1 / 38

Un-winding the HST*

Un-winding the HST*. The Society of Notaries Public of British Columbia BRIAN TITANICH SR. MANAGER COMMODITY TAX BDO CANADA LLP 21 APRIL 2012

stacie
Download Presentation

Un-winding the HST*

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Un-winding the HST* The Society of Notaries Public of British Columbia BRIAN TITANICH SR. MANAGER COMMODITY TAX BDO CANADA LLP 21 APRIL 2012 *The following is presented for educational purposes only. Readers should contact their tax advisors if questions arise related to material contained in this presentation. Client name - Event - Presentation title

  2. Outline • Background to De-Harmonization • Tax is Payable – So What? • New Housing Incentives • Questions Unwinding the HST

  3. BACKGROUND TO DE-HARMONIZATION Un-winding the HST

  4. Un-winding the HSTWhere Did It Start? • Announcements and Publications • August 26, 2011 British Columbians vote in favour of eliminating HST and returning to PST and GST system. • February 17, 2012 BC Finance Minister announces in a press release that HST will no longer apply to supplies where tax becomes payable on or after April 1, 2013. • February 17, 2012 BC Ministry of Finance releases Tax Information Notice #12 “Enhanced New Housing Rebates and Transitional Rules for the Re-implementation of the British Columbia Provincial Sales Tax”. Un-winding the GST

  5. Un-winding the HSTWhere Did It Start? • Announcements and Publications • February 17, 2012 Finance Canada releases “Transitional Rules Relating to the Elimination of the HST in British Columbia”. • February 24, 2012 CRA releases GST/HST Notice #270 “Elimination of the HST in British Columbia in 2013 – Questions and Answers”. • March 1, 2012 BC Ministry of Finance releases Tax Information Notice #13 “Grant for Purchasers of New Residential Housing Used as a Secondary or Recreational Residence”. • April 2, 2012 CRA releases update to Notice #270. • To date no federal or provincial legislation released. Un-winding the HST

  6. TAX IS PAYABLE SO WHAT? Un-winding the HST

  7. Un-winding the HSTWhy is “Tax Payable” so important? • Need to know when you are required to remit GST/HST. • Need to know when you are eligible to claim ITCs/Rebates. • Need to know whether to collect/pay GST at 5%/PST at 7%, just GST at 5% or HST at 12%. Un-winding the HST

  8. Un-winding the HST5%, 12% or 7%? • Rules • If tax becomes “payable” before April 1, 2013, HST at 12% should be applicable. • If tax becomes “payable” after March 31, 2013, GST at 5% should be applicable. • If tax becomes “payable” after March 31, 2013, PST at 7% should be applicable if supply is subject to PST.* • * HST Notice #12 – “When consideration becomes due will be determined in a manner consistent with the federal rules regarding consideration”. Un-winding the HST

  9. Un-winding the HSTTax Payable – General Rule • 168. (1) General rule — Tax under this Division in respect of a taxable supply is payable by the recipient on the earlier of the day the consideration for the supply is paid and the day the consideration for the supply becomes due. • "consideration" includes any amount that is payable for a supply by operation of law. Un-winding the HST

  10. Un-winding the HSTTax Payable – When is Consideration Due? • Determining when consideration is paid – relatively straight forward when money is paid. • Payment may not be money - must consider if payment made other than with money (e.g., barter transactions). • Determining when consideration becomes due a bit more involved. • Earliest of: • the day the supplier first issues an invoice (i.e., or the date of that invoice, if earlier); • the day the supplier would have, but for an undue delay, issued an invoice; and • the day the recipient is required to pay that consideration or part pursuant to an agreement in writing. Un-winding the HST

  11. Un-winding the HSTTax Payable – Types of Supplies • Sale of tangible personal property (i.e., goods) ^ • Services ^ • Intangible Personal Property ^ • Real Property ^ • Lease of property • Continuous Supplies (e.g., water , gas and electricity) • Construction Services • Holdbacks • Deposits • ^ Special overriding rules for these types of supplies will be discussed in subsequent slides. Un-winding the HST

  12. Un-winding the HSTTax Payable – Sale of Goods • Question #1: I invoice a customer before April 1, 2013 for the sale of computers. The customer pays the invoice on or after April 1, 2013. What rate of tax do I charge on this sale? • Since the consideration became due when you issued the invoice before April 1, 2013, the GST/HST became payable on the date of the invoice and this is before April 1, 2013, you would charge the customer the 12% HST. • Overriding Rule • …where all or any part of the consideration for a taxable supply has not been paid or become due on or before the last day of the calendar month immediately following the first calendar month in which … where the supply is of tangible personal property by way of sale … the ownership or possession of the property is transferred to the recipient…tax under this Division in respect of the supply, calculated on the value of that consideration or part, as the case may be, is payable on that day. Un-winding the HST

