On March 1, 2016, a number of new legislative provisions came into force regarding personnel placement agencies (a "PPA"). These changes were prompted by the targeting by the Agence du Revenu du Québec ("Revenu Québec") of PPAs in order to curtail clandestine work and the failure of some PPAs to remit compulsory deductions at source ("DAS") to the taxation authorities.
Difficulties in finding qualified employees in certain sectors of the economy have led to the emergence of PPAs.
These firms offer businesses experiencing labour shortages the services of temporary workers. This is a common practice in the healthcare sector, for example.
In areas of activity where manpower is scarce and the work involved requires no specific training, as is the case, for example, with various jobs in the agricultural sector, the hiring of temporary immigrant labour has become commonplace.
Such workers show up at the place of business of a PPA client and perform the required tasks. After the work has been completed, the PPA invoices the client, who pays for the services rendered by the PPA as well as the applicable sales and services taxes (GST/PST).
In some cases, the DAS and the GST/PST collected from clients are not remitted to the taxation authorities by the PPAs.
This practice has unfortunately led to a plethora of assessments served on the PPSs' clients, who operate legitimate businesses in full compliance with the law. It is important to note that in many cases the PPAs in question have valid employer numbers and GST/PST registration numbers (duly assigned to them by the taxation authorities).
Revenu Québec has taken the position that the PPAs' clients, as the actual employers of the temporary workers, owe it the applicable DAS amounts, and it has moreover rejected their requests for tax refunds.
New legislative provisions
The Act mainly to implement certain provisions of the Budget Speech of 4 June 2014 and return to a balanced budget in 2015-2016 (Bill 28) introduced new measures seeking to better control PPAs by requiring them to obtain a certificate issued by Revenu Québec.
A PPA is defined in the Act as a person that has an establishment in Quebec and carries on a business in Quebec whose activities consist in offering personnel placement services. We do not know at present whether Revenu Québec will interpret this definition as including businesses that offer outsourcing services to their clients. The definition in the Act of a personnel placement contract does not shed any light on this question.
A "personnel placement or temporary help contract" is defined in the Act as a contract entered into between a personnel placement agency and a client for the provision of personnel placement services or temporary help services that consist in providing workers needed to meet the temporary workforce needs of the client.
Obligations of PPAs
New provisions of the Taxation Act (the "TA") specify that a PPA must hold a certificate from Revenu Québec where the total dollar amount of the contracts entered into with its clients, exclusive of taxes, is greater than $25,0001.
In calculating this $25,000 threshold, contracts entered into in a previous calendar year must be taken into account, except for personnel placement contracts entered into before March 1, 20162.
A certificate is valid until the end of the three-month period following the month in which it was issued3. It must remain in effect throughout the term of the contract's performance, and if it expires during that term, a new certificate must be obtained within 15 days following the expiration date4.
To be eligible to receive a certificate, a PPA must meet the following conditions5:
- Be up to date in filing the returns and reports required under fiscal laws (e.g. income tax return, GST/PST reports, etc.);
- Not be late in paying any amount payable under those laws or, if such amounts are overdue, an agreement must have been reached with the taxation authorities for the repayment thereof.
Clients now are obliged by the TA to ensure that the PPA's certificate is valid.
To do so, they must follow the following three steps6:
- Obtain a copy of the PPS's certificate;
- Ensure that the certificate is valid; and
- Not later than the 10th day after the provision of services began, verify its authenticity.
Verification of the validity and authenticity of a certificate is done through the "Clic Revenu" page of Revenu Québec's website. It is important that clients document and retain a copy of these verifications.
Once the $25,000 threshold has been reached by the parties, the client's obligation starts to apply on the date a bid is submitted and not on the date the contract is entered into.
When the certificate expires, the client must obtain a copy of the new certificate within 30 days following the expiration date, and verify the new certificate's validity and authenticity7. PPA clients must thus pay particular attention to the date that appears on the certificates.
In order to ensure that these new provisions are respected, the government has introduced an array of penalties, for both PPAs and their clients. These penalties range from $500 to $2,500, and can be doubled in cases of repeated failure to comply. In this regard, we invite you to consult a table setting out the penalties by clicking here.
It is also worth mentioning that before imposing a penalty on either a PPA or a client, the Minister must send the alleged offender a notice specifying the instance of non-compliance.
1 s. 1079.8.26 TA
2 s. 1079.8.26 TA
3 s. 1079.8.29 par. 3 TA
4 ss. 1079.8.28 (a) TA
5 s. 1079.8.29 par. 2 TA
6 s. 1079.8.27 par. 1 TA
7 ss. 1079.8.28 (b) TA