As of February 2016, under a new measure announced in the Action Plan in Response to the 2014-2015 Ombudsman Annual Report, Revenu Québec (“RQ”) has the administrative discretion to stay collection actions when an objection or an appeal is brought to a Québec Sales Tax (“QST”) assessment.
The Tax Administration Act (“TAA”)1 legislatively provides for the stay of collection actions in the case of Québec income tax assessments, with the exception that for “large corporations”2 the stay only applies to one half of the amount assessed. In the case of QST assessments, however, the taxpayer was required to pay the full amount assessed to be able to proceed with the objection and subsequent appeal, if any.
Under this new policy, the taxpayer who is assessed for the failure to collect QST or who has been denied input tax refunds (“ITRs”) may request a stay of all collection actions while the objection or appeal is in progress, provided that the taxpayer has otherwise complied with its other Québec tax obligations (including income or payroll taxes) and the recovery of the debt is not in jeopardy. Where a stay is granted, any outstanding ITRs will no longer be applied to the tax debt, but will instead be refunded to the taxpayer.
This administrative concession is in line with the Canada Revenue Agency’s (“CRA”) administrative guidelines for postponing collection procedures pending the resolution of an objection or appeal provided for in section 315 of the Excise Tax Act. Under these procedures, the CRA will postpone collection actions without requiring security in the following circumstances:3
- the taxpayer has an otherwise satisfactory compliance history;
- there is no published departmental policy about the assessed matter;
- there are reasonable differences in the interpretation of the legislation;
- the taxpayer has not collected the GST relating to the assessment from its clients;
- the business is financially secure; or
- there are extraordinary circumstances (e.g., fire or flooding).
The internal policies of RQ’s collections department are not publicly available. However, our experience with the new policy leads us to conclude that RQ will apply the policy in a similar manner to how the CRA applies its analogous policy. More particularly, the policy seems to be applied where the taxpayer can show that it has arguments that would lead RQ to vacate the assessment and it establishes that it intends to object to or appeal from the assessment.
It is the taxpayer’s responsibility to request the stay on collection measures either verbally or in writing with the collections officer.
The suspension of collection measures remains in force for the duration established by the collections officer unless RQ believes its ability to collect on the debt is compromised. In our experience, separate stays must be requested at each stage (e.g., for the 90-day delay to object, for the delay for the objection to be determined, etc.).