  13. Un-winding the HSTTax Payable – Sale of Goods – Overriding Rule • Question #2: In June 2012, we have a sales promotion where our customers purchase furniture without having to make any payments until June 2013. Our customers receive ownership and possession of this furniture in June 2012, but would not receive an invoice for payment until June 2013? • Customer does not pay or receive an invoice until after March 31, 2013. Does GST at 5% and PST at 7% apply? • No, HST at 12% applies. Because the customers receive possession and/or ownership of the furniture in June 2012, the 12% HST is considered to be payable at the end of July 2012. Since this date is before April 1, 2013, the 12% HST applies to the sale of this furniture. Un-winding the HST

  14. Un-winding the HSTTax Payable – Services • Question #3: I am a real estate broker. In March 2013, I enter into a listing agreement with a vendor to arrange for the sale of the vendor’s house situated in British Columbia. The closing date of the sale is on or after April 1, 2013, which is when I will issue the invoice to the vendor for my services. What rate of tax would I charge on these services? • Since you would be issuing the invoice on or after April 1, 2013, you would charge 5% GST. Must not be an undue delay in issuing the invoice. • Other than construction services that are entered into under a written agreement and are expected to take more than three months to complete, there are no specific overriding rules for services. Un-winding the HST

  15. Un-winding the HSTTax Payable – Intangible Personal Property* • Question #4: We are selling admissions to a concert that is to be held in June 2013. If customers purchase tickets in December 2012 to attend this concert, what rate of tax would apply to the purchase of these tickets? • The 12% HST rate would apply to tickets purchased before April 1, 2013, for admission to a concert to be held on or after April 1, 2013. • Question #5: What rate of tax would apply to a magazine subscription renewal if it is accepted and paid by the customer before April 1, 2013 but the magazines would be provided to the customer on or after April 1, 2013? • If the magazine subscription renewal payment is made before April 1, 2013, or becomes due before April 1, 2013, the amount would be subject to 12% HST, even though the magazines would be provided on or after April 1, 2013. • * No overriding rule for Intangible Personal Property Un-winding the HST

  16. Un-winding the HSTTax Payable – Sales of Real Property • Overriding Rule - Tax is payable (except for special condo sales) on the earlier of the day ownership of the property is transferred to the recipient and the day possession of the property is transferred to the recipient under the agreement for the supply. • Question #6: When would the 5% GST apply to a taxable sale of real property in British Columbia? • The 5% GST would apply in respect of a sale of real property, if both ownership and possession of the property transfer to the purchaser after March 31, 2013, and payment is not made or becomes due before April 1, 2013. Un-winding the HST

  17. NEW HOUSING INCENTIVES Un-winding the HST

  18. Un-winding the HSTEnhanced New Housing Rebates • For new homes currently entitled to the BC new housing rebate that are subject to HST (12%) between April 1, 2012 and March 31, 2013: • Enhanced PVAT rebate – 71.43% of PVAT up to a maximum of $42,500 (Purchase price up to $850,000). • Prior to April 1, 2012 rebate was available up to a maximum of $26,250 (Purchase price up to $525,000). • No GST rebate if house over $450,000. • Houses over $850,000 still entitled to $42,500 rebate. • Does not include new homes were HST became payable between announcement date (February 17, 2012) and March 31, 2012. Un-winding the HST

  19. Un-winding the HSTEnhanced New Housing Rebates • Example #1 • I buy a new house from a builder and both ownership and possession transfer to me under the written agreement of purchase and sale on May 31, 2012. The purchase price of the home is $875,000 plus the HST. Would I be eligible for the enhanced B.C. new housing rebate? • As the HST on your purchase will be payable on or after April 1, 2012 and before April 1, 2013, you would be eligible for the maximum enhanced B.C. new housing rebate of $42,500, provided you meet the conditions for the existing B.C. new housing rebate. Un-winding the HST

  20. Un-winding the HSTEnhanced New Housing Rebates • Example #2 • On November 15, 2011, I entered into a written agreement of purchase and sale to buy a new duplex for $950,000 plus HST. Under the agreement, possession of the duplex will transfer to me on March 24, 2012, but title won’t transfer until April 1, 2012. Would I be eligible for the enhanced B.C. new housing rebate? • The HST on your purchase becomes payable on March 24, 2012, which is the earlier of the day that ownership or possession of the duplex is transferred under the agreement. As the HST becomes payable prior to April 1, 2012, the enhanced B.C. new housing rebate would not be available on this purchase. • You would be eligible to recover 71.43% of the 7% provincial part of the HST that you paid on the purchase price of the duplex, to a maximum of $26,250. Un-winding the HST

