Transition to the Harmonized Sales Tax in Ontario and British Columbia and Winding Down of Provincial Sales Tax in Ontario and British Columbia
Date:
To: Chief Financial Officers, Deputy Chief Financial Officers and Functional Heads of Administration
General
It is government policy that departments charge and collect, where applicable, the Goods and Services Tax (GST) or the Harmonized Sales Tax (HST) on their taxable supplies (goods and services) and pay GST or HST on their purchases, as required by legislation. Currently, the federal government departments collect and pay GST at the rate of 5% in the provinces of Ontario and British Columbia.
With respect to the provincial sales tax (PST), departments charge and collect 8% on taxable supplies in Ontario and 7% on taxable supplies in British Columbia. Departments are exempt from the PST and therefore do not pay PST on their purchases in these two provinces.
As of , the GST and the PST in Ontario and British Columbia will be replaced by the HST.
Legislation to enact the HST has been passed into law by the Governments of Canada and Ontario. The HST in Ontario, effective will be 13% consisting of the 5% federal part and an 8% provincial part.
Similar legislation is expected to be introduced soon in the province of British Columbia and, subject to legislative approval, would also provide for the implementation of HST in British Columbia beginning . The HST in British Columbia would be 12% consisting of the 5% federal part and a 7% provincial part.
Both the Ontario and British Columbia governments have issued Tax Information Notices outlining the general transition rules in support of their implementation of the HST.
The Tax Information Notice for Ontario is found on the following website: http://www.rev.gov.on.ca/en/notices/hst/03.html
The Tax Information Notice for British Columbia is found on the following website:http://www.sbr.gov.bc.ca/businsess/Consumer_Taxes/Harmonized_Sales_Tax/
HST_Transitional_Rules.html
As well, the Canada Revenue Agency provides detailed information that explains the transition to HST. http://www.cra-arc.gc.ca/gncy/hrmnztn/menu-eng.html
This bulletin is intended to assist you and your department in identifying changes that will be necessary in your department. Please note that this is a guidance document only. The legislative authority is Part IX of the Excise Tax Act. The framework for the harmonization of the provincial sales taxes with the goods and services tax is set out in the respective Comprehensive Integrated Tax Collection Agreements with Ontario and British Columbia.
The attached annex highlights the major changes outlined in the Ontario and British Columbia Tax Information Notices. Even though complete policy and administrative details have not yet been issued, departments should familiarize themselves with all the transitional provisions included in the two Tax Information Notices and begin the process of assessing the changes required to their financial systems, GST/HST rate references on documentation such as invoices, contracts, internet web sites, point of sale systems and departmental policies, processes and procedures in order to comply with the HST requirements in Ontario and British Columbia. Please be aware that the HST would apply to consideration that becomes due, or is paid without becoming due, on or after for property and services provided on or after .
In addition, information on the winding down of the provincial sales taxes is included.
The HST in Ontario and British Columbia is similar to the HST introduced in several Atlantic Provinces in 1997. As such major changes to systems and to procedures should not be required past the transitional phase. Training may be required for transitional considerations and for employees not familiar with the HST.
The Office of the Comptroller General will continue to issue bulletins as updated information becomes available.
Inquiries
Financial Management Community: Should you require further information about the application of the GST/HST and the PST in federal government departments please do not hesitate to contact Anna Marinelli CGA, Financial Management Policy Division, at 613-954-3692 or by e-mail at: Anna.Marinelli@tbs-sct.gc.ca;
Contracting Community: Should you require further information regarding the impact of the GST/HST on contracts, please do not hesitate to contact Mark Schizkoske, Acquired Assets and Services Sector, at 613-946-6273 or by email at Mark.Schizkoske@tbs-sct.gc.ca;
Original signed by Bill Matthews
Assistant Comptroller General
Financial Management and Analysis Sector
Office of the Comptroller General
Annex
Point-of-Sale Rebates
The HST will operate as a single value-added tax based on the operating rules of the GST. The HST applies generally to the same base of goods as the GST. Both provinces though are proposing point-of-sale rebates for certain goods. For example, in Ontario, an amount equal to the 8% provincial part of the HST will be rebated to purchasers at the point-of-sale, on books and other designated goods such as prepared foods sold for an amount not more than $4. Please refer to the following website to determine whether your department provides any of the goods subject to the point-of-sale rebates. http://news.ontario.ca/rev/en/2009/11/more-point-of-sale-exemptions-for-ontario-hst.html
In British Columbia, an amount equal to the 7% provincial part of the HST will be rebated to purchasers at the point-of-sale on books and other designated goods such as motor fuels.
The point-of-sale rebates for British Columbia can be found on the following website. http://www.sbr.gov.bc.ca/business/Consumer_Taxes/Harmonized_Sales_Tax/HST_Transitional_Rules.html
Accounting and Reporting
The registration and collection requirements applicable to the GST will be retained. GST registrants are automatically registered to collect and remit the HST.
