HST Summary of Helpful Files
Disclaimer: Please note this information has been compiled for the use of the members of Motor Coach Canada and Ontario Motor Coach Association. Files are based on GST and HST Legislation and CCRA Tax Authorities as of March, 29th, 2010. This information is intended for your general guidance and convenience of reference only. Tax Authorities can be amended at any time and therefore for the purpose of applying tax users should consult tax authorities. While MCC has strived to ensure the information is accurate, MCC cannot be held responsible for any costs or damages that a company may incur as a result of using this information. Companies are urged to make business decisions based on a thorough review of tax authorities and to seek professional advice and counsel as required. It is recommended that you consult directly with CCRA or your tax advisor to ensure you obtain the latest information and that the GST/HST advice you receive is based on the facts in your particular case.
For general information contact CCRA at 1800-959-5525 for service in English and 1800-959-7775 for service in French. All GST / HST Memoranda by chapter can be viewed at Memoranda Series.
June 25th New File on how to treat a tour in both an HST participating province and a non HST participating province Click Here!. Thank you to MCC member Watkin + Associates for this information for members.
May 2010 Information Sheet on Transition to Harmonized Sales Tax - Tour Packages -
Calculating the GST/HST on Tour Packages
This memorandum explains that suppliers who sell tour packages are required to identify the various elements of the package in order to determine the amount of the goods and services tax/harmonized sales tax (GST/HST), if any, that they must collect. It also sets out the rules for determining the portions of the tour package that are subject to tax at 5%, 13% or 0% under the Excise Tax Act (the Act).
1. Typically, suppliers such as tour operators purchase passenger transportation services, short-term and/or camping accommodation, sightseeing excursions, and other property and/or services which they assemble into tour packages and supply for an all‑inclusive price. Suppliers who sell tour packages in Canada must prorate the selling price of a package based on the value of the taxable and non-taxable property and services included in the package in order to determine the amount of the GST/HST that they must charge.
2. There are rules that must be applied when prorating the selling price of a tour package based on the value of the taxable property and services included in the package. Generally, taxable property and services are the property and services included in a tour package that, if supplied separately and not as part of a package, would be taxable at 5% or 13%. Before applying the rules found in section 163, the supplier must ensure that what is being supplied is a tour package.
For more information please visit: http://www.cra-arc.gc.ca/E/pub/gm/27-1/27-1-e.html
Harmonized Sales Tax for Ontario and British Columbia – Questions and Answers on General Transitional Rules for Personal Property and Services -
BC HST Transitional Rules
On July 23, 2009, B.C. announced its plans to implement a Harmonized Sales Tax for B.C. (the HST) which, subject to legislative approval, would come into affect July 1, 2010.
The link below is to the General Transitional Rules for British Columbia HST. The notice provides general descriptions of transitional rules for the HST that will be proposed to be enacted in the federal Excise Tax Act (ETA). It also provides general descriptions of provincial measures that will be proposes to be enacted to wind down the applicable provisions of the Social Service Tax Act (SSTA) and the Hotel Room Tax Act (HRTA).
Ontario HST Transitional Rules
There are several resources online that will help members understand the transitional rules for the Harmonizing of the Ontario Provincial Sales Tax and the Federal Goods and Services Tax. Those resources can be found at: http://www.rev.gov.on.ca/en/notices/hst/03.html- this focuses General Transitional Rules for Ontario HST and the winding down of the RST. KPMG also has and in-depth section on their website on the HST including a one hour free web presentation going over transitional rules, including passenger transportation service. http://www.kpmg.ca/en/ms/pstgst/index.html.
The Government transitional rules document states in example 17: In May 2010, a vendor sells a bus pass that entitles the purchaser to unlimited access to commercial bus services between Toronto and Niagara Falls during a two-month pass period from June 1st, 2010 to July 31st, 2010. The HST would NOT apply to the consideration for the sale of the pass."It is our understanding that the full transitional rules will be released before March 31st, so until that time it will be difficult to understandthe full implications on our members.
