Since 2010, any contractor that enters into a contract with a public body for $25,000 or more has had to obtain a certificate from Revenu Québec (a "CRQ")1.
In 2011, this requirement was broadened to include front-line subcontractors, i.e. subcontractors as opposed to sub-subcontractors.
Recently, the requirement was broadened yet again, this time to cover private-sector construction contracts.
Recent amendments to the Taxation Act2 provide that as of March 1, 2016 the requirement to obtain a CRQ now extends to private contracts, and to all levels of subcontractors. Thus, both general contractors and subcontractors are affected by these new provisions, albeit in different ways. While both general contractors and subcontractors must obtain a CRQ, general contractors must also obtain a copy of their subcontractor's CRQ, and ensure that they are both valid and authentic.
In order to avoid nasty surprises, you should bear the following in mind about these recent changes:
Which contracts are affected? Private-sector contracts (the question as to whether or not contracts with public bodies are also affected has not yet been resolved).
What is being targeted? All Quebec contracts of a subcontractor entered into after February 29, 2016 with the same general contractor, whose total value is $25,000 or more, excluding taxes.
Please note! Once the $25,000 threshold has been reached, the requirement for the subcontractor to obtain a CRQ with that same contractor will apply to any subsequent contract entered into by them.
There is however an exception for construction contracts entered into because of an emergency that threatens human safety or property.
Who is being targeted? Any contractor or subcontractor that has a business establishment in Quebec and carries on business activities in Quebec for which it must hold a licence issued by the province's construction regulator, the Régie du bâtiment du Québec.
Please note! Contrary to the rule for public contracts, the new provisions apply to all levels of subcontractors, including sub-subcontractors, sub-sub-subcontractors, etc.
Subcontractor's obligations: To obtain a CRQ and give a copy to the contractor at some point between the date on which its bid was submitted and the seventh day after the date when work under the subcontract began.
Penalty for non-compliance: A subcontractor who fails to comply with these new requirements is liable to a fine of between $500 and $5,000.
Contractor's obligations: To obtain a copy of the CRQ from all of its subcontractors no later than the seventh day after the date when work under the subcontract began and, no later than the 10th day after that date, verify its authenticity with Revenu Québec.
The certificate's authenticity can be verified online via Revenu Québec's website3. To do this, you will need a copy of the CRQ or a record of the information thereon: date and time of issuance, registered name of the subcontractor and its Quebec Enterprise Number.
Penalty for non-compliance: A contractor who fails to comply with these requirements is liable to a fine of between $500 and $5,000.
How long is the certificate valid? A CRQ is valid until the end of the three-month period following the month in which it was issued. However, an initial CRQ issued between February 1, 2016 and January 31, 2017 will be valid for up to three, four or five months following the month in which it was issued. The validity period will be indicated on the certificate.
Please note! A CRQ does not have to be renewed while the contract between the contractor and the subcontractor is being performed. Nor is there necessarily any requirement to obtain and provide a new CRQ if a new contract has been entered into by the same contractor and subcontractor. The sole criterion is that the CRQ be valid at any point between the date on which the bid for the new subcontract was submitted and the seventh day after the date when work under the new subcontract began.
Additional penalties: Anyone who submits a counterfeit CRQ or falsifies the content of a validly issued one is liable to a fine of $5,000 to $30,000 in the case of a natural person, and of $15,000 to $100,000 in all other cases.
In light of these amendments, we recommend that you adjust your contracts to account for these new provisions, depending on whether you are a contractor or subcontractor.
For more information regarding the foregoing, or for sample clauses to include in your contracts, we invite you to contact the undersigned.
1 This requirement applies to a contractor who has a business establishment in Quebec where it carries on activities on a permanent basis.
2 CQLR, c. 1-3, sections 1079.8.16 to 1079.8.24
3 www.revenuquebec.ca/fr/sepf/services/scr_amr_verif/default.aspx (The verification can only be done in French.)
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.