Recent Changes to the QST Registration Rules for Non-Resident Suppliers of Digital Supplies

What are the new Quebec Sales Tax (QST) Rules?

On March 27, 2018, the Quebec budget introduced new Quebec Sales Tax (“QST”) rules expanding the threshold of QST registrant requirements with focus on non-resident suppliers in the e-commerce sector.  The budget addressed the lack of specific rules for online sale transactions which previously led to most non-residents being exempt from collecting QST.

Who does it affect?

The proposed rules will now require the following suppliers to register and collect QST:

• Non-residents of Canada (ex. US located corporations); and
• Residents of Canada located outside of Quebec, who:

(i) make supplies of digital property or services to recipients who reside in Quebec and are not QST registrants, or “specified Quebec consumers”, and

(ii) the total value of the consideration for all taxable supplies made by the supplier exceeds $30,000 during a 12-month period.

The proposed rules will become effective January 1, 2019, for non-residents of Canada and September 1, 2019, for residents of Canada located outside of Quebec.

Additional details

Suppliers who fall under the new rules will be registered under the specific registration system which is not considered part of the regular QST register system. These specific registrants will not be able to claim an input tax credit in regard to QST paid in respect of property or services incurred.  Additionally, QST charged to specific Quebec consumers under the new rules will not be eligible for income tax credits claims by these consumers.

How we can help

The focus on this new measure is to better grasp the digital economy and to address the lack of specific QST rules addressing this area. As a result, most corporations are exempt for QST purposes.  If your company supplies digital property or services to Quebec, you may be impacted by the proposed changes. Please contact your experienced DMCL advisor with any questions or concerns.