New certificates from Revenu Québec: Am I affected?

Construction contracts

As of March 1, 2016, the requirement to obtain a certificate from Revenu Québec for individuals who wish to conclude a contract involving construction work extends to the entire construction industry, including the private sector. 

These rules apply to all contracts that provide for construction work carried out in Quebec for which the contractor doing the work must hold a valid licence from the Régie du bâtiment du Québec. However, the rules apply only to contractors and sub-contractors who have an establishment and operate a business in Quebec, and who hold a valid licence from the Régie du bâtiment du Québec. 

When the total value of construction contracts signed after February 29, 2016 between a contractor and a single sub-contractor reaches $25,000 (including the contract on which the sub-contractor is bidding), the sub-contractor is now required to obtain a certificate and submit it to the contractor. Once the $25,000 threshold has been reached, any subsequent construction contract between the same parties will be subject to the certificate requirements. It should be noted that these requirements apply to all levels of sub-contracting.

Accordingly, sub-contractors have until the seventh day after the construction work begins to obtain a certificate and provide a copy to contractors. Note that if the sub-contractor is a partnership or consortium, each member of the partnership or consortium may be subject to this same requirement. Contractors must obtain a copy of the certificate and ensure its validity no later than the seventh day after the work begins, and verify its authenticity no later than the 10th day after the start of the work. 

Note that if a contractor already has a certificate from a sub-contractor for a previous contract and the certificate is still valid, the parties may be exempt from these requirements under certain conditions. The same applies to emergency situations that jeopardize the safety of persons or property.

Contracts respecting placement services and temporary help services

The requirement to obtain a certificate from Revenu Québec also extends to employment agencies. Therefore, when an employment agency provides workers to alleviate the temporary labour shortages of a client, another person or a government agency in the normal course of business or operations, the agency and its client are subject to these new rules under certain conditions.

The new requirements apply to agencies and their clients who have an establishment in Quebec and operate a business. 

The rules are essentially the same as those that apply to construction contracts, except for a few differences. For example, if an agency has to renew its certificate while the contract is being carried out, it must provide a copy of the new certificate to its client, who must ensure its validity and verify its authenticity.

Validity period

Certificates from Revenu Québec are valid until the end of the third month following the month in which they were issued. However, certificates issued for the first time between February 1, 2016 and January 31, 2017 will be valid until the end of the third, fourth or fifth month after they were issued. 

Obtaining, validating and verifying the authenticity of a certificate

Currently, certificates from Revenu Québec can be obtained, verified and authenticated online. 

To obtain a certificate, applicants must have filed the returns and reports required under Quebec tax laws. In addition, they must not have an overdue account with the tax authority, or, if they do, they must have reached a payment agreement and observe it, or the collection of their debt must have been legally suspended.

If the above conditions are not met, applicants may contact Revenu Québec’s Direction du recouvrement to rectify the situation.

Penalties

Under the new provisions of the Taxation Act (Quebec), penalties apply when a person fails to comply with one or more obligations under a contract or when an amount is received or paid but the failure to comply has not been remedied by the parties. However, these penalties will apply only as of September 1, 2016 and if the Minister has sent a notice by registered mail. In addition, the applicable penalties may be doubled for a subsequent offence.

What should you do?

If you are subject to these certificate requirements, you must first register with Revenu Québec’s online service if you have not already done so. Then, you should put a system in place to:

• identify the contracts covered;
• identify your obligations;
• keep evidence of:
  
  • certificates obtained and submitted, if you are a sub-contractor or an employment agency; or
  • certificates obtained, validated and authenticated, if you are a contractor or client of an employment agency.

Conclusion

It will be worthwhile to see how effective these new measures and their application will be in income tax and commodity tax audits. For example, what will happen if a contractor or client does not have a valid certificate? How will the certificate tie in with the documentation requirements for input tax credits and refunds as well as expense deductibility rules for Quebec tax purposes?

Kristina Lucic, lawyer, M.Fisc.
Sylvain Thibeault, lawyer, M.Fisc.