HARMONIZATION OF THE QUEBEC SALES TAX
Following the harmonization agreement with the federal government, changes will affect the QST on January 1, 2013. Here is a summary of the different elements that could affect your business:
- GST removed from QST calculation
- Transitional rules
- Mathematical factors for calculating an RTI (expense account)
- QST to be remitted on taxable benefits
- Exemption for financial services: end of ITRs and cancellation of QST registration for asset management companies
-
Refunds for new homes and rental properties
GST removed from QST calculation
Currently, QST at 9.5% is calculated on consideration that includes GST at 5%, so the effective QST rate is 9.975%. As of January 1, 2013, the QST rate will be increased to 9.975%, excluding GST, which corresponds to the effective rate in effect in 2012. Your systems must be modified to take account of this change.
Currently, QST at 9.5% is calculated on consideration that includes GST at 5%, so the effective QST rate is 9.975%. As of January 1, 2013, the QST rate will be increased to 9.975%, excluding GST, which corresponds to the effective rate in effect in 2012. Your systems must be modified to take account of this change.
Transitional rules
The QST, at a rate of 9.975%, will apply to taxable supplies (sales) for which this tax becomes payable on or after January 1, 2013. QST generally becomes payable on the date shown on the invoice or the payment date indicated in a written agreement.
The QST, at a rate of 9.975%, will apply to taxable supplies (sales) for which this tax becomes payable on or after January 1, 2013. QST generally becomes payable on the date shown on the invoice or the payment date indicated in a written agreement.
Buildings
The 9.975% rate applies to a sale of real estate if the written agreement was signed after December 31, 2012. The same rule applies to the leasing of real estate as to the leasing of movable property or services.
The 9.975% rate applies to a sale of real estate if the written agreement was signed after December 31, 2012. The same rule applies to the leasing of real estate as to the leasing of movable property or services.
Goods and services
The 9.975% rate applies to taxable supplies for which tax became due on or after January 1, 2013 and was not paid before. If the tax becomes due more than once, the 9.975% rate applies to any part of the consideration that becomes due on or after January 1, 2013.
The 9.975% rate applies to taxable supplies for which tax became due on or after January 1, 2013 and was not paid before. If the tax becomes due more than once, the 9.975% rate applies to any part of the consideration that becomes due on or after January 1, 2013.
Expense accounts
The new QST rate slightly modifies the mathematical calculation factors used to determine the eligible QST rebate. Here is a summary table:
|
QST rates |
Mathematical factor
for a allowance paid |
Percentage determined
(Simplified method GE) |
Factor determined (simplified SME method) |
|
|
2012
|
9,5% |
9,5/109,5 |
5% |
9/109 |
|
2013 |
9,975% |
9,975/109,975 |
5% |
9/109 |
Taxable benefits – automobile
The QST to be remitted on the standby charge will be 9.975/109.975 as of January 1, 2013. When the operating cost benefit corresponds to half the standby charge, the same factor must be used. When the operating expense benefit is calculated on the number of kilometers driven for personal use, the QST to be remitted is 6.0%.
Exemption for financial services: End of ITRs and cancellation of QST registration for asset management companies
Financial services are taxable at 0% (zero-rated) QST. Investment income is considered a financial service. This allows companies in the financial sector (including management companies) to register for QST only and recover the QST paid on all their purchases. As a result of the harmonization agreement, financial services will become exempt on January 1, 2013, and this type of business will no longer be able to claim a QST refund related to this type of income. If an asset management company is not registered for GST, it will have to cancel its QST registration on January 1, 2013. She will have one month to file her last QST return.
Generally, there is a tax impact when cancelling a registration for people who own fixed assets. The Ministère des Finances du Québec has announced in its information bulletin 2012-4 that there will be no QST impact for companies in the financial sector that cancel their QST registration. Special rules have been introduced to prevent any future recovery of RTI on these assets.
Management companies with other types of income (rental, for example) will be able to keep their QST registration if they are registered for GST. When calculating their tax credits, they will no longer be able to claim a credit on expenses related to financial services.
Refunds for new homes and rental properties
The amendment to the QST calculation results in changes to the calculation of the QST rebate for a new residential complex under a written agreement entered into after December 31, 2012:
- The portion of the rebate calculated on the GST rebate will no longer be granted;
-
The maximum allowable QST will be modified to take into account the various limits.
For an individual, the QST rebate on GST can reach a maximum of $598.50.
Should you require further information on the changes effective January 1, 2013, please do not hesitate to contact us.
Benoît Vallée, CPA, CGA
Senior Director, Indirect Taxes
Telephone: 514-878-0240
bvallee@demersbeaulne.com
Senior Director, Indirect Taxes
Telephone: 514-878-0240
bvallee@demersbeaulne.com
