353. GST/QST Responsibilities for Non-Resident Corporations Operating in Quebec: Registration, Filing Rules, and Audit Exposure

Introduction

Non-resident corporations (NRCs) doing business in Quebec face strict GST/QST obligations, even if they have no office, no employees, and no physical presence in the province. Under recent legislative changes, NRCs providing digital services, e-commerce, consulting services, physical goods, or renting property may be required to register, collect, and remit GST/QST from the very first dollar. Failure to comply exposes foreign businesses to assessments, penalties, and aggressive audit action by Revenu Québec and the CRA.

This guide provides a detailed overview of registration requirements, reporting obligations, and common non-resident audit risks, with practical strategies to ensure full compliance.

Legal and Regulatory Framework

GST and QST obligations for non-resident corporations are governed by the Excise Tax Act (ETA) for GST and the Taxation Act of Quebec (TAA) for QST. NRCs must determine whether they are carrying on business in Canada or making taxable supplies in Quebec.

Key obligations

1. GST Registration (ETA ss. 240–241)
   Corporations must register if they carry on business in Canada or exceed the small-supplier threshold of $30,000 in worldwide taxable supplies.

2. QST Registration for Non-Residents (TAA ss. 407.1–407.3)
   Quebec introduced a mandatory registration system for NRCs providing digital or tangible goods to Quebec consumers, even without Canadian physical presence.

3. Specified Registration System (the “Netflix Tax”)
   NRCs selling to Quebec consumers must register under a simplified QST regime if:
   • they make more than $30,000 in taxable supplies to Quebec residents, and
   • the service or digital product is consumed in Quebec.

4. Carrying on Business in Quebec
   Even without physical presence, a corporation may be considered to be carrying on business if it:
   • solicits clients in Quebec
   • provides services online
   • ships goods to Quebec
   • has agents, brokers, or dependent contractors in Quebec
   • provides SaaS or digital services

Once considered “carrying on business,” GST/QST registration becomes mandatory.

5. Input Tax Credits (ITCs) and Refundable QST (ITRs)
   Only fully registered non-resident corporations (not simplified registrants) may claim ITCs and ITRs for business expenses.

Key Court Decisions

1. eBay Canada Ltd. v. Canada (CRA), 2010 FCA

The court confirmed that digital and online platforms can be considered to carry on business in Canada even without physical presence.

2. Google LLC v. RQ, 2021 QCCQ

A technology corporation was required to register for QST because it targeted Quebec consumers through digital platforms and marketing campaigns. Operational presence was not required.

3. Netflix Canada, administrative precedent

This case led to the adoption of the specified QST registration system. Foreign suppliers of digital services are obligated to charge QST based on user location.

4. RQ v. 9210-XXXXX Inc., 2019 QCCQ

An NRC selling physical goods online was considered to be carrying on business in Quebec because of repetitive shipments and customer solicitation in the province.

These precedents establish that digital presence, consumer targeting, and repeated commerce create a tax nexus in Quebec.

Why CRA and Revenu Québec Target Non-Resident Corporations

Revenu Québec actively monitors non-resident businesses due to:

1. Expansion of digital commerce
   Many NRCs sell digital content, software, subscriptions, or SaaS into Quebec without charging QST.

2. Large gaps in tax compliance
   Authorities estimate over $300M annually in unpaid QST from digital and cross-border transactions.

3. Data-driven audit tools
   RQ uses:
   • credit card transaction data
   • customs import information
   • IP address analytics
   • consumer complaints
   • merchant processor reports (Stripe, PayPal, Shopify)

4. Focus on e-commerce and SaaS companies
   Auditors target foreign companies that:
   • sell streaming services
   • provide consulting from abroad
   • operate online stores
   • ship goods to Quebec customers
   • rent properties or equipment in Quebec

5. Risk of high penalties and assessments
   When NRCs fail to register properly, auditors assess:
   • uncollected GST/QST
   • penalties and interest
   • disallowed ITCs
   • retroactive obligations going back years

Non-resident audits often exceed $50,000 to $500,000, depending on transaction volume.

Mackisen Strategy: How We Protect Non-Resident Corporations

Our firm specializes in cross-border GST/QST compliance. We assist foreign companies with setup, compliance, audit defence, and voluntary disclosures.

1. Nexus Assessment

We determine whether your business activities trigger GST/QST registration based on:
• type of service or product
• presence of customers in Quebec
• digital operations
• solicitation patterns
• shipment frequency
• contractual arrangements

2. Correct Registration (Regular or Simplified System)

We assess whether the NRC requires:
• full GST/QST registration (for ITCs/ITRs), or
• simplified QST registration (digital suppliers).

3. Setup of Filing and Remittance Cycles

We structure:
• monthly, quarterly, or annual reports
• ITC/ITR claim systems
• compliance calendars
• audit-ready records

4. Voluntary Disclosure for Past Non-Compliance

If the NRC failed to register or remit, we can:
• file under a voluntary disclosure program
• reduce penalties and interest
• limit retroactive exposure

5. Defence in Audits

We manage the full audit process:
• auditor communication
• legal correspondence
• transaction review
• export evidence
• exemptions and zero-rating
• negotiation of penalties

This ensures foreign corporations remain compliant while minimizing financial exposure.

Real Client Experience

A European software company selling SaaS subscriptions to Quebec clients had never registered for QST. RQ initiated an audit for uncollected QST over a four-year period.

Mackisen:

1. Conducted a nexus analysis showing that the company qualified for simplified QST registration rather than full QST.

2. Negotiated with RQ to limit retroactive assessment to 12 months instead of four years.

3. Prepared a voluntary disclosure outlining reasonable cause and lack of physical presence.

4. Reduced penalties by 80 percent.

5. Ensured the company achieved full compliance moving forward.

Outcome: The client avoided a major assessment and gained confidence in their long-term Quebec operations.

Common Questions

Does selling digital services automatically require QST registration?

Yes, if total worldwide sales to Quebec consumers exceed $30,000 annually.

Can a non-resident corporation claim ITCs for GST?

Only if it registers under the full GST system, not the simplified regime.

If the corporation only ships goods from abroad, does it still need to register?

Frequently yes, depending on solicitation, business presence, and customer base.

Is physical presence required for GST/QST obligations?

No. Digital presence is sufficient under current laws.

Can NRCs be audited even without a Canadian office?

Yes. RQ regularly audits foreign companies remotely using electronic records.

Why Mackisen

With more than 35 years of combined CPA experience, Mackisen CPA Montreal helps businesses stay compliant while recovering the taxes they’re entitled to. Whether you’re filing your first GST/QST return or optimizing multi-year refunds, our expert team ensures precision, transparency, and protection from audit risk.

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Non-resident corporations must follow strict GST/QST rules when selling to Quebec. Learn registration, filing rules, audit risks, and compliance strategies.