The provisions of Bill28 concerning the fight against tax evasion and undeclared work[1] (hereinafter the "Act") came into force on March 1, 2016. These new provisions extend the obligation to obtain a certificate of compliance with the fiscal laws from Revenu Québec to subcontracts for construction work in excess of twenty-five thousand dollars ($25,000).

Contracts covered

The provisions apply to contracts entered into between a contractor and a subcontractor for construction work for which a licence is required under the Building Act[2] for a total value of twenty-five thousand dollars ($25,000), excluding taxes, either under one contract, all contracts entered into during the current calendar year, or all contracts entered into during the previous calendar year. The Act stipulates that construction contracts entered into before March 1, 2016 are not to be taken into account.

Obligations of the subcontractor and the contractor

Under the Act, subcontractors must obtain a certificate of compliance with the fiscal laws from Revenu Québec. The Act also provides that contractors must obtain the subcontractor's tax certificate from the subcontractor and verify its validity and authenticity. The subcontractor must obtain this certificate in the period that begins with the date on which a bid is submitted and that ends no later than the seventh day after the work begins. The contractor must obtain a copy of this certificate from the subcontractor in the same period and verify its validity no later than the tenth day after the work begins.

Tax certificate

The purpose of the tax certificate, in the prescribed form, is to confirm that a person has filed the returns and reports required under fiscal laws and has no overdue amount under such laws, unless there is a suspended recovery or an arrangement with the tax authorities under which the person has not defaulted.

The certificate is valid for three (3) months following the month in which it was issued.

Penalties

The Act sets out a penalty ranging from five hundred dollars ($500) to two thousand five hundred dollars ($2,500) for a subcontractor who fails to obtain the tax certificate and an additional penalty ranging from two hundred and fifty dollars ($250) to five thousand dollars ($5,000) where a subcontractor received an amount for construction work performed without having remedied the failure to obtain the tax certificate.

The Act sets out a penalty ranging from five hundred dollars ($500) to two thousand five hundred dollars ($2,500) for a contractor who fails to obtain the required certificate from the subcontractor and an additional penalty ranging from two hundred and fifty dollars ($250) to five thousand dollars ($5,000) where a contractor paid an amount for construction work performed for which no tax certificate was obtained.

The Act also sets out a penalty ranging from two hundred and fifty dollars ($250) to one thousand two hundred and fifty dollars ($1,250) for a contractor who fails to verify the authenticity of the tax certificate obtained from the subcontractor.

Under the Act, the Minister of Revenue must first send a notice of default by registered mail before imposing the above-mentioned penalties.

Finally, the Act provides that penalties may be doubled in the event of repeat offences within a period of three (3) years.