Do you have to charge QST if your business is located outside of Quebec?
Quebec is unique in a number of different ways. This is great if you enjoy exposure to different types of culture and cuisine. It isn’t so great where it comes to tax. Almost every type of tax filing in Quebec requires an additional return, which often has different rules and calculations from the federal tax filings. Quebeckers are resigned to this and fortunately tax software or a good accountant tends to make the management of taxes significantly easier.
Prior to January 1st, 2019 a business, even if they had customers in Quebec, did not have to worry about Quebec based taxes as long as they did not have a physical or significant presence in Quebec. This changed on January 1st, 2019 when Quebec implemented a comprehensive set of rules for businesses located outside of Quebec, that, if they meet certain criteria, are now required to collect and report Quebec Sales Tax (QST or TVQ) on sales made in Quebec.
The reason that Quebec implemented these rules was to ensure that businesses in Quebec who do charge sales tax to consumers were not unfairly disadvantaged with the added benefit of substantially increasing their tax revenues. The primary types of businesses that are being targeted are digital platforms eg Netflix and the numerous other online businesses who sell both products and services to Quebeckers but are not located in Quebec.
How do the new rules work?
Generally speaking, consumption taxes (GST/HST and QST) in Canada are only effectively charged to consumers who purchase goods or services for their personal consumption. In practice, under the regular rules, businesses who are registered for sales tax charge all customers regardless of whether they are businesses or individuals. They are then allowed to claim back GST/HST and QST charged on any expenses that are paid relating to their business. The net effect of this is that only final consumers and businesses that are not registered for GST/HST and QST end up paying sales tax.
The rules that were implemented on January 1, 2019 for businesses that are not resident in Quebec are slightly different. Unlike the regular method of charging sales tax where all customers are charged and offset by sales tax paid on business expenses, QST is only charged to specified customers which are defined as :
consumer of property or a service means an individual who acquires, or brings into Québec, the property or service at his expense for his personal consumption, use or enjoyment or the personal consumption, use or enjoyment of any other individual, but does not include an individual who acquires, or brings into Québec, the property or service for consumption, use or supply in the course of the commercial activities of the individual or other activities in the course of which the individual makes exempt supplies”.
In other words businesses who are not resident in Quebec and who are required to register for QST under the specified method only charge individuals who use goods are services for final consumption.
Is your business required to register
So how do you know if you are required to charge QST? The fundamental rule for when determining if you as a business that is located outside of Quebec are required to register and charge QST is whether your revenues from specified customers in Quebec exceeds $30,000 over a twelve month period. As explained above, this does not include customers who are other businesses (who engage in commercial activity). If your revenues to Quebec residents exceeds $30k and you are not selling through a third party platform such as AirBnB or Amazon that already charge QST to its customers, then you must register for QST.
. To verify whether a customer is located in Quebec, you may use several types of information including:
Billing, home or business address
Bank account location or billing address
IP address
Location of a landline service
Other relevant info
Businesses that must charge sales tax also include digital platforms and are subject to the same criteria.
Once you register, you would begin to charge all specified customers (defined above) QST at a rate of 9.975% on the gross sale amount. Many Quebeckers might have noticed that their Netflix charge increased as of January 1st, 2019. (There was then an additional increase in July 2021 as CRA implemented a similar rule for digital platforms requiring that they register and charge GST).
Many businesses have both specified customers and customers that engage in commercial activities. In the case where a customer is registered for QST and provides you with their QST registration details, then you do not have to charge them QST. You are not required to verify the validity of the QST number but you must retain it in case of future audit.
Types of QST Registration for Business Outside of Quebec
There are two types of QST Registration:
1. Registration under the specified system includes:
Suppliers Outside Canada Who Are Not Registered Under the General GST/HST System
Suppliers Outside Québec Who Are Registered Under the General GST/HST System
Operators of Accommodation Platforms which includes short term accommodation (such as vacation rentals)
Operators of Distribution Platforms Outside Québec including goods and services as long as the supplies are not made through another platform that is already registered
2. Registration under the general system includes:
Suppliers Outside Québec Who Store or Deliver Property in Québec which includes goods that essentially have a physical existence (referred to as corporeal movable property). Examples include furniture, clothing, computer hardware and supplies and anything else that you can touch and feel.
Operators of Distribution Platforms that provide “corporeal movable property” (exactly the same as above) that use a distribution platform to do so.
In both of the above cases the corporeal movable property is shipped from outside Québec and delivered in Québec, other than by mail or courier.
How to Register for QST for Businesses Outside of Quebec
Registration under the “specified” system is done online by clicking on “access my account” at this link where you set up your username, password and go through the interview process. Once you have registered, you can see your tax obligations, file your returns and change business information through the Revenue Quebec online portal for “suppliers outside Quebec”. Upon registration you will receive a QST number with a suffix that ends in NR.
Registration under the general system , for businesses outside of Quebec, requires that you contact Revenue Quebec either by phone at 1 833 372-3850 or by emailing them at Contact-NR@revenuquebec.ca. Once you are registered under the general system, you would collect and file your QST return exactly as a regular Quebec based supplier would, which is similar to GST/HST reporting. General registration allows you to claim QST paid on expenses.
How to Report and Remit Your Taxes under the Specified System
Under the specified system, you are required to report and remit any QST collected within one month after every quarter of the calendar year. This means that QST reports are due as follows:
Q1 January to March QST return is due by April 30th
Q2 April to June QST return is due by July 31st
Q3 July to September QST return is due by October 31st
Q4 October to December QST return is due by January 31st
You can file your return by using the file a return service which is provided in My Account
The net amount of tax to remit are
amounts collected from specified customers,
less refunds to specified customers
less bad debts (amounts that you will not collect from customers)
plus any bad debts recovered.
Note that under a specified registration, you are not allowed to claim QST (ITRs) paid on expenses.
Payment can be made via your banking institution using the payment code provided when you file your return through my account with Revenue Quebec. Most Canadian banking institutions allow you pay with the payment code provided by Revenue Quebec, by using the business tax payment and filing service.
Payment for foreign suppliers can also be paid by SWIFT. The payment instructions are provided in the acknowledgement receipt when you file your tax return.
List of businesses that are outside of Quebec that are registered for QST
Revenue Quebec has a handy list of suppliers that are registered for QST that allows you to verify if a supplier is charging you correctly and is actually registered. It can be found here
While having to register, collect and report QST is an additional administrative burden for anyone who does business in Quebec, the process is fairly straightforward.
Ronika Khanna is an accounting and finance professional who helps small businesses achieve their financial goals. She is the author of several books for small businesses and also provides financial consulting services.
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