Digital Suppliers Outside Quebec: QST is calling

The Quebec government has launched a new tax measure that requires digital vendors from outside the province to register, charge and remit the Quebec Sales Tax (QST). The measure targets cloud services and downloads of digital software, music and entertainment products sold to consumers within the province.

Under the new measure, both non-Canadian and Canadian suppliers and operators of specified digital platforms not previously registered for the QST must register under the new system if they sell to consumers in the province, even if they have no physical or significant presence in Québec.

Starting January 1, 2019 for non-Canadian vendors, and September 1, 2019 for Canadian vendor, they must charge the QST on taxable supplies of certain goods, intangibles and services provided to specified consumers who are residents of Québec. The amendment defines specified consumers as individuals purchasing property for their or another individual’s personal consumption, use or enjoyment.

The QST registration is mandatory if the value of all taxable supplies made to specified Québec consumers exceeds a $30,000 threshold. A similar measure, which has been in effect since January 1, 2019, applies to certain suppliers and operators of specified digital platforms which are located outside Canada and are not GST / HST registrants.

It is interesting to note the QST paid under this QST system is not recoverable as an input tax refund that would be under the normal QST regime. This may surprise a few Quebec purchasers seeking a refund or rebate of the tax paid. It is not eligible.

Bill 13

In June 2019, Québec Bill 13 (Bill 13) received Royal Assent, retroactive to January 1, 2019. The bill included measures not previously provided in the original amendments to the Act respecting the Quebec Sales Tax (AQST). Bill 13 introduced the following amendments to alleviate certain administrative burdens and ensure full compliance:

1. Election of an Agent to Account for QST
   

   Under the regular QST regime, a QST registrant may appoint an agent registered in the QST file to account for the QST on its behalf. Bill 13 extends such election to foreign suppliers registered under the new QST regime, which can make a joint election to allow an agent registered under the regular QST regime to remit the QST collected on its behalf.

2. Conversion of Foreign Currency for Remittance Purposes
   

   Bill 13 amends the AQST to allow a foreign supplier to remit the net QST in certain prescribed foreign currencies. Hence, a QST registrant under the new QST regime may elect to determine its net tax for a reporting period and remit QST in Euros or U.S. dollars (prescribed foreign currency), rather than in Canadian dollars. If the supplies are not expressed in Canadian dollars or in a prescribed foreign currency, the method of conversion into a prescribed foreign currency of choice — or in Canadian dollars — must be previously accepted by the Minister of Finance and used systematically for at least 24 months.

3. Minister’s Discretion to Register Foreign Suppliers Under New QST Regime
   

   Bill 13 allows the minister to unilaterally register any foreign supplier under the new QST regime if the minister believes they are not in compliance with the requirements previewed in the AQST. This is similar to what is allowed under the federal Excise Tax Act in respect of the GST / HST regime.

Contact

If you are a Canadian resident outside of Quebec or a foreign supplier outside of Canada and require more information on the new QST regime, contact Moïse Parienté, Partner, Tax Services at MNP at 514 315-3678 or [email protected].