BC HST Update Presentation - Frankie Fenton, CMA

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Frankie Fenton, CMA presents to the Fraser Valley Chartered Accountants Association

Frankie Fenton, CMA presents to the Fraser Valley Chartered Accountants Association

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  • Conditions same as existing NHRNHR: s 254 - general, 254.1 – building only, 256 - owner built, 256.2 – rentalBC & Ont – 256.21 (regs)BC & Ont - New Harmonized Value-Added Tax System Regulations, No.2Division 2vs GST – caps at $350K, gradually claws back until $450K, then no rebate
  • Owner-built homes, no HST paid on land – max rebate $28,475
  • Conditions same as existing NHRPer Notice #13 - Unless otherwise stated or the circumstances otherwise require, the definitions and concepts in the Excise Tax Act apply Long –term vacation rentals - term to qualify as exempt - definition residential complex excludes hotel motel or lodge, similar, periods of continuous possession or use of less than 60 days – apply for these purposes?
  • There are few other special transition rules announced, for less common issues – see Finance’s release Feb 17th (link on later slide) -performance bonds, some self-supplies of real property, pension plans, PSB’s, financial institutions
  • Legislation – Bill 56 New Housing Transition Tax and Rebate Act (May 28)Does not apply to:unaffixed mobile/floating homes owner-built homesGrandparented (ag’t before Nov 18, 2009)Note - special rules for double-straddled homes
  • Details to come in regsRequired written statement (post-Feb 17, 2012):“If ownership and possession of a newly constructed or substantially renovated home transfer on or after April 1, 2013:the 7 per cent provincial component of the HST and the B.C. new housing rebate for primary residences will generally no longer apply;a B.C. transition tax of 2 per cent may become payable; andthe builder may become eligible for an associated B.C. transition rebate.”
  • Similar to Fed rules on implementation of HSTExpect BC to release some of their own PST transitional rulesNote – times when GST/HST deemed to become payable:Undue delay on issuing invoice – when invoice would normally have been issuedWritten agreement provides earlier date than invoice – agreement supercedesLeases – earlier of when each monthly payment is due or is paidOwnership or possession is transferred – GST deemed payable on last day of calendar month following month of transferWritten agreements for construction/repair of real property >3 months – GST deemed payable on last day of calendar month following month when work substantially completed
  • Expected that this is just the Fed side of transition rules. Opening the floodgates for This is also a bit more simplistic than what we saw in 2010 – Goods: “to extent “ delivery/ transfer of ownership is after June 2010Svc: “ to extent “ consideration relates to portion of svc performed after June 2010Special rules for subscriptions, transportation , memberships, etc
  • Bill 54 – Provincial Sales Tax Act
  • Letter written by ____ fearmongering
  • Most not in legislation, will be either in regs or admin only.
  • Announcement Date – Aug 26, 2011Basic Tax Content – Finance has concern over potential abuse. Once BC de-harmonizes, Ottawa will have no mechanism to recover the provincial portion of a rebate/ITC from BC.  There have been ongoing discussions with Finance in Ottawa regarding the proposed change, particularly the unfairness when a person makes a taxable sale of real property prior to April 1, 2013.  In this situation, tax is collected at 12% but the vendor can claim a rebate/ITC of only the federal portion of the tax paid on acquisition; the 7% provincial portion is unrecoverable resulting in tax cascading.  Finance will only say that they are re-examining the provision.  approached BC Finance about a rebate of the provincial portion  of the HST when a taxable sale is made after April 1, 2012 in recognition of the fact that sales of real property are not subject to PST. So far nothing – there was no mention of such a rebate in Bill 56 announced Rumours of regs addressing this later this fall

