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In March 2012 the governments of Canada and Quebec announced that the Quebec Sales Tax (QST) and the Federal Goods and Services Tax (GST) will be harmonized as of January 1, 2013.
Effective January 1, 2013, the current QST will become “Amended QST” to further harmonize certain QST provisions to fall in line with the GST/HST legislation. The QST will still be a separate provincial sales tax administered by Revenu Québec, and Quebec will continue to have the authority to decrease or increase its QST rate. This is very different from the full harmonization that Ontario implemented as of July 1, 2010.
For most taxpayers outside the financial services sector, the effect of the harmonization will have little impact as products and services will be taxed the same way as they are now.
The following are the main changes that will be introduced:
Movable Property and Services
The taxable supply of movable property or a service will be subject to the QST at the 9.975% rate if all of its consideration becomes due after December 31, 2012 and it is not paid before January 1, 2013.
The QST at the 9.975% rate will apply to the taxable supply of real estate made under a written agreement entered into after December 31, 2012, in which case it will be calculated on the value of the consideration of the supply established excluding the GST.
The rules described above regarding the taxable supply of movable property or a service will also apply regarding the taxable supply of an immovable made under a lease.
The current QST system provides that large businesses (i.e. businesses with taxable supplies in Canada exceeding $10,000,000) cannot claim Input tax refunds for the following goods and services:
Under the “Amended QST” system, the ITR restrictions for large businesses will remain in place. However, following an initial period of no more than five years from January 1, 2013, Quebec has committed to a three year phase-out period ending in 2020.
It has also been agreed that the QST system would ensure that the QST tax bases as well as the administrative, structural and definitional parameters produce results identical to those produced under the Federal tax system. In this context, changes to the following areas will be implemented:
A PDF version of this update is also available here.
Related Topics:Tax Rates; GST; HST
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