GST/QST Bad Debt Deduction: How Far Should A Creditor Go In The Collection Process?

On June 10, 2020, in Greenfield Mining Services Inc. v.Quebec Revenue Agency, the Court of Quebec (the Court), per the Honourable Jo Ann Zaor, ruled that the plaintiff, Greenfield Mining Services Inc. (Greenfield), was entitled to a deduction under section 444 of the Quebec Sales Tax Act (QSTA) following the write-off of a bad debt in its books of account.

With respect to GST and QST, a supplier who, in its books of account, writes off all or part of the consideration and tax payable in respect of a taxable supply may generally claim a deduction in calculating its net tax in respect of the debt so written off, provided certain legal conditions are met.

Since the concept of "bad debt" (also known as "uncollectible account") is not defined in the legislation, one must normally rely on the criteria developed by the courts. In this case, the Court took the opportunity to clarify the tests applicable when analyzing the uncollectibility of a debt under the QSTA and