Federal government departments will pay the HST and will charge it to the existing refundable advance account (RAA). There is no requirement for a special line of coding to differentiate between GST and HST.
Federal government departments will credit HST revenue to the same central account that is currently established to record GST revenue.
The current reporting requirements for the GST will apply also under the HST. Federal government departments will continue to report on a monthly basis to the Canada Revenue Agency. For each reporting period departments and agencies will file one tax return which will include all tax collected (GST and HST were applicable).
Federal government departments are not required to account separately for the federal and provincial parts of the HST.
Liability for tax
The tax will generally be levied on the same basis as under the GST. The place of supply rules for the HST in Ontario and British Columbia have not yet been announced.
Government Purchases
The provinces and the federal government have agreed to set up a rebate mechanism for HST purposes. Under this system, both the federal government and the provinces of Ontario and British Columbia will pay HST on their purchases.
The federal government will receive the applicable rebate through the existing RAA. Departments will recover all tax paid (including both the 5 per cent federal part and the 7 or 8 percent provincial parts) through the RAA.
Departments should review standard contract clauses to ensure that HST is properly addressed in Ontario and British Columbia.
Contracting authorities must respect Appendix C- Treasury Board Contracts Directive included in the Treasury Board Contracting Policy http://www.tbs-sct.gc.ca/pol/doc-eng.aspx?id=14494 to ensure the inclusion of all applicable taxes when calculating basic contracting limits.
Supplies made outside of Canada
The current rules for determining when supplies are made outside of Canada will continue to apply for purposes of the HST in Ontario and British Columbia.
Employee Benefits
Generally, the application of HST to employee benefits will be the same as under the current rule for the GST. HST will apply to the employee benefit when the place at which the employee ordinarily worked or last reported for work is located in Ontario or BC. The taxable benefit remittance rates have not yet been announced. An updated bulletin will be released once the information becomes available.
Employee Allowances and Reimbursements
For the most part, the rules regarding allowances and reimbursements paid to employees will be the same as under the GST. In the case of allowances, the allowance must be for supplies all or substantially all of which were made in BC or Ontario, or, in the case of a motor vehicle allowance, the use of the motor vehicle must be in the participating provinces. HST deemed to have been paid will also form part of the RAA. For departments who use the factor method rates for determining the amount of HST paid, these rates are currently being developed for Ontario and British Columbia. An updated bulletin will be released once the information becomes available.
Transitional Rules
The transitional rules are designed to ensure that the current GST and provincial retail sales tax systems do not overlap with the HST. They specify a number of key dates with respect to the timing for departments and agencies to account for the HST.
Important Dates
The HST would not apply to consideration that becomes due or is paid without having become due on or before even if it relates in whole or in part to property or services to be provided after . The provincial tax information notices refer to self-assessment requirements but the federal government is not subject to the self-assessment rules.
The HST would generally apply to consideration that becomes due or is paid without having become due on or after this date for property and services provided on or after .
Generally, all taxable supplies made in Ontario and BC on or after this date will be subject to the HST. Please refer to the point-of-sale rebate information notices for those goods which are eligible for point-of-sale rebates of an amount equal to the provincial part of the HST.
Tangible Personal Property (Goods)
The HST would generally apply to a supply of goods by way of sale to the extent that the goods are delivered, and ownership of the goods is transferred, to the recipient of the supply on or after .
Consideration due or paid on or after
The HST would generally apply to consideration that becomes due, or is paid without having become due, on or after for a supply of goods by way of sale, to the extent that the consideration is for goods that are delivered, and for which ownership is transferred, to the recipient of the supply on or after .
Consideration due or paid on or after and before
The HST would generally apply to consideration that becomes due, or is paid without having become due, on or after and before for a supply of goods by way of sale, to the extent that the consideration is for goods that are delivered, and for which ownership is transferred, to the recipient of the supply on or after . The 5% federal part of the HST is included in the GST/HST return according to the normal rules and the provincial part of HST is included in the GST/HST return for the reporting period that includes .
Example: A client orders and pays for a taxable good on and the taxable good is delivered and ownership is transferred in . HST applies to this transaction. The 5% federal part of the HST is included in the GST/HST return for the reporting period that includes , and the provincial part of HST in the GST/HST return for the reporting period that includes .
Subscriptions to Periodical Publications
Notwithstanding the general transitional rule, HST would generally not apply to consideration that is paid before for a subscription to a periodical publication.
Leases and Licences
Consideration due or paid on or after
The HST would generally apply to consideration that becomes due, or is paid without having become due, on or after for a supply of property by way of lease, licence or similar arrangement, to the extent that the consideration is for the part of a lease interval that occurs on or after (unless the lease interval begins before and ends before ). Property includes goods, intangible personal property, non-residential real property and commercial real property that are supplied by way of lease, licence or similar arrangement, the consideration for which is rent, royalties or similar payments.
