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How does BC’s new HST affect me?

27/01/2010


How does BC’s new HST affect me? That has been the question on the minds of a lot of British Columbians recently. The announcement in July by the Federal and BC governments was unexpected, since there was no indication that BC was moving in that direction. In fact, during the May 2009 provincial election, the BC government had stated that we would not be moving to a Harmonized Sales Tax system. The proposed change has raised a furor among certain taxpayers and in certain industries, such as the restaurant industry, since the HST will have a more significant effect on them.

So how will the HST affect us? Let’s look at some areas that are affected by the change.
 
Businesses
 
Businesses will generally benefit from the change, because the HST will result in a simpler, more streamlined system of recording and remitting a single sales tax, rather than the current dual GST/PST system. Their costs will also decrease because certain purchases will no longer have a PST component, which was generally non-recoverable, and will be replaced by the provincial portion of the HST, which will generally be recoverable. If you currently charge the GST, you will now charge the HST. If you are currently able to recover the GST, you will be able to recover the HST.
 
However, the transitional rules will, in some cases, result in a need to be careful about how to track, and charge or recover, the HST. There are three key dates to keep in mind, for those items that are normally subject to the GST.
 
October 14, 2009:  If you sell a tangible personal property (i.e., goods), for delivery after June 30, 2010, and the payment was due between October 14, 2009 and April 30, 2010, or was paid within those dates, the HST does not have to be charged. While the purchaser is required to self-assess the HST, this is only applicable to “non-consumers”. This term includes the following:

  • A purchaser who acquires these supplies for consumption, use or supply in a business that is making GST/HST-exempt supplies (such as a daycare);
  • A purchaser who use simplified procedures to calculate their net tax (such as certain charities, public service bodies, and small businesses); and
  • Selected financial institutions will also have to self-assess the HST as applicable.

For those businesses that fit the criteria, and currently are not able to recover the GST, this cost would have to be calculated and remitted to the Canada Revenue Agency on their GST return that covers the period of July 1, 2010.  The latest that this amount is required to be remitted is November 1, 2010 and there will be a special form if your GST return is not due before this time period.
 
May 1, 2010: If you sell a tangible personal property (i.e., goods), for delivery after June 30, 2010, and the payment was due between May 1, 2010 and June 30, 2010, or was paid within those dates, you will be required to charge the HST.
 
July 1, 2010: The HST will be fully implemented on that date, and will be charged on all applicable goods being sold.
 
For the provision of services, the HST will apply on a pro-rated basis for services performed before and after July 1, 2010, unless at least 90% of the services have been provided prior to July 1, 2010, in which case the HST will not be charged, even if the invoice is issued after that date.
 
Consumers
 
Most goods are currently subject to the PST, and the change to the HST will not really be noticeable. However, there are certain goods and services that are currently not subject to the PST, but will be subject to the HST. A prime example is the restaurant industry, which is currently not subject to the PST, but will have to charge the HST next year.
 
On November 12, 2009, the Ontario government, which is rolling out its own HST at the same time as BC, announced that the Ontario component of the HST would not apply to qualifying prepared food and beverages sold for $4.00 or less. This has increased pressure on the BC government to provide a similar exemption. While the BC government has agreed to meet representatives of the industry, there has been no further word on this issue as at November 30.
 
Another area where consumers will see a change is new residential housing. As announced in November 18, 2009, the proposed HST rules include a rebate of the BC component of the HST, calculated at 5% of the cost of the residence up to $525,000 – a maximum rebate of $26,250. This will be in addition to the current GST housing rebate (if the property meets these conditions).   However, unlike the GST housing rebate, the provincial HST rebate is not eliminated once the price of the house exceeds $525,000.
 
So what happens to the PST?
 
Good question – you would think that it would disappear after July 1, 2010, and that is certainly the case – up to a point. However, there are some transitional issues to note. For example, what happens if you buy something before July 1, 2010, and return it after that date? Generally, there will be a refund of your PST, if you returned it by October 31, 2010.
 
For businesses, final PST returns will generally be required to be filed on or before July 23, 2010. For any PST adjustments that occur on or after July 1, 2010, the business will have to file a supplemental PST return on or before the 23rd day of the following month. There will also be a period of time when businesses could be subject to audits of their PST returns (for up to six years), so the PST will still be around for a while.
 
Summary
 
The shift from the GST to the HST will involve a transition for businesses and consumers, and the rules of the game are still being ironed out. Over the next few months, more information will become available, from both levels of government. The BC government has a website dedicated to the HST, at http://www.gov.bc.ca/hst. You can also contact the Ministry of Finance at (604) 660-4524 in Vancouver, or toll-free at 1 877 388-4440, or e-mail your questions to [email protected].
 
Alladin Versi, CMA, FCMA, CFP is a tax specialist with Meyers Norris Penny LLP, and currently leads the firm’s tax group for the Vancouver Island region. Based out of MNP’s Nanaimo office, he specializes in strategic corporate tax planning for businesses, corporate reorganizations, purchases and sales of businesses, as well as estate planning.