Canada: Revenu Québec implements new mandatory certificate for personnel placement agencies and subcontractors

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1 23 June 2016 Global Tax Alert News from Americas Tax Center Canada: Revenu Québec implements new mandatory certificate for personnel placement agencies and subcontractors EY Global Tax Alert Library The EY Americas Tax Center brings together the experience and perspectives of over 10,000 tax professionals across the region to help clients address administrative, legislative and regulatory opportunities and challenges in the 33 countries that comprise the Americas region of the global EY organization. Copy into your web browser: Tax/Americas-Tax-Center---borderlessclient-service Executive summary In its continuing efforts to curtail tax evasion and undeclared work, Revenu Québec has implemented additional compliance measures that became effective on 1 March 2016 under Bill 28, An Act mainly to implement certain provisions of the Budget Speech of 4 June 2014 and return to a balanced budget in , which received Royal assent on 21 April The current system of certification is partly modified by these measures, which above all extend the obligation to hold a certificate, particularly for the construction industry and personnel placement agencies operating in the province of Québec. Revenu Québec strongly believes that a substantial amount of tax revenue is lost in these industries. To remedy this situation, under the new measures, subcontractors and personnel placement agencies are now required to obtain a certificate from Revenu Québec before entering into private contracts for construction work, personnel or temporary placement services. Non-compliance with this new obligation could result in penalties.

2 2 Global Tax Alert Americas Tax Center Detailed discussion The Revenu Québec certificate The Revenu Québec certificate confirms that the entity, as at the date of its request, meets the following conditions: It has filed the returns and reports required under Québec s tax laws It has no outstanding accounts with the Minister of Revenue of Québec or, if it has an overdue account, that it has entered into a payment agreement or the collection of its debts has been legally suspended Contracts covered by the obligations related to the Revenu Québec certificate Construction contracts Construction contracts that meet the following three conditions are subject to these obligations: The contract was entered into after 29 February 2016 between a subcontractor and a contractor holding a license required under Chapter IV of the Building Act The contract is performed in Québec and provides for work that requires the subcontractor to hold a license required under Chapter IV of the Building Act The contract meets the threshold described below This obligation does not apply to contracts related to an emergency that threatens the security of persons or property. Personnel placement or temporary help contracts Contracts for personnel placement and temporary help services that meet the following three conditions are subject to these obligations: The contract was entered into after 29 February 2016 between a personnel placement agency and a client The services provided for in the contract consist of providing workers needed to meet the temporary workforce needs of the client, another person or a public body in the course of carrying on their business or their activities, as applicable The contract meets the threshold described below This obligation does not apply to contracts related to an emergency that threatens the security of persons or property. Threshold Construction contracts or personnel placement or temporary help contracts are subject to the obligations related to the Revenu Québec certificate when the total cost of a given contract and contracts entered into previously in the calendar year, or the total cost of a contract entered into in a previous calendar year, but after 29 February 2016, is equal to or greater than CA$ 1 25,000 (excluding taxes). Certificate validity period The certificate will remain valid until the end of the month in which it was issued and during the following three-month period. However, until February 2017, the validity period could be either three, four or five months. The end date of the validity period is recorded on the certificate. Obligations of subcontractors and personnel placement agencies 2 Between the date the bid of a given contract is submitted and the end of the seventh day following the start of work or provision of services, the subcontractor or personnel placement agency must: Hold a valid Revenu Québec certificate Provide a copy to the contractor or client For new contracts entered into during the certificate validity period, the subcontractor or the personnel placement agency is not required to resubmit a copy of the certificate to the contractor or client. At the end of the certificate validity period, the subcontractor or personnel placement agency is required to obtain a new Revenu Québec certificate in order to enter into new contracts. Obligations of contractors and clients of personnel placement agencies 2 Between the bid date and the end of the seventh day following the start of work or provision of services, the contractor or the client must: Obtain from the subcontractor or personnel placement agency a copy of the Revenu Québec certificate Ensure its validity

3 Global Tax Alert Americas Tax Center 3 No later than the 10th day following the start date of work or provision of services, the contractor or the client must verify the authenticity of the certificate, as described below and keep proof of authentication of the certificate. Penalties Effective 1 September 2016, the following penalties could apply, depending on the cost of the contract, to entities that do not comply with their obligations relating to the certificate: An entity that does not hold a valid certificate or fails to provide it, or fails to obtain a copy and ensure its validity within the time prescribed, is liable for a penalty ranging from $500 to $2,500. If the entity has received or paid an amount without holding a certificate or without having obtained a copy of the certificate and ensured its validity within the time prescribed, it is liable for additional penalties ranging from $250 to $5,000. Furthermore, if an entity subject to the obligations related to the Revenu Québec certificate fails to verify its authenticity in the prescribed manner and within the time prescribed and to keep proof of authentication, it is liable for a penalty ranging from $250 to $1,250. Generally speaking, an entity subject to the obligations will be liable for a penalty only if a warning regarding non-compliance with an obligation has already been delivered by the ministry via registered mail. In the event of a subsequent offence within three years from the issuance of an assessment notice, the penalty amount will generally be doubled. Last, any entity subject to these obligations that is guilty of certain offences, including the production or falsification of a Revenu Québec certificate, may generally be liable for penalties ranging from $5,000 to $100,000. In the event of a subsequent offence within a five-year period, the minimum and maximum penalty amounts will generally be doubled. Obtaining and verifying a certificate To request a Revenu Québec certificate, you must use the online service, Request an Attestation de Revenu Québec. Any person or entity subject to the legal obligation to verify a certificate must use the online service, Mandatory Verification of an Attestation de Revenu Québec. Endnotes 1. Currency references in this Alert are to CA$. 2. Each member of a partnership or consortium must hold and provide a valid Revenu Québec certificate.

4 4 Global Tax Alert Americas Tax Center For additional information with respect to this Alert, please contact the following: Ernst & Young LLP (Canada), Montréal Jean-Hugues Chabot Daniel P. Legault Manon Jubinville Ernst & Young LLP (Canada), Toronto Dalton Albrecht Sania Ilahi Ernst & Young LLP (Canada), Calgary David D. Robertson Ernst & Young LLP (Canada), Vancouver Katherine Xilinas

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