What Are TPS and TVQ in Quebec Explained

Sales taxes are a common feature of modern economies, representing a levy on the sale of goods and services. These taxes are typically added to the price of a product or service at the point of sale, with the collected funds then remitted to the government. In Canada, a federal sales tax applies nationwide, and some provinces also impose their own provincial sales taxes. This article aims to clarify the two primary sales taxes applicable in Quebec: the federal Goods and Services Tax (GST) and the provincial Quebec Sales Tax (QST), known locally as TPS and TVQ respectively.

Understanding TPS

The Taxe sur les produits et services (TPS), or Goods and Services Tax (GST), is Canada’s federal sales tax. Applied across the entire country, including Quebec, its purpose is to tax most goods and services consumed in Canada. The standard rate for the TPS is 5%, which is added to the listed price when consumers purchase goods or services.

Businesses registered to collect TPS act as agents for the federal government, collecting this tax from customers. They can claim Input Tax Credits (ITCs) on the TPS paid for purchases related to their commercial activities. ITCs allow businesses to recover the TPS paid on eligible business expenses, ensuring only the end consumer bears the tax burden.

Understanding TVQ

The Taxe de vente du Québec (TVQ), or Quebec Sales Tax (QST), is a provincial sales tax specific to Quebec. This tax operates alongside the federal TPS, contributing to the total sales tax burden in the province. The standard rate for the TVQ is 9.975%. A unique aspect of the TVQ is its calculation method: it is applied to the selling price that already includes the TPS. For example, on a $100 item, the 5% TPS is added first, then the 9.975% TVQ is applied to the $105 subtotal.

Businesses registered for TVQ collect this tax from their customers and can claim Input Tax Refunds (ITRs) for the TVQ paid on their business purchases. This allows them to recover the TVQ paid on their inputs.

Registering for TPS and TVQ

Businesses need to register for both TPS and TVQ if their total worldwide taxable supplies exceed $30,000 over a single calendar quarter or over the last four consecutive calendar quarters. This threshold applies to both taxes. Federal TPS registration is managed by the Canada Revenue Agency (CRA), while provincial TVQ registration is handled by Revenu Québec.

To initiate the registration process, businesses can use online services provided by both the CRA and Revenu Québec, or submit physical forms. Required information for registration includes the business’s Social Insurance Number (SIN) or Business Number, trade name, primary business activity, and the start date of commercial activities. Businesses should register for TVQ before making the first taxable supply in Quebec and for TPS before the 30th day following the first taxable supply in Canada.

Collecting and Remitting TPS and TVQ

Once registered, businesses are required to charge both TPS and TVQ on most taxable sales of goods and services in Quebec. The collected amounts must then be remitted to the respective tax authorities. Businesses calculate their net tax by taking the total TPS and TVQ collected from customers and subtracting the ITCs and ITRs claimed on their business expenses.

The frequency of filing and remittance periods (e.g., monthly, quarterly, annually) depends on a business’s annual sales volume. Tax returns must be filed even if no amount is due or if a refund is expected. Payments to the CRA for TPS and to Revenu Québec for TVQ can be made electronically through financial institutions or via pre-authorized debits. Businesses must maintain accurate records of all sales and purchases to ensure proper calculation and remittance of these taxes.