Use of Courtesy or Demonstration Vehicles
As a motor vehicle dealer, you acquire vehicles for the purpose of resale. However, you may place some vehicles at the disposal of your employees or customers. If your business is a large business, you must remit the QST on each vehicle used in this way during a given month.
We consider that you have made a vehicle sale on the last day of the month. You are required to calculate and remit QST on 2.5% of the sum of the purchase price of the motor vehicle as if it had actually been collected. Any fraction of a month during which a vehicle is used for a purpose other than resale counts as a full month.
This rule applies to vehicles made available to employees or customers until December 31, 2020. If your business is a large business, you must calculate and remit the QST on 2.5% of the purchase price of the motor vehicle made available to employees or customers in the given month. You can claim an ITR for the QST remitted, calculated at the applicable rate for the year in which the vehicle was made available to employees or customers (25% for 2018, 50% for 2019 and 75% for 2020).
These rules do not apply under the GST system.
A dealer that is a large business places motor vehicle A (which has a purchase price, including GST, of $12,000) at the disposal of an employee on March 1, 2018.
On March 10, 2018, the vehicle is sold by the dealer in the ordinary course of the dealer's activities. On that date, the dealer places another vehicle, vehicle B (which has a purchase price, including GST, of $20,000), at the disposal of the employee.
On March 25, 2018, vehicle B is sold by the dealer, and another vehicle, vehicle C (which has a purchase price, including GST, of $15,000) is placed at the disposal of the employee. The employee has used three vehicles in the course of the same month. The dealer must therefore remit the QST to Revenu Québec for the month on the purchase price of the three vehicles as follows:
|Vehicle A ($12,000 x 2.5%)||$300.00|
|Vehicle B ($20,000 x 2.5%)||+||$500.00|
|Vehicle C ($15,000 x 2.5%)||+||$375.00|
|QST payable ($1,175 x 9.975%)||$117.21|
If you make a motor vehicle available to an employee for their own personal use during the year, you are considered to have granted the employee a taxable benefit which must be included when calculating their income for the year. You must also calculate the QST on the value of the benefit and include it in your net tax for the period that includes the last day of February of the following year. The QST calculated in this way applies in addition to the tax calculated on 2.5% of the purchase price of the vehicle applicable to a large business.
If your business is a large business, the QST calculated on the value of the benefit must be included when calculating your net tax at the applicable rate:
- 25% for a benefit granted in 2018
- 50% for a benefit granted in 2019
- 75% for a benefit granted in 2020
- 100% for a benefit granted in 2021 or after
In the example above, the dealer would have to calculate the value of the benefit related to the employee's personal use of the vehicles in 2018 as well as the related QST. The QST on the value of the benefit would be included at the rate of 25% in the dealer's net tax for the period that includes the last day of February 2019.
For more information, click Employee Benefits.
Dealers that are large businesses and that did not include, when calculating their net tax, the QST on the benefit related to the personal use of motor vehicles by their employees for 2018 to 2020 have until October 31, 2021, to do so. Interest and penalties will apply after that date.