Passenger Transportation Services
In February 2010 Canada Revenue Agency Released Ontario and British Columbia: Transition to the Harmonized Sales Tax – Passenger Transportation Services that document can be found at: http://www.cra-arc.gc.ca/E/pub/gi/gi-054/gi-054-e.html
Place of Supply Rules
The Department of Finance announced proposed changes to the Harmonized Sales Tax (HST) place of supply rules in the regulations made pursuant to the Excise Tax Act. These rules specify whether, and at what rate, suppliers must charge the provincial component of the HST on their supplies of taxable property and services in Canada. There are also changes proposed to the related rules that, in certain circumstances, require self-assessment or provide for rebates of the provincial component of the HST on property or services where the property or services are brought into a province or are acquired in a province for consumption, use or supply outside that province.
Many of the current HST place of supply rules for property and services rely on the location of the supplier to determine whether a sale is subject to the provincial component of the HST. It is proposed that the HST place of supply rules for intangible personal property and services be changed so that there is less reliance on the supplier’s location and greater reliance on where the consumer of the intangible personal property or service is located. These changes will help to accommodate variable rates of the provincial component of the HST under the Provincial Choice Tax Framework Act and will modernize the rules to address changing business models and technological advances.
General Requirements for Books and Records
This memorandum explains the requirements under the Excise Tax Act (the Act) for registrants and certain non-registered persons to retain and make available books and records, documents and other information. Such records should enable the determination of the tax charged and remitted on taxable supplies of goods and services as well as the tax paid on business purchases and claimed as an input tax credit or rebate. Memorandum 15.1
Foreign Conventions and Tour Incentive Program
Tour Operators in Canada who are selling to inbound tour operators in other countries can claim a rebate for tour packages by completing Form106. The "tour operator" that you are selling your tour package to is eligible for a rebate. Canadian suppliers would be able to claim the rebate on that tour operators behalf. Source: http://www.cra-arc.gc.ca/E/pub/tg/rc4036/rc4036-e.html#P500_721 - The rebate amount for GST paid on the accommodations is 50% unless any night is on a train or a boat which is not eligible for the rebate, and any nights on those types of accommodations would have to attract GST and be calculated in the GST amount.
The rebate can be claimed by Canadian suppliers but you now have to file new Form GST106, Schedule2-Information on Claims Paid or Credited for Foreign Conventions and Tour Packages, for every reporting period in which they claim a deduction from their net tax because they paid or credited a rebate amount for tax that became payable on an eligible tour package or a foreign convention after March 31,2007.
The form you required is http://www.cra-arc.gc.ca/E/pbg/gf/gst106/gst106-09e.pdf
The primary benefit is that businesses can claim the provincial portion (i.e., 7 percent) of the Harmonized Sales Tax (HST) as an input tax credit (ITC). This is already the case for the federal Goods and Service Tax (GST), but not the Provincial Sales Tax (PST).
Once fully harmonized under the HST, both sales taxes can be claimed as ITCs resulting in an estimated $210 million tax savings for BC’s transportation sector.
Any business with annual gross revenue below $10 million can claim full ITCs. Businesses with annual gross revenue greater than $10 million are subject to temporary restrictions on ITCs, which the government announced will gradually expire by 2018. Until then, these businesses can only claim the federal portion of the HST (equivalent to 5-percent GST) for the following:
“Gross revenue” is defined as total revenue from all companies under the same ownership.
Gross revenue will be determined based on the total revenue for each fiscal year preceding the July 1 implementation / anniversary date. If it falls below the $10 million threshold, the business will be able to claim full ITCs starting with the next July 1 anniversary date (next “recapture period”), if it does not, ITC restrictions will continue to apply.
In the event that fiscal year revenue exceeds $10 million but the business claimed full ITCs in the next recapture period (starting July 1), it will be subject to assessment and penalties for the provincial portion of the HST (7 percent) that it claimed as an ITC.
Destination generally determines the applicable tax rate for domestic freight transportation services irrespective of where a shipment originates and the location of the business that initiates the shipment. In other words, the tax rate that prevails in the jurisdiction of destination is applicable.
For example, a freight transportation service from BC to AB will be subject to 5-percent GST even if the company that initiates the shipment is a BC-based business. A freight transportation service from AB to BC will be subject to 12-percent HST even if it is initiated by a business based in AB.