  21. Un-winding the HSTEnhanced New Housing Rebates • Example #3 • On February 14, 2012, I entered into a written agreement to purchase a new single-unit house from a builder for $800,000 plus the HST. Ownership and possession transfer to me under the agreement, and the HST becomes payable, on July 31, 2012. At the time we entered into the agreement, I qualified for the maximum existing B.C. new housing rebate of $26,250 and the builder agreed to pay or credit the rebate amount to me. Would I now be eligible for the enhanced B.C. new housing rebate? • As the HST on your purchase will be payable on or after April 1, 2012 and before April 1, 2013, your B.C. new housing rebate would be subject to the proposed enhanced rebate threshold of $42,500. The total of your enhanced B.C. new housing rebate would be $40,001 ($800,000 × 7% × 71.43%). Un-winding the HST

  22. Un-winding the HSTEnhanced New Housing Rebates • Example #4 • On December 1, 2012, I enter into a written agreement to purchase a new single-unit house from a builder and both ownership and possession are to transfer to me under the agreement on March 31, 2013. However, due to unforeseen construction delays, ownership and possession transfer to me on • June 30, 2013. The agreement indicates that the purchase price of the home is $800,000 plus the HST. Would I be eligible for the enhanced B.C. new housing rebate? • If ownership and possession do not transfer to you until June 30, 2013, the HST would no longer be payable on your purchase of the house. The GST and the B.C. transition tax would apply (explained later). As such, you would not be eligible for either the existing or the enhanced B.C. new housing rebate. Un-winding the HST

  23. Un-winding the HSTEnhanced New Housing Rebates • Qualifying Houses • Must be used as a primary place of residence by the individual purchaser or a relation of the individual. • Must be newly constructed or substantially renovated homes (e.g., single unit homes, residential condominium units and duplexes). • Includes • New homes purchased together with leased land. • New mobile homes and floating homes. • Houses acquired through the purchase of qualifying shares in a housing co‐op. Un-winding the HST

  24. Un-winding the HSTEnhanced New Housing Rebates • Owner Built Homes • Owner (individual) built homes or substantially renovated homes are eligible for the enhanced rebate provided, on or after April 1, 2012, the construction/renovation is 90% completed. • Application must be filed with CRA. • HST Paid on Land • Owner entitled to 71.43 % of the provincial component of the HST paid on qualifying construction expenses (including land), up to a maximum rebate of $42,500. No phase‐out of this rebate. • No HST Paid on Land • Owner entitled to 71.43 % of the provincial component of the HST paid on • qualifying construction expenses up to a maximum rebate amount of $28,475 (i.e., 67 per cent of $42,500). Un-winding the HST

  25. Un-winding the HSTEnhanced New Housing Rebates • "substantial renovation" of a residential complex means the renovation or alteration of a building to such an extent that all or substantially all of the building that existed immediately before the renovation or alteration was begun, other than the foundation, external walls, interior supporting walls, floors, roof and staircases, has been removed or replaced where, after completion of the renovation or alteration, the building is, or forms part of, a residential complex. • Generally, all or substantially all = 90% or more • TIB - 092 Un-winding the HST

  26. Un-winding the HSTEnhanced New Housing Rebates • Claiming of Rebates • Generally rebates must be claimed within two years after the day ownership of the complex or unit is transferred to the individual (no changes). • For owner built homes and co-op shares the application must be filed with the CRA before April 1, 2017. • New Housing rebates can be assigned by purchaser to the builder. • Where builders have agreed to pay or credit the existing B.C. new housing rebate, they are encouraged to pay or credit the enhanced portion as well. • If the builder pays or credits only the existing B.C. new housing rebate and the • purchaser is also entitled to the enhanced portion, the purchaser could still receive the enhanced portion by contacting the CRA directly. Un-winding the HST

  27. Un-winding the HSTEnhanced New Rental Housing Rebates • Enhanced new rental housing rebates will be provided to landlords required to pay HST on a self‐supply that occurs on or after April 1, 2012 and before April 1, 2013. • Enhanced rebates will be provided to landlords that purchase newly • constructed or substantially renovated rental housing in B.C. where the HST • becomes payable on or after April 1, 2012 and before April 1, 2013. • Enhanced new Rental Housing Rebates cannot be assigned to the builder. • To qualify for the rebate it must be shown that it can reasonably be expected that the first use of the housing will be for occupancy or use by an individual under a rental arrangement, or for occupancy by the builder, as a primary place of residence for a period of at least one year. Un-winding the HST

  28. Un-winding the HSTEnhanced New Rental Housing Rebates • Qualifying Housing for New Rental Housing Rebates • single‐unit housing, residential condominium units and duplexes; • mobile homes and floating homes; • units in multiple unit housing (e.g., residential units in traditional apartment • buildings or long‐term residential care facilities); and • single‐unit housing or units in multiple unit housing in a housing co‐op. Un-winding the HST

