Did you know? A person registered for QST does not have to pay QST when acquiring a motor vehicle intended for resale or lease for a continuous period of at least 1 year.
THE ZERO-RATING RULE IN THE QST SYSTEM
The Act Respecting the Québec Sales Tax (“AQST”) zero-rates (taxable at 0%) a supply by way of sale of a motor vehicle to a person who is registered for the QST, where the person receives the vehicle solely for the purpose of making a further supply by way of sale or lease under an agreement under which continuous possession or use of the vehicle is given to a person for a period of at least one year.
As a reminder, here are some useful definitions:
“Motor vehicle” under the QVTA:
Motor vehicle means a self-propelled road vehicle with a net mass of less than 4,000 kilograms, equipped with at least four wheels and designed primarily for the transportation of persons or goods by road.
“Road vehicle” according to the Highway Safety Code:
A motorized vehicle that can travel on a road; vehicles that can only travel on rails, power-assisted bicycles and electrically-powered wheelchairs are excluded from road vehicles; trailers, semi-trailers and removable axles are assimilated to road vehicles.
In other words, the definition of a motor vehicle under the QVSA:
– Includes: Jeep-type vehicles, trucks, vans and buses.
– Excludes: vehicles that can only run on rails, power-assisted bicycles and electrically-powered wheelchairs.
Once again, a registrant who purchases a motor vehicle for resale or lease for at least 1 year is not required to pay QST to the vehicle supplier.
It is very important to understand and properly apply this zero-rating rule, since a person covered by this provision can neither claim an input tax refund (“ITR”) nor claim a refund of tax paid in error when amounts on account of QST have been paid to the suppliers of said vehicles or to the SAAQ.
The only way to recover an amount paid as QST in error on a transaction covered by this rule would be to obtain a refund from the vehicle’s original supplier (e.g. dealer). However, such a supplier is unlikely to comply with a request from a person who did not disclose his or her intention to ? when acquiring the motor vehicle in the first place.
To avoid any problems and, above all, to reduce the final cost of purchasing a motor vehicle, you need to be aware of and apply a specific procedure for which our consumption tax department will be happy to assist you.
Above all, if in the last four years you have acquired a motor vehicle in circumstances covered by the rules described above, and you have claimed an ITR or any other form of QST refund, we recommend that you contact us so that we can help you regularize your situation. In recent months, the tax authorities have been targeting these transactions more closely.
CONTACTS
Sylvie Therrien
Associate – Commodity taxes
Telephone: 450 971-1550, ext. 3321
Jerry Médénou, CPA
Director – Consumption taxes
Telephone: 450 971-1550, ext. 3606
