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On September 30, 2011 Canada and Quebec signed a
Memorandum of Agreement (MOA) regarding the harmonization of the Quebec
Sales Tax (QST) with the Goods and Services Tax (GST). The agreement
reflects a commitment by both parties to negotiate a Canada-Quebec
Comprehensive Integrated Tax Coordination Agreement (CITCA), which would
set out the terms of the harmonization.
The current GST rate is 5%. The current QST rate
is 8.5%, scheduled to increase to 9.5% on January 1, 2012.
Some key components of the MOA:
Quebec will continue, generally, to administer the
QST and the GST/HST in Quebec, and the QST will continue to be
legislated by Quebec.
The proposed implementation date for the Amended QST
January 1, 2013.
The tax rules and tax bases for GST and QST will be
harmonized, which will make things much easier for businesses.
Quebec will undertake to discontinue charging QST
on the GST (tax on tax).
Quebec may increase or decrease the QST rate.
Canada will make payments totalling $2.2 billion to
Quebec, with $733 million of this paid on the first business day
following implementation date, and the remaining $1,467 million one
year later, provided the Amended QST continues to remain in place.
Quebec undertakes to mirror under the QST
legislation the place of supply rules
under the GST/HST legislation, and the rules in respect of financial
services and financial institutions under the GST/HST legislation.
Quebec has certain measures under the QST that
currently deviate from the GST/HST, and may continue to deviate.
These measures are:
Administrative measures under Quebec’s Tax Administration Act.
Zero-rating of motor vehicles acquired for re-supply and collection of the QST at the retail level by the
Societe de l'assurance automobile du Quebec.
Anti-avoidance rule for the purposes of calculating the QST payable regarding a used road vehicle.
Measures applicable to the operators of flea markets.
Measures applicable to clothing manufacturers.
Measures applicable to the operators of establishments providing restaurant services.
Mandatory registration of certain small suppliers and of certain persons not residing in Quebec and not carrying on a business there.
The application of the tax to road vehicles supplied otherwise than in the course of commercial activities.
The compensation to the municipalities of Laval,
Montreal and Quebec for the repeal of the amusement tax.
The Amended QST base may deviate from the GST/HST base provided
that the absolute value of the deviations does not exceed 5% of
the estimated GST base for Quebec. There are certain
measures already implemented by Quebec, which represent a
deviation 3% of the estimated GST base. These measures are:
Zero-rating of tobacco.
Zero-rating of books.
Zero-rating of diapers for children and items used for bottle-feeding or breast-feeding.
Zero-rating of admission to a non-foreign convention sold by the convention sponsor to a non-resident participant.
Zero-rating of passenger transportation services from Quebec to another province with transfer to another conveyance outside Canada.
Zero-rating of inter-provincial services of ferrying by watercraft of motor vehicles and passengers between parts of a road or highway system separated by a stretch of water.
Zero-rating of inter-provincial air ambulance services.
Transitional exemptions for the Mohawks of Kahnawake.
Non-taxation of certain properties and services supplied by municipalities due to the fact that these inputs were not eligible for any rebate.
Rebate of the tax paid by certain international organizations.
Rebate of the tax paid regarding automatic door openers for handicapped persons.
Rebate of the tax paid regarding a pleasure boat temporarily brought into Quebec for winter storage.
Taxation by self-assessment of food products intended for making wine or beer.
Non-rebate of the tax paid regarding short-term accommodations or camping accommodations included in a tour package.
Easing of the self-supply rule for a single unit residential complex or a residential unit held in co-ownership.