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Clarifications on the increase in the QST rate to 9.5% on January 1, 2012

2011-12-13

The start of 2012 will be marked by the second one-percent increase in the QST rate, bringing it to 9.5%. The effective QST rate will be 9.975%, because the QST is levied on a GST-included amount.

Transitional rules

The transition to the new rate will be carried out under the exact same rules that applied last year when the rate was raised to 8.5%. Here is a brief reminder:

  • Movable property and services
    The taxable supply of movable property or a service will be subject to the 9.5% QST rate if all of the consideration for the supply becomes due after December 31, 2011, and is not paid before January 1, 2012. In addition, the 9.5% QST rate will apply to any portion of the consideration for such a supply that becomes due after December 31, 2011, and is not paid before January 1, 2012. As was the case with the increase in 2011, a measure was drawn up in collaboration with the Société de l’assurance automobile du Québec to allow two QST rates to be applied upon registration of a road vehicle when a portion of the price of the vehicle is paid in 2011 (8.5%) and the balance in 2012 (9.5%).

Immovables

  • Supply by way of sale
    The taxable supply of an immovable by way of sale will be subject to the 9.5% QST rate if it is made pursuant to a written agreement entered into after December 31, 2011, and according to which ownership and possession of the immovable are transferred to the recipient after such date.

    Accordingly, if a written agreement was entered into in 2011 for the construction, renovation, alteration or repair of an immovable, the supply will be subject to the 8.5% rate, regardless of when the payment is made or when ownership and possession are transferred to the recipient. For example, the date an initial contract is entered into for the construction of a new home will determine the QST rate applicable. Remember, if the written agreement was entered into before January 1, 2011, the supply will be subject to the 7.5% rate. This rule also applies to holdbacks under contracts related to these immovables.
  • Supply other than by way of sale
    The rules regarding the taxable supply of movable property or a service will also apply to the taxable supply of an immovable made other than by way of sale. As a result, the QST rate will be established based on the date on which the consideration becomes payable or is paid.

New series of mathematical factors for 2012

Several mathematical factors used to calculate the QST will be affected by this rise in the QST rate. The specified factor under the simplified method of calculating rebates regarding an expense account will be 9/109 for small and medium-sized businesses, and the specified percentage for large businesses will be 5% (taxable supplies exceeding $10 million).

The same will apply for the simplified method that certain small businesses can use (revenues from taxable supplies of $219,000 or less including tax in 2012): rates will be increased to 3.4% for vendors of corporeal movable property and 6.6% for other businesses.
 
Jean Lanoue, FCA
Member of the Committee for CAs in Taxation and Commodity Taxes

Michel Ducharme, CGA

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