By Gary F. Chow, CA
Harmonized
Sales Tax for British Columbia
Legislation
has been proposed to harmonize the B.C .Social Services Tax (PST) with the
federal Goods and Services Tax (GST) to create a Harmonized Sales Tax (HST) as
of July 1, 2010. The HST in British
Columbia would be 12%, consisting of the 5% federal portion and a 7% provincial
portion.
Many
goods and services purchased by public service bodies presently not subject to
PST will be subject to the new HST, resulting in a cost increase (7% in B.C.),
less any proposed new partial rebate that applies. For example, the following expenses currently
taxed at only 5% GST (no PST) will be subject to 12% HST: commercial real
property rentals and leases, internet and web hosting services, professional
and consulting services and advertising services.
Current Registrants
Organizations
that are currently registered for GST will start collecting 12% HST in lieu of
GST on sales of taxable goods and services as of July 1, 2010. Your existing GST number will remain the same
for HST purposes.
Rebates for Charities
and Non-Profit Organizations
Currently,
charities and qualifying not-for-profit organizations are eligible to receive a
rebate of 50% of any GST paid that is not eligible for Input Tax Credits. Eligible hospitals, schools, colleges and
municipalities receive rebates ranging from 67% to 100% of the federal GST
paid.
A
partial rebate of the provincial portion of the HST is proposed for charities
and qualifying not-for-profit organizations that are currently eligible for GST
rebates. The partial rebates will be
·
Charities and qualifying
non-profit organizations: 57%
·
Hospital and health
authorities: 58%
·
Eligible facility operators
and external suppliers: 58%
·
Eligible universities and
public colleges: 75%
·
Municipalities: 75%
·
Eligible schools: 87%
The
rebates will be administered by the Canada Revenue Agency in a consistent
manner with current GST rebate practices.
Transitional Rules
Generally,
HST will apply to the sale of taxable goods and services if the goods are
delivered and ownership is transferred on or after July 1, 2010. A full
analysis of the various transitional rules on the implementation of HST is
beyond the scope of this article; however we have outlined some key
transitional rules below:
1. Prepayments
on Goods or Services
The
transitional rules for prepayments on goods where ownership will be transferred
or services rendered on or after July 1, 2010 fall into three categories:
·
Prepayments becoming due or
made prior to October 14, 2009 – HST is not applicable;
·
Prepayments becoming due or
made between October 14, 2009 and May 1, 2010 – HST will not be charged by the
vendor, but may be subject to self-assessment by certain businesses; and
·
Prepayments becoming due or
made on or after May 1, 2010 – HST is applicable.
The
self-assessment requirement for prepayments made between October 14, 2009 and
May 1, 2010 is applicable for businesses where the goods or services acquired
are not used exclusively in its commercial activities or the goods are subject
to a restriction on the ITCs. The
business would be able to claim ITCs on the self-assessment if they are not
subject to any restrictions.
2. Services
In
most cases, when the performance of services straddles the July 1, 2010
transition date, HST will apply to the portion of the services performed on or
after July 1, 2010. For example, for a
2-month service contract where 50% of the service is performed in June 2010 and
50% is performed in July 2010, HST will apply on the 50% relating to July. HST will not apply if the service is substantially
all (90% or more) performed prior to July 1, 2010.
3. Leases
Similar
to services, HST will be applicable to the time interval of the lease that
relates to the period on or after July 1, 2010. For example, for a 6-month lease interval from
May to October, HST will apply to the 4-month portion from July to October.
HST
will not apply if the lease interval begins before July 1, 2010 and ends on or
before July 31, 2010.
