All Quebec cities and municipalities apply for GST and QST refunds on purchases they make as part of their municipal activities.
However, it is a little known fact that certain expenses are not eligible for tax reimbursement, such as the acquisition or leasing of certain motor vehicles supplied to an employee.
Revenu Québec has issued a ruling to the effect that no tax refund is granted to a municipality when a motor vehicle acquired or leased is provided free of charge to an employee, such as a police officer, firefighter or administrator, who uses it in part for personal and business purposes, and a taxable benefit is included in that employee’s income. Indeed, it is not uncommon for a municipality to provide a vehicle free of charge to one of its employees, for use in part in the municipality’s exempt activities, such as the operational management inherent in a fire or police department, or for prevention or intervention, and in part for the employee’s personal use.
In cases where the supply of these vehicles is distinct from other supplies of vehicles made by the municipality, Revenu Québec is of the opinion that the municipality is making an exempt supply of these vehicles to its employees. Given this tax exemption, section 173 of the Excise Tax Act (“ETA”) does not apply, and no tax is to be remitted by the municipality on the taxable benefit arising from the personal use of this vehicle by its employee. Nonetheless, despite this fact, paragraph 4(1)(h) of the Public Service Bodies Rebate Regulations of the ETA specifically excludes this type of property from the general GST and QST rebate application to this type of body.
It is therefore important to be aware of this situation when making your next motor vehicle purchase or lease, specifically for the purposes of determining the tax refund for public service bodies.
If you have any questions or comments about this or any other commodity tax issue, please do not hesitate to contact our team.
Sylvie Therrien | Associate – Commodity Taxes
Telephone: 450 971-1550 ext. 3321