Transcript

  • 1. BC HST/PST TransitionUpdateFrankie Fenton 1
  • 2. Agenda• New Measures• Transition Rules• Legislation• Planning 2
  • 3. New Measures• Enhanced New Housing Rebate for the provincial portion of HST• New grant, similar to New Housing Rebate, for secondary and recreational properties 3
  • 4. 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 4
  • 5. 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 5
  • 6. 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, 2013Note – must be applied for within 6 months of earlier oftransfer 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 6
  • 7. New Measures – NH GrantSecondary 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 7
  • 8. Transition Rules• Residential Property Sales – • Transitional Tax Adjustment • Transition Rebate • Builder Disclosure Requirements• General Property and Services• Importations• Taxable Benefits 8
  • 9. Transition – PublicationsFederal:Notice 270 - re elimination of HST – transition Q&A:http://www.cra-arc.gc.ca/E/pub/gi/notice270/README.htmlNotice 272 - re enhancements to new housing rebates:http://www.cra-arc.gc.ca/E/pub/gi/notice272/README.htmlDept Finance Transition Rules:http://www.fin.gc.ca/n12/data/12-017_1-eng.aspBC:News release February 17, 2012 (transition rules)http://www.newsroom.gov.bc.ca/2012/02/transition-measures-support-new-home-buyers-builders.htmlHST Notice #12 – re enhancement to new housing rebate, and housing transition rules:http://www.pstinbc.ca/media/2012_housing_rules_FEB.pdfHST Notice #13 – re new housing grant: 9http://www.sbr.gov.bc.ca/documents_library/notices/hst_notice_013.pdf
  • 10. Transition - ResidentialBill 56 – New Housing Transition Tax and Rebate Act (royal assent May 31)http://www.leg.bc.ca/39th4th/3rd_read/gov56-3.htmTransitional 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 builderTransition Rebate: • Available to the builder • Only applicable where transition tax applied to supply of home 10 • Computed on sale price, based on degree of completion at April 1, 2013
  • 11. Transition - ResidentialBuilder 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 11
  • 12. Transition – GeneralProperty and Services:Tax applies based on when it becomes payable or is paid withouthaving come duePayable = earliest of invoice, date of invoice, or day invoice wouldnormally be issued (note times when tax deemed to become payable) 12
  • 13. Transition – GeneralProperty and Services:Invoiced (or paid before invoice) before April 1, 2013, HST appliesInvoiced (or paid before invoice) after March 2013, GST/PST apply 13
  • 14. Transition – GeneralLeases – payment (tax) becomes due on date stipulated in leaseagreementReal 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 14
  • 15. 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 15
  • 16. Transition – Taxable BenefitsTax 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+ 16
  • 17. LegislationNews Release May 14, 2012:http://www.newsroom.gov.bc.ca/2012/05/legislation-delivers-on-promise-to-return-to-pst.htmlBill 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
  • 18. 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 & aircraftExemptions:• Food and restaurant• Manufacturing inputs and prototypes• Manufacturing equipment• TPP resupplied by lease• Copies of movies or broadcasts 18
  • 19. LegislationAdministration: • 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 19
  • 20. 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 oftax under Part IX of the ETA that the person was required to pay on theproperty and improvements thereto, after deducting any amounts (otherthan ITCs) that the person was entitled to recover by rebate, remission orotherwise and after taking into account any depreciation in the value ofthe property.As of Announcement Date, the BC component of HST would not beincluded in calculating the basic tax content of real property situated in 20BC or tangible personal property ordinarily situated in BC.”
  • 21. PlanningExempt Activity:• Unrecoverable tax base likely narrowing• Focus on the differentials , consider delaying: • services/outsourcing • real property & improvements • building rent • IntangiblesCommercial Activity:• Unrecoverable tax base broadening• Focus on the differentials , consider accelerating: • Capital expenditures • Repairs to TPP 21
  • 22. Planning• Consider impacts on budgets/forecasting• Revisit existing long-term contracts, discuss pricing implications• Systems/procedure changes • Tax codes • PST self-assessments • Documents/invoices 22
  • 23. Thank you!frankie@fentontax.ca 604.613.7223 23