Based on current information, a business with more than $10 million in gross revenue would not be able to claim full ITC on a vehicle with a GVW less than 3,000 kg. Businesses with gross revenue greater than $10 million will only be able to claim the federal portion of the HST (5 percent) as an ITC when purchasing or leasing such vehicles until 2018.
There is, however, the possibility that the ITC restriction will only apply to passenger vehicles, not commercial vehicles. Additional clarification from the provincial government about the precise definition of a vehicle for the purpose of this restriction should be available in the coming months.
Companies with gross revenue below $10 million will able to claim the full ITC for the federal and provincial components of the HST when purchasing vehicles with GVW below 3,000 kg.
Although the Multi-Jurisdictional Vehicle (MJV) Tax is going to be phased out, the insurance and licensing portion of pro-rate fees payable to ICBC is not going to be affected. Pro-rate fees paid on or before June 30, 2010 will include MJV Tax.
It appears that fleets that will be renewing their pro-rate prior to June 30 will have to pay the full pro-rate amount including MJV Tax for the entire year.
ICBC insurance in BC is tax exempt(i.e., not subject to GST or PST). Insurance will remain exempt when the HST comes into effect.
The BC government has indicated that it will not be assessing an MJV exit tax.
There is a point-of-sale exemption for gasoline and diesel fuel. Gasoline and diesel will continue to be subject to the federal portion of the HST (equivalent to current 5-percent GST) but will not be subject to the provincial portion (equivalent to 7-percent PST).
Given that there is a point-of-sale exemption for the provincial portion of the HST and only the federal portion will apply to motor fuel sales (equivalent to current 5-percent GST), there should be no changes when filing International Fuel Tax Agreement (IFTA) returns.
Companies can continue to claim HST on independent contractors (owner-operators) in the same manner as they currently claim input tax credits for GST, assuming they are currently claiming them correctly.
Additional clarification is still required from the government, but it would appear that if the fuel is re-supplied to owner-operators, the company will likely have to charge the owner-operator HST on the fuel.
There is a point-of-sale exemption from the provincial portion of the HST on motor fuel purchases. As such, the company itself should only be subject to the federal portion of the HST (5 percent), which it can claim as an ITC.
However, when re-supplying fuel to owner-operators, the company will likely have to charge full HST (12percent). Owner-operators should be able to claim a 12-percent ITC for these fuel purchases.
For example, if an owner-operator fills up at a fuelling station and pays the bill directly, then the 7-percent BC point-of-sale rebate will apply. Only the 5-percentGSTwill be collected on the fuel purchase and the owner-operator will claim an ITC for that amount.
If an owner-operator fills up at a card lock facility but the fuel is billed to a company, the 7-percent BC HST point-of-sale rebate will apply and only the 5-percent GST will be collected on the billing to the company. However, when the company bills the owner-operator for the fuel there is effectively a re-supply for GST/HST purposes and the company will have to collect 12-percentHST on the billing for the fuel (and any other items billed to the owner-operator).The owner-operator will be entitled to claim a full ITC for the 12-percentHST.
It does not appear that the re-supply by the company to the owner-operator is the type of transaction to which the BC point-of-sale rebates will apply. At the end of the day, however, no GST or HST should become unrecoverable, because full ITCs can be claimed for all GST/HST charged to each of the parties.
It depends. If the accessorial charge is incidental to the movement of the goods, it is subject to the same rate as the shipment itself. The applicable tax rate is determined by the jurisdiction of destination.
However, if the accessorial charge is not incidental to the movement of the goods and the accessorial service is provided in BC, full HST will be applicable.
These shipments are considered to be split deliveries, with each delivery subject to the tax rate applicable in the jurisdiction of destination. For example, if there is a single shipment, but deliveries are split among BC, AB and ON, the applicable tax rate would be 12-percentHST for the portion of the shipment delivered to BC, 5-percent GST for the portion delivered in AB, and 13-percent HST for the portion delivered in ON.
Continuous international in-bond shipments, which are currently zero rated, will continue to be zero rated. This also applies to shipments with a stopover in an intermediate jurisdiction. For example, a shipment from WA destined to AB with a stopover in BC should not be subject to HST.
If the stopover is longer than would be considered reasonable in order to qualify as an incidental service to the movement of the goods, any accessorial charges would be HST taxable (e.g., storage fees).