Liliane Fortier, Les Affaires 01-09-2012
When you conduct commercial activities, you usually have to register for the GST and QST. Under an agreement between the federal and Quebec governments, Revenu Quebec administers the GST in Quebec. As a result, applications for the two taxes must be submitted to that agency. Below is a summary of what you should know about them both.
1. Changes in 2013
The GST is a 5% tax applied to the selling price, and the QST is a 9.5% tax applied to the selling price plus the GST, for an effective rate of 9.98%. As of January 1, 2013, the QST rate will rise to 9.975%, but the GST will be excluded from the QST calculation. In other words, the QST effective rate will remain the same.
2. Register Before Making a Sale
Before you make your first taxable sale in Quebec, your QST file must be opened, and you must collect the QST as soon as you are considered registered. The GST registration form must be submitted by the 30th day following the day on which you make your first taxable sale. Both applications can be made on the same form (the LM-1).
3. Determine Which Type of Sales You Make
To decide whether or not to register, you must determine the type of sales you are making—i.e., taxable, zero-rated, or tax-exempt. If you are making taxable or zero-rated sales, then you must register.
- Taxable sales are sales on which the GST and QST must be collected; they represent most sales made in connection with commercial activities.
- “Zero-rated” sales are taxable at a rate of 0%, meaning that no GST or QST need be collected. Zero-rated items include basic groceries and prescription drugs, as well as certain medical devices.
- Similarly, no GST or QST is collected on tax-exempt goods and services. These include long-term residential rents, most health and dental-care services, and daycare services.
4. Claim Your Tax Credits
Once you have registered, you’ll be able to claim credits to recover the GST and QST you paid on goods and services acquired in the course of your commercial activities. These credits are usually referred to as ITCs (for the GST) and ITRs (for the QST). If you make taxable or zero-rated sales, you are entitled to these credits. However, you cannot claim these credits on taxable purchases made for tax-exempt sales.
5. “Small Suppliers”
If you are considered a “small supplier”, you can opt whether or not to register for the GST and QST. If you decide to register, you are entitled to receive ITCs and ITRs. Small suppliers are individuals whose total taxable sales do not exceed $30,000 for the preceding four calendar quarters taken as a whole.
N.B.: This article does not deal with all exceptions or specifications applicable to the GST and QST.
Liliane Fortier, CPA, CA, LL.M. Tax Partner tax services – Demers Beaulne
514 878-0258 – firstname.lastname@example.org
About the Author: Dejan Ristic
In 2004, I founded Exceleris. In addition to managing all recruitment aspects of Exceleris, I have consulted (as CFO or in similar roles) with a number of technology companies (both publicly traded and venture funded start-ups)....