confirms that there is no right to a rebate of the tax paid under section 16 of the AQST in respect of supplies of goods delivered in Québec and services and incorporeal movable property consumed in Québec, as mentioned in the budget. However, two exceptions apply with respect to the above QST rebate entitlement. The project excludes from any right to such rebate the specified financial institutions referred to in one of paragraphs 6 and 9 of the definition of "specified financial institution" set out in section 1 of the AQST (namely, an insurer's segregated funds and investment plans) as well as selected specified financial institutions. These are exceptions to section 477.17 only. They do not affect any rebates to which some of these financial institutions may be entitled under another provision of the AQST, such as the rebate provided for in section 402.14 of the AQST in favor of pension plans. ——————————————— 1 This Alert does not address the other measures contained in the bill, particularly with regard to the accommodation tax and the duties on transfers of immovables. ——————————————— For additional information with respect to this Alert, please contact the following: Ernst & Young LLP (Canada), Montréal
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