Tax Insights: New QST registration rules – Implications to asset managers providing services to Quebec residents

April 16, 2018

Issue 2018-19

In brief

The March 27, 2018 Quebec budget proposes to expand the Quebec Sales Tax (QST) registration rules to non-residents of Quebec that supply services and incorporeal moveable property (i.e. intangible property) to individuals that reside in Quebec. If enacted, commencing September 1, 2019, Canadian-resident asset managers and investment advisers may be required to register for QST under a “new specified registration system” and to collect QST on supplies made to “specified Quebec consumers.” These rules may also affect managers that charge fees to investors outside of a fund or who hold segregated accounts.

In detail

Mandatory registration

The new registration rules proposed in the budget require suppliers that have no physical presence, and are not carrying on business, in Quebec to register for QST under a new “specified registration system” if they:

  • supply services or incorporeal moveable property to individuals residing in Quebec, and 
  • earn annual revenues derived from these supplies exceeding $30,000  

The new registration requirement is effective:

  • September 1, 2019, for Canadian-resident suppliers 
  • January 1, 2019, for non-residents of Canada

Draft legislation has not yet been released.

QST collection and remittance

Section 23 of the Act respecting the Québec sales tax currently deems that most services and supplies of personal property are made outside Quebec if the supplier is:

  • a non-resident of Quebec
  • not carrying on business in Quebec, and 
  • not registered for QST  

However, this non-resident over-ride rule will no longer apply to supplies that are made to a “specified Quebec consumer” by suppliers that are required to be registered under the new specified registration system.

Consequently, most suppliers will likely be required to collect QST on services and intangible property that they provide to specified Quebec consumers. 

Specified Quebec consumers

Specified Quebec consumers are generally limited to individuals that are resident in Quebec and not registered for QST. Therefore, suppliers that must register under the new specified registration system will need to determine if the individuals receiving the supplies are registered for QST, so that QST is not collected in error from individuals that are registered for QST. 

To avoid these complexities, certain suppliers may want to make a special election and register under the “general registration system.” The benefits of doing this include potentially claiming input tax refunds; however, providing security may be required. Registration will be permitted only if the existing requirements for voluntary registration are met.

The takeaway 

Investment managers and advisers that charge fees to individuals that are resident in Quebec should consider how these proposed rules will impact their operations and whether they will be required to register under the new QST specified registration system. 

 

Contact us

Brent Murray

Partner, PwC Law LLP

Tel: +1 416 947 8960

Tariq Nasir

Senior Manager, PwC Canada

Tel: +1 416 815 5320

Sarah Noftell

Senior Manager, PwC Canada

Tel: +1 416 815 5260

Mario Seyer

Partner, PwC Canada

Tel: +1 514 205 5285

Follow us
Follow PwC Canada