Castro – Quebec Superior Court grants judicial review of an ARQ refusal to backdate a QST registration by more than 30 days

After a long and difficult history (see, e.g., Castro) the Castros requested in 2023 that the ARQ retroactively register, for QST purposes, a corporation to which they had transferred real estate in 2010. They hoped that, by virtue of such retroactive registration, the corporation would now be the one liable for the QST on the transfer, be able to claim a corresponding input tax refund, and that the ARQ assessments of them in 2016 for failure to charge QST on the 2010 transfer could be annulled.

The ARQ refused the request on the basis that they had not complied with the relevant ARQ Bulletin requiring that either the retroactive backdating not exceed 30 days or that the applicants demonstrate that, on the transfer date, the corporation had been obligated to register for QST purposes (the "Decision").

The Castros now sought judicial review of the Decision (and sought review in the Federal Court of the corresponding CRA refusal).

Vaillancourt JCS noted that the Quebec equivalent of ETA s. 241(1) did not place limits as to the discretion of the ARQ as to what extent to retroactively register a taxpayer, referred to Stemijon as authority for the proposition that “[i]t is a well-established legal principle that a decision based solely on policy, and not on the law, cannot be considered reasonable” and then stated:

For this reason alone, the Decision must be considered unreasonable. The Minister refused to exercise his discretion, while the decision-maker believed that the request could not be accepted due to a requirement that is not found in the statute. He improperly concluded that the Bulletin limited his discretionary power and, in doing so, he refused to exercise his discretion.

After noting various arguments of the ARQ suggesting that the Castros’ position “rested on fragile grounds”, he indicated that this did not matter because none of such considerations were addressed in the Decision. The Decision was remitted to the ARQ for reconsideration.

Neal Armstrong. Summary of Castro c. Agence du revenu du Québec, 2025 QCCS 3494 under ETA - s. 241(1).