Revenu Québec recently announced changes relating to the calculation of the value of a consideration deemed to include taxes. Lanoue Taillefer Audet Inc. will discuss the subject in the next issue of the Tacticien newsletter. The following is a translation of an excerpt from the article to be published.
Excerpt from Tacticien, volume 10, No. 3
Section 182 of the Excise Tax Act and Section 318 of the Act respecting the Québec sales tax address the situation where amounts are paid as a consequence of a modification, termination or breach of an agreement for the making of a taxable supply. Under these sections, the amount paid to the supplier is deemed to include GST and QST. The payment recipients are required to deduct the taxes and remit them to the tax authorities, while the payers are deemed to have paid a corresponding amount in taxes, which could entitle them to ITRs and ITCs.
During the 2009 Commodity Tax Symposium organized by the Association de planification fiscale et financière (APFF), Revenu Québec indicated that interest and the additional indemnity provided for under Section 1619 of the Civil Code of Quebec was part of the consideration deemed to include GST and QST.
At the APFF’s most recent symposium held in May 2012, Revenu Québec changed its position on the matter and said that the interest and additional indemnity components did not have to be considered for the purposes of the above-mentioned calculation.
We had discussions with Revenu Québec representatives, who presented this “new” interpretation, to find out the extent of its impact on past transactions. Revenu Québec advised us that decisions will be made on a case-by-case basis so as not to penalize anyone in the situations contemplated. If you or one of your clients is affected by this change, please contact us so that we can determine any effects and, if appropriate, the necessary adjustments.
Jean Lanoue, FCPA, FCA