BC HST/PST Transition Update

Frankie Fenton

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Agenda

• New Measures• Transition Rules• Legislation• Planning

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New Measures

• Enhanced New Housing Rebate for the provincial portion of HST

• New grant, similar to New Housing Rebate, for secondary and recreational properties

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New Measures – Enhanced NHR

• Pre- existing rebate available up to a max $26,250 (71.43% provincial portion HST – max price $525,000)

• Proposed enhancement increases the cap to $42,500 (still 71.43% PPHST – max price $850,000)

• Available where HST becomes payable between April 1, 2012 and April 1, 2013

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New Measures – Enhanced NHR

• Enhanced NHR administered by the CRA• Can be credited directly by the builder• Builder may choose to only credit the pre-existing rebate – if

so, purchaser applies for balance from CRA• Full rebate can also be applied for from CRA

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New Measures – NH Grant

• New grant meant to mirror BC NHR, for qualifying secondary and recreational properties

• Max grant of $42,500 (71.43% PPHST – max price $850,000)• Available where HST becomes payable between April 1, 2012

and April 1, 2013

Note – must be applied for within 6 months of earlier of transfer of ownership or possession, and prior to Oct 1, 2013(Apply to BC Ministry, not CRA)http://www.sbr.gov.bc.ca/individuals/Customer_Service/BonusesAndGrants/grant_new_sec_rec_residences.htm

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New Measures – NH Grant

Secondary or Recreational Residence:• Non-primary residence• Used by individual (or qualifying relation) for vacationing or

secondary living• Excludes commercial use – i.e. vacation rentals, small business by

an HST registrant entitled to ITC’s• Located in “qualifying area” – in BC, but outside Capital Regional

District and Vancouver Regional District

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Transition Rules

• Residential Property Sales – • Transitional Tax Adjustment• Transition Rebate• Builder Disclosure Requirements

• General Property and Services• Importations• Taxable Benefits

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Transition – PublicationsFederal: Notice 270 - re elimination of HST – transition Q&A: http://www.cra-arc.gc.ca/E/pub/gi/notice270/README.html

Notice 272 - re enhancements to new housing rebates:http://www.cra-arc.gc.ca/E/pub/gi/notice272/README.html

Dept Finance Transition Rules:http://www.fin.gc.ca/n12/data/12-017_1-eng.asp

BC:News release February 17, 2012 (transition rules)http://www.newsroom.gov.bc.ca/2012/02/transition-measures-support-new-home-buyers-builders.html

HST Notice #12 – re enhancement to new housing rebate, and housing transition rules:http://www.pstinbc.ca/media/2012_housing_rules_FEB.pdf

HST Notice #13 – re new housing grant:http://www.sbr.gov.bc.ca/documents_library/notices/hst_notice_013.pdf

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Transition - Residential

Bill 56 – New Housing Transition Tax and Rebate Act (royal assent May 31)

http://www.leg.bc.ca/39th4th/3rd_read/gov56-3.htm

Transitional Tax Adjustment:• 2% transition tax where • (PP)HST does not apply to sale of the property• Construction 10% or more complete by April 1, 2013• Ownership/possession transfers before April 1, 2015

• Payable by the purchaser, collected by builder

Transition Rebate:• Available to the builder• Only applicable where transition tax applied to supply of home• Computed on sale price, based on degree of completion at April 1, 2013 10

Transition - Residential

Builder Disclosure Requirements:• Written disclosure required in all purchase agreements• Applies to agreements entered into both before , and after,

Feb 17, 2012• Penalty of 1% of home price (max $10,000) for failing to

provide disclosure• Gross negligence 4%/$40,000

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Transition – General

Property and Services:

Tax applies based on when it becomes payable or is paid without having come due

Payable = earliest of invoice, date of invoice, or day invoice would normally be issued (note times when tax deemed to become payable)

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Transition – General

Property and Services:

Invoiced (or paid before invoice) before April 1, 2013, HST applies

Invoiced (or paid before invoice) after March 2013, GST/PST apply

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Transition – General

Leases – payment (tax) becomes due on date stipulated in lease agreement

Real Property • tax becomes due on earlier of transfer of ownership or

possession• Condos – if unregistered at possession – tax payable at

transfer of ownership or 60 days following registration

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Transition – Imports

• Property/Services brought in – no HST on delivery of goods, invoicing of services after March 2013

• Imported into Canada – no HST where Customs import accounting done after March 2013

• Imported taxable supplies – no HST where consideration for supply payable after March 2013

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Transition – Taxable Benefits

Tax Factors:• Auto operating benefit – 5% 2012, 3.5% 2013, 3% 2014+• Other benefits – 11% 2012, 5.75% 2013, 4% 2014+• Passenger vehicle ITC – 12% 2012, 6.75% 2013, 5% 2014+• Employee/Partner rebates – 12% 2012. 6.75% 2013, 5% 2014+

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Legislation

News Release May 14, 2012:http://www.newsroom.gov.bc.ca/2012/05/legislation-delivers-on-promise-to-return-to-pst.html

Bill 54 – Provincial Sales Tax Act (royal assent May 31)

http://www.leg.bc.ca/39th4th/3rd_read/gov54-3.htm

• Cleaned up structure, more organized• Simplified administration• Much still subject to exceptions in regulations – Dec?• Draft transition rules legislation also expected this fall 17

LegislationTax Payable:• 7% on TPP, taxable services, mobile homes• Taxable services now include hotel accommodation (@ 8%)• New section for “related services”- taxes any service “in relation to”

TPP, “except in relation to legally related services”• Same graduated rates for passenger vehicles >55K (10% >57K)• 10% on liquor • 12% private sales of vehicles, boats & aircraft

Exemptions:• Food and restaurant• Manufacturing inputs and prototypes• Manufacturing equipment• TPP resupplied by lease• Copies of movies or broadcasts

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Legislation

Administration:• Online account access• Online registration (begins Jan 2013)• Return due date moved to month-end• Vendor number = Federal Business Number• Small sellers with annual revenue <$10K again not required to

register

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Legislation - ETAProposed change to definition of “basic tax content”:

Dept Finance Transition Rules:http://www.fin.gc.ca/n12/data/12-017_1-eng.asp

“The basic tax content of a person’s property is generally the amount of tax under Part IX of the ETA that the person was required to pay on the property and improvements thereto, after deducting any amounts (other than ITCs) that the person was entitled to recover by rebate, remission or otherwise and after taking into account any depreciation in the value of the property. As of Announcement Date, the BC component of HST would not be included in calculating the basic tax content of real property situated in BC or tangible personal property ordinarily situated in BC.” 20

Planning Exempt Activity:• Unrecoverable tax base likely narrowing • Focus on the differentials , consider delaying:• services/outsourcing• real property & improvements• building rent• Intangibles

Commercial Activity:• Unrecoverable tax base broadening• Focus on the differentials , consider accelerating:• Capital expenditures• Repairs to TPP 21

Planning

• Consider impacts on budgets/forecasting• Revisit existing long-term contracts, discuss pricing

implications• Systems/procedure changes• Tax codes• PST self-assessments• Documents/invoices

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Thank you!

frankie@fentontax.ca604.613.7223

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