The province of Quebec has recently released updates to a number of TVQ interpretation bulletins. Below is a summary of the more significant changes:
TVQ 1-4/R2, “Nominal Partnerships”
This revision replaces the previous version issued September 30, 2011 and clarifies the distinction between a nominal partnership and a partnership within the meaning of the Civil Code of Quebec. The bulletin clarifies that a nominal partnership is not a “partnership” within the meaning of article 2186 of the Civil Code due to the absence of at least one essential element necessary for the formation of a partnership. Therefore, a nominal partnership cannot be considered a “person” under section 1 of the Act respecting the Quebec sales tax (QSTA). The interpretation of the legislation and the effective date of July 1, 1992 have not changed.
TVQ 16-30/R1, “Nominee Agreements”
This bulletin has been reworded to provide better clarification and reflects a change concerning recognition of nominee agreements by Revenu Québec. The bulletin explains the liability of the owner of an immovable and a nominee for the payment, collection and remittance of QST in respect of a supply of an immovable.
An election is provided for in section 41.0.1 of the QSTA which can only be made to a recipient after April 23, 1996 by a nominee who is a QST registrant acting on behalf of another person (the mandator). In order for a nominee agreement to be valid, the agreement must have been entered into on or before the acquisition of the property and must comply with the mandate provision of the Civil Code of Quebec. In addition, the mandator and the mandatary must disclose the agreement and its details to Revenu Québec in order for the nominee agreement to be recognized for tax purposes.
TVQ 57-2/R1, “Reduction for Prompt Payment of the Consideration for a Supply”
As a result of legislative amendments in 2001, this TVQ was updated to include rebates paid by a registrant related to certain zero-rated sales of motor vehicles (i.e., sales subject to QST at 0%) as taxable at the applicable QST rate of either 7.5%, 8.5%, or 9.5%. In particular, zero-rated sales of vehicles to a registrant for resupply by way of sale or long-term lease would fall under these revised rules. Typically, rebates related to zero-rated sales are not subject to QST at 7.5%, 8.5% or 9.5%.
In cases where rebates are paid for zero-rated sales described above, or for taxable sales subject to QST at 7.5%, 8.5% or 9.5%, the QST is calculated by applying a factor to the rebate amount. For example, a rebate paid in 2012 related to a sale subject to 9.5% QST, would be subject to QST at an amount calculated by applying the factor of 9.5/109.5 to the amount of the rebate.
TVQ 80-1/R1, “Supply of Property in the Event of Death”
This bulletin has been revised to reflect amendments to section 80 of the QSTA, and clarifies that the bulletin refers to the supply of property of a deceased individual made by the succession of the individual instead of by the individual’s personal representative. This change was made to be consistent with the rules of civil law concerning succession. The bulletin has effect from July 1, 1992. Where certain conditions are met, the QSTA allows an election to be made to have the business property of a deceased individual to be transferred free of tax to another individual who is both a beneficiary of the succession and a QST registrant.
TVQ 80.2-1/R1, “Telephone Order Management Service” and TVQ 80.2-2/R1, “The Supply of Long-Distance Services by Certain Hotel Establishments”
These bulletins have been replaced from the previous versions to take into account the repeal of section 80.2 of the QSTA on August 1, 1995. The changes clarify the entitlement to input tax refunds for large businesses in respect of certain telecommunication services.
TVQ 124-1/R1, “School Authorities Eligible for Partial Québec Sales Tax Rebates on Their Supplies of Student Transportation” and TVQ 124-2/R1, “School Transportation Service Rendered to School Boards or Private Educational Institutions”
These bulletins have been reworded to provide further clarity of the application of the legislation. TVQ 124-1/R1 explains how the QSTA applies in respect of partial QST rebates that may be claimed by certain school authorities. TVQ 124-2/R1 provides guidance on the application of QST to situations where a school board provides transportation for all or some of the students of another school board or a private educational institution. The interpretation of the legislation and the effective date of July 1, 1992 remain unchanged.
TVQ 138.1-1/R1, “Supply by a Charity of Funeral Property and Services”
This release replaces the previous version issued September 30, 1999 to reflect the amendments made to the QSTA. This bulletin explains how the QSTA applies in respect of supplies of certain funeral property and services made by a charity. The TVQ now states that if corporeal movable property is supplied by way of lease in conjunction with the exempt supply of an immovable, that in turn was supplied by way of lease, the supply of such corporeal movable property is also exempt under the exclusion provided in paragraph (4) of section 138.1 of the QSTA. The interpretation has effect from January 1, 1997.
TVQ 179-1/R1, “Meals Supplied to an Air Carrier”
This revision was required as a result of the change in Quebec’s interpretation on the tax status of meals provided to an air carrier. Meals supplied to an air carrier may now be eligible for zero-rating if the sale is made to a recipient (not a consumer) who intends to ship the property outside Quebec and also meets the following conditions:
- the recipient ships the property outside Québec as soon after the property is delivered by the person to the recipient as is reasonable having regard to the circumstances surrounding the shipment outside Québec and, where applicable, to the normal business practice of the recipient;
- the property is not acquired by the recipient for consumption, use or supply in Québec before the shipment of the property outside Québec by the recipient;
- after the supply is made and before the recipient ships the property outside Québec, the property is not further processed, transformed or altered in Québec except to the extent reasonably necessary or incidental to its transportation; and
- the person maintains evidence satisfactory to the Minister of the shipment of the property outside Québec by the recipient.
The carrier must reasonably show that the meals will not be consumed in Quebec airspace in order to be eligible for the zero-rating.
Previously, these meals were not eligible for zero-rating unless supplied to a non-resident who is not registered for QST purposes and uses the meals in its business of, for example, transporting property or passengers by aircraft, railway or ship.
TVQ 180-1/R1, “Supplies of Short-Term Accommodations Made to Transportation Businesses”
This update clarifies that, despite the elimination of the QST rebate on short-term accommodations to non-resident persons in November 2001, QST remains zero-rated on short-term accommodations supplied to a person that carries on transportation services, where that person is not resident in Quebec and also not registered for QST purposes.
TVQ 186-2/R2, “Co-operative Advertising Service”
This TVQ has been withdrawn.
TVQ 327-2-1/R1, “Drop Shipment Certificate”
Due to changes in 2003 to the QSTA, updates were made to include the service of storing goods as part of the services eligible for tax-free treatment where a drop shipment certificate is issued. This legislative change was also made for GST/HST purposes in 2001.
TVQ 514-1/R1, “Administration Costs Connected with an Uninsured Social Benefits Plan”
This TVQ was rephrased to provide further clarification on the application of the tax on insurance premiums and the QST to administration costs connected with an uninsured social benefits plan.
TVQ 529-1/R1, “Certification of the Taxable Portion of an Insurance Premium”
The legislative change in 2011 is now reflected in this TVQ. It includes authorized distributors to the list of persons responsible for collecting the tax on insurance premiums. This amendment is effective starting October 1, 2010.