February 2, 2016

VersaPay receives Revenu Quebec reassessment proposal

TORONTO -- VersaPay Corporation hasreceived proposal letters from Revenu Quebec (RQ) in which RQ is proposing to reassess VersaPay under various rules contained in the Excise Tax Act and the Quebec Sales Tax Act in relation to the Company's 2008 to 2014 tax years. The potential for the proposed reassessments has been anticipated and has been previously disclosed by the Company.

The Proposals outline RQ's positions that the Company owes GST/HST of $2.3 million (before interest) and Quebec Sales Tax of $1 million (including interest and penalty). The issuance of the Proposals does not require the Company to pay any amount to RQ at this time. Failing a resolution at the Proposal stage, RQ may proceed to issue notices of reassessment for reporting periods falling within one or more of the Relevant Taxation Years.

VersaPay is currently reviewing the Proposals. VersaPay has not recorded a liability in its consolidated financial statements for the proposed reassessed taxes payable described above.

Management believes that the Company has filed its tax returns and paid applicable taxes in compliance with Canadian federal and provincial tax laws. VersaPay intends to vigorously defend its tax filing positions and is now in the process of preparing its response to the Proposals. There is no assurance that the Company's objections and appeals will be successful. If RQ issues notices of reassessment and is successful, VersaPay will be required to pay the taxes owing plus applicable interest thereon. The Proposal does not indicate the amount of interest or other penalties in respect of the GST/HST for the Relevant Taxation Years. Further, taxation years subsequent to 2014 remain open to audit by RQ.

"We are confident that we have complied with all tax laws in a manner consistent with others in the merchant services industry," said Craig O'Neill, Chief Executive Officer of VersaPay. "We have sought a legal opinion on the matter and confirmed that our services have correctly been treated as tax exempt. Any attempt by Revenu Quebec to change this exemption, if successful, would apply industry-wide and as such VersaPay would be required to collect tax from our customers and partners. As a result, the direct tax liability to VersaPay would be marginal. We are confident of our position and will defend it vigorously."

Should VersaPay receive a notice of reassessment from RQ based upon the Proposals, the Company intends to file a notice of objection within the required 90-day periods provided under the Excise Tax Act and the Tax Administration Act (Quebec).

 

 

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