Tax holiday granted to sailors residing in Québec and who are involved in international freight transportation

A vessel is deemed to be engaged in international freight transportation when, during a voyage, one or both ports, i.e. the port of origin or of destination, is outside the limits of the Canadian Territorial Sea or Fishing Zones, as defined by the Oceans Act of Canada.

All commercial operations performed in Canadian coastal waters or Fishing Zones, as defined by the Oceans Act of Canada are not deemed to be international freight transportation.

A vessel deemed to be engaged in international freight transportation must fly the Canadian flag and be registered in a Québec port under the terns of the Canada Shipping Act (R.S. (1985), c. S-9).

To be eligible, a sailor must live in Québec, as provided for in the Taxation Act (R.S.Q., c. I-3).

To be eligible for a tax holiday, a sailor must be assigned to a vessel involved in international freight transportation, as defined in subsection 1.1, for a period of a least 10 consecutive days beginning in the current year or having begun in the previous year.

An eligible sailor may be employed by more than one eligible shipowner in the course the same taxation year and be hired on more than one vessel deemed to be engaged in international freight transportation. When the sailor’s period of assignment on such a vessel is less than 10 days, the sailor is still eligible for a tax holiday if assigned, subsequently and without interruption, to a vessel which is equally deemed to be engaged in international freight transportation and that the sum of these periods of assignment is of at least 10 consecutive days.

However, this assignment period would not be considered a period of 10 consecutive days if the period of assignment of the sailor on a vessel engaged in international freight transportation is of less than 10 consecutive days and that the sailor is assigned subsequently to a vessel which is engaged in coastal shipping, as defined by the Coasting Trade Act of Canada (1992, c. 31).

Under no circumstances can periods of assignment of less than 10 days aboard a vessel carrying out international freight transportation be cumulated.

To be eligible, a sailor must have performed almost all employment related duties on a vessel operated by an eligible shipowner. By “almost all employment related duties”, the ministère des Transports means “90% of the duties”. This means that the condition is fulfilled to the extent a sailor has performed 90% of the employment related duties on such a vessel.

A copy of the sailor's eligibility certificate issued by the ministère des Transports du Québec must be attached to the sailor's yearly income tax return.

The eligibility certificate for the tax holiday set up for sailors residing in Québec may be issued once a year by the ministère des Transports du Québec.

The ministère du Revenu du Québec requires Québec employers to forward the “Summary of Source Deductions and Employer Contributions” (form RLZ-1.S) on the last day of February following the taxation year at the latest. To harmonize procedures, the sailor’s eligibility certificate will also be issued and sent in accordance with the same provisions.

The certificate issued by the ministère des Transports du Québec is worded and laid out so as to consolidate all useful information in order to identify the eligible vessel and shipowner, validate the assignment period of 10 consecutive days and certify that the sailor has performed all the related employment duties aboard a vessel.

The eligibility certificates will be issued in three copies distributed as follows:

• 1^st copy: ministère des Transports du Québec
• 2^nd copy: Sailor (attached to the income tax return)
• 3^rd copy: Sailor (for his files)

Eligible shipowner refers to a “person residing in Canada, a corporation which is a foreign subsidiary of such a person or a company whose members residing in Canada, including a corporation controlled by persons residing in Canada, are equity owners in this company whose market value exceeds 10% of the fair market value of the full equity of the company.”

Applications for the tax holiday granted to sailors who are involved in international freight transportation must be filed for each taxation year by the eligible shipowner, which must complete a specific form  (French only) and include the required information. For each vessel aboard which an eligible sailor will have received earnings which can be deducted from his taxable revenue in the form of a tax holiday, the eligible shipowner must provide the ministère des Transports du Québec a detailed statement of the vessel engagement during the relevant taxation year. The start and end date of each period for which the vessel will be deemed to be engaged in the international trade of goods must be established according to accepted criteria, on the basis of the information shown on relevant documents and generally recognized by the parties involved in international shipping. If applicable, the following documents, as well as any others deemed necessary, can be reviewed upon request by the representatives of the ministère des Transports du Québec.

• Laytime Statement
• Notice of Readiness
• Statement of Facts
• Charter Party
• Crew List
• Log Book
• Certificate of Registry

In the case of each vessel for which a detailed statement of vessel engagement to international freight transportation is forwarded to the ministère des Transports, the shipowner should attach a detailed crew list for the relevant period. Given that the ministère des Transports is required to issue an eligibility certificate specific to each sailor, the list filed by the shipowner must make it possible to identify specific eligible employees.

The vessel’s detailed engagement statement and crew list can be forwarded, per trip, at any time during the year. However, if the shipowner wishes to forward the information only once a year, he must do so no later than January 31 of the year following the relevant taxation year.

The eligible shipowner who employs an eligible sailor should enter the total earnings of the employee, earnings which may or not give rise to a tax holiday, on RELEVÉ 1 “Employment and Other Income” payable to the ministère du Revenu du Québec. The shipowner must indicate, in the center of Relevé 1, “Tax holiday to sailors” followed by the amount of earnings received after August 31, 1996 and eligible for the deduction.

Given that there is a direct relationship between the eligible shipowner and the eligible sailor in his employ, the ministère des Transports will issue the eligibility certificate to the shipowner only when the documents required from him have been duly forwarded within the time limits. The eligibility certificate issued to the shipowner should allow for the identification of the vessels engaged in international freight transportation aboard which eligible sailors have received earnings entitling them to a tax holiday.

The eligibility certificates will be delivered in two copies distributed as follows:

• 1^st copy: ministère des Transports
• 2^nd copy: shipowner (for his files)

Seagoing personnel assigned to a vessel usually consist of a main crew and, during the crew holidays, a relief crew. The earnings pertaining to vacation leave for the period during which a tax holiday can be requested are also eligible for this tax holiday.

To allow the ministère du Revenu to carry out the audits and reconciliations which may be required, the eligible shipowner must provide, upon request from the representatives of the ministère du Revenu du Québec, all record books, lists or documents which can be deemed relevant and useful.

Any notice or document shall be deemed to have been properly served when transmitted by registered letter, telegram, telex or facsimile to the following address:

NB: French version prevails

Direction du transport maritime, aérien et ferroviaire
Ministère des Transports du Québec 
700, boulevard René-Levesque Est, 24e étage 
Québec (Québec) G1R 5H1 
Telephone: 418 643-1864
 Facsimile: 418 646-6196