  29. Un-winding the HSTTransitional Rules for New Housing • PST will • not apply to sales of real property. • apply to certain types of housing (e.g., a mobile home purchased without land) where possession transfers on or after April 1, 2013. • apply to construction inputs that are used to improve real property on or after April 1, 2013. • 2% Transition tax • applies to sales of new housing that will not be subject to HST (only GST); • if 10% or more of the housing is completed as of April 1, 2013; and • ownership or possession of the new housing transfers, or a self‐supply occurs, before April 1, 2015. Un-winding the HST

  30. Un-winding the HSTTransitional Rules for New Housing • 2% Transition tax (continued) • 2% transitional tax is calculated on total consideration for the new housing (including land); • transitional tax is generally payable by the purchaser; • transitional tax will become payable on same date as GST; and • will be collected by the builder and remitted to CRA. Un-winding the HST

  31. Un-winding the HSTEnhanced New Housing Rebates • What is a “self-supply” and when is it triggered? • A self-supply is a situation where a builder of new housing is considered to make a sale and repurchase of the housing and to have both collected and paid the HST at the time of the self-supply. • A self-supply by a builder is triggered at the later of the time construction or substantial renovation of the housing is substantially completed and the time possession or use of the housing, or a unit in the housing, is given under a lease, licence or similar arrangement for use by an individual who is the first to occupy the housing as a place of residence. Un-winding the HST

  32. Un-winding the HSTTransitional Rules for New Housing • Self-supplies • If builder is required to pay GST on self-supply made on or after April 1, 2013; and • Construction or substantial renovation of the housing is more than 10% completed as of April 1, 2013. • Builder will be required: • to pay the transitional tax of 2% on the fair market value of the housing; • the transitional tax is payable on the day of self-supply; and • a specified form will be used to report the transitional tax. Un-winding the HST

  33. Un-winding the HST Transitional Rules for New Housing • Transitional Rebate • Transitional rebate available to builders only; • Transitional rebate only available if transitional tax has become payable; • Transitional rebate on sales of new housing calculated on the total consideration for the housing and the degree of completion as of April 1, 2013; • Transitional rebate available to builders who are required to self-assess on new housing on or after April 1, 2013, calculated on fair market value under self-supply rules and the degree of completion of the housing as of April 1, 2013. • No transitional rebates for sales of mobile homes, floating homes and owner built homes. Un-winding the HST

  34. Un-winding the HSTB.C. Transitional Rebate • Degree of completion of construction or Transition rebate as a percentage of • substantial renovation as of April 1, 2013 consideration or fair market value • Less than 10 per cent not applicable • 10 per cent ≤ and < 25 per cent 1.5 per cent • 25 per cent ≤ and < 50 per cent 1.0 per cent • 50 per cent ≤ and < 75 per cent 0.5 per cent • 75 per cent ≤ and < 90 per cent 0.2 per cent • 90 per cent or greater 0.0 per cent Un-winding the HST

  35. Un-winding the HSTB.C. Transitional Period • Builder Certification Requirements • To claim the B.C. transition rebate, the builder will be required to certify that it paid PST on substantially all of the building materials that were incorporated on or after April 1, 2013 into the new construction. The builder will also be required to keep receipts for audit purposes. • Builder Disclosure Requirements • Written agreements of purchase and sale of newly constructed or substantially • renovated housing entered into by builders will be required to contain certain disclosures to purchasers and to the CRA. Un-winding the HST

  36. Un-winding the HSTB.C. Transitional Period • Penalties • If the builder fails to fully and accurately disclose the required information, a • penalty of up to 1 per cent of the home price to a maximum of $10,000 per home; • If the builder knowingly, or under circumstances amounting to gross negligence, • makes or participates in making a false statement or fails to fully and accurately • disclose the required information, a penalty of up to 4 per cent of the home price • to a maximum of $40,000 per home. Un-winding the HST

  37. Un-winding the HSTB.C. Grants for Purchasers of New Housing • Must be purchases of new housing for use as a secondary or recreational residence; • Provincial component of the HST becomes payable and is paid on such homes on or after April 1, 2012 and before April 1, 2013; • Home must be located in a qualifying area of the province (outside the Capital Regional District and the Greater Vancouver Regional District) and purchased or constructed for use as a secondary or recreational residence; • Grant equivalent to New Housing Rebate • Purchasers of new secondary and recreational residences are required to apply for the grant directly to the Ministry of Finance. • Applications for the grant must be received by the Ministry within 6 months of the payment of the HST and prior to October 1, 2013. Un-winding the HST

  38. QUESTIONS Un-winding the HST

More Related