Example: A client makes a lease payment for the lease interval from to . The HST would not apply to the lease payment (regardless of when the payment was made).
Example: A monthly lease payment becomes due and is paid on for the lease interval from to . The HST would apply to the lease payment.
Consideration due or paid on or after and before
The HST would generally apply to consideration that becomes due, or is paid without having become due, on or after and before for a supply of property by way of lease, licence or similar arrangement, to the extent that the consideration is for the part of a lease interval that occurs on or after (unless the lease interval begins before and ends before ). The 5% federal part of the HST is included in the GST/HST return according to the normal rules and the provincial part of HST is included in the GST/HST return for the reporting period that includes .
Example: On , a lease payment becomes due and is paid for the taxable supply of a site in a campground. The lease interval is four months ( through ). The part of the payment for the months of May and June would not be subject to the HST but would be subject to the GST at 5%. The part of the payment for the months of July and August would be subject to the HST at 12% in BC or 13% in Ontario.
Commercial Parking Passes
A supply of a commercial parking pass would be treated as a supply of non-residential real property by way of lease, license or similar arrangement for the purposes of the transitional rules for the HST.
Services
HST would generally apply to a supply of a service to the extent that the service is performed on or after . The HST would generally not apply, however, to a supply of a service if all or substantially all (90 per cent or more) of the service is performed before .
When the consideration for services that are performed on or after becomes due, or is paid without having become due, before , no HST will apply. However, if the consideration becomes due, or is paid without having become due, on or after , the HST will apply.
Example: Your department provides taxable services for the two months ending ; 50% of the services are performed on or after . An invoice is issued on . GST is payable at 5% on the consideration for the services performed before . HST is payable on the consideration for the services performed in .
Admissions
HST would generally apply to a supply of an admission to a seminar, an activity or an event to the extent that the event occurs on or after . The HST would generally not apply, however, to a supply of an admission to an event if all or substantially all (90 per cent or more) of the event occurs before .
When the consideration for an admission to an event that occurs on or after becomes due, or is paid without having become due, before , no HST will apply. However, if the consideration becomes due, or is paid without having become due, on or after , the HST will apply.
Example: Your department accepts online registration and payment for workshops that will be offered after . On-line registration begins on .
GST applies to registration fees that become due or are paid without having become due before .
The HST would apply to registration fees that become due or are paid without having become due on or after .
Continuous Supplies
The HST would generally apply to consideration for a supply of property or services delivered, performed or made available (as the case may be) on a continuous basis by means of a wire, pipeline or similar conduit or satellite or other telecommunications facility (e.g., natural gas, electricity) to the extent that the consideration is for property or services that are delivered, performed or made available to the recipient of the supply on or after .
If the supplier cannot reasonably determine when the property or services are delivered, performed or made available, the consideration for the supply would be prorated in equal parts according to the number of days in the period to which the consideration is attributable.
Example: A supplier of natural gas issues an invoice to a person for the period from to . A meter reading was not done on . The HST would apply to 50 per cent of the total amount payable, representing the 15 days out of the 30-day period that are on or after .
Other Transitional Rules
There are many other transitional rules that have not been included in this bulletin as they most likely will not impact federal government departments such as the transitional rules for memberships. Departments though are responsible for reviewing the provincial Tax Information Notices in detail to determine which transitional provisions apply to their organizations keeping in mind that the federal government is not subject to any of the self-assessment rules.
The provincial Tax Information Bulletins include as well transitional rules for intangible personal property by way of sale or by way of lease or licence where the payments do not vary with the amount of use or profits from the property, budget payment arrangements, combined supplies and progress payments and holdbacks. If your department engages in any of these activities then you should review these particular sections in detail as well.
Finally, Federal government departments do not claim input tax creditswith respect to theGST/HST that is paid or payable on the acquisition of property or services. Rather the GST/HST is relieved through theRefundableAdvance Account(RAA) mechanism andthe Federal Government Departments GST Remission Order. For these reasons, therecapture of input tax credit (RITC) rules http://www.rev.gov.on.ca/en/notices/hst/05.html would not apply to federal government departments.
Winding down the PST in Ontario and British Columbia
On the PST in Ontario and British Columbia would generally cease to apply to the sale of goods delivered and ownership of goods transferred to the purchaser on or after July 1, 2010 and to the sale of services on or after . Both provincial tax information bulletins provide details on the winding down of the PST.
Final PST returns would generally be required to be filed with the Ontario Ministry of Revenue on or before . Where an amount is collected or becomes payable as or on account of PST after , the PST would be reported on a supplemental PST return to be filed on or before the 23rd day of the following month. All supplemental PST returns would be required to be filed no later than .
For British Columbia, the final PST returns would generally be required to be filed with the British Columbia Ministry of Finance on or before . Where an amount is collected or becomes payable as or on account of PST after , the PST would be reported on a supplemental PST return to be filed on or before the 23rd day of the following month.
Page details
- Date modified: