[PPT] - Ontario Sales Tax Ontario Sales Tax Harmonization Harmonization PowerPoint Presentation

SLIDE 1

Prepared by: Horne LLP Prepared by: Horne LLP 1

Ontario Sales Tax Ontario Sales Tax Harmonization Harmonization

Horne LLP Horne LLP March 31 March 31st

st, 2010

, 2010

SLIDE 2

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Outline Outline

Background

Overview

GST / HST Basics

Transition Rules

Recaptured ITC

Recaptured ITC’ ’s s

New Place of Supply Rules

Winding Down the RST

Preparing for HST

Mandatory Electronic Filing

Questions and Answers

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Background Background

Implementation of GST / QST / HST

Implementation of GST / QST / HST

Comprehensive Tax Reform in Ontario and B.C.

Comprehensive Tax Reform in Ontario and B.C.

Corporate tax cuts

Personal tax cuts

Transitional payments

Sales Tax Harmonization

Sales Tax Harmonization

March 28

March 28th

th, 2009

, 2009 – Budget Announcement Budget Announcement

October 14

October 14th

th, 2009

, 2009 – General Transition Rules General Transition Rules

December 15

December 15th

th, 2009

, 2009 – Federal and Ontario Bills Pass Federal and Ontario Bills Pass

February 1

February 1st

st, 2010

, 2010 – Recapture of ITC Recapture of ITC’s

February 25

February 25th

th, 2010

, 2010 – New Place of Supply Rules New Place of Supply Rules

Future?

Future?

Information:

Information:

Canada

Canada www.cra.gc.ca/harmonization www.cra.gc.ca/harmonization

Ontario

Ontario www.ontario.ca/taxchange www.ontario.ca/taxchange

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Overview of HST Overview of HST

Single Rate Value Added Tax Effective

Single Rate Value Added Tax Effective July 1 July 1st

st, 2010

, 2010

13% rate (8% OVAT, 5% GST)

Administered by CRA

Same base and structure as GST

Exceptions?

Exceptions?

Point of Sale Rebates

Recaptured ITC

Recaptured ITC’ ’s s

Continuing Taxes

New Housing Rebate

Loss of Vendor Compensation

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Point of Sale Rebates Point of Sale Rebates

Children

Children’ ’s clothing and footwear s clothing and footwear

Children

Children’ ’s car seats and car booster seats s car seats and car booster seats

Diapers

Diapers

Feminine hygiene products

Feminine hygiene products

Books (including audio)

Books (including audio)

Printed newspapers

Printed newspapers

Prepared food products sold for $4 or less

Prepared food products sold for $4 or less

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Recaptured ITC Recaptured ITC’ ’s s

Applies to large businesses, financial

Applies to large businesses, financial institutions, and related entities institutions, and related entities

Restricts

Restricts OVAT portion of ITC for: OVAT portion of ITC for:

Energy

Telecommunications services

Road vehicles less than 3,000 kilograms

Food, beverage and entertainment expenses

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Continuing Taxes (ORST?) Continuing Taxes (ORST?)

Alcohol

Alcohol

Transient accommodation

Transient accommodation

Private sales of specified vehicles not

Private sales of specified vehicles not subject to GST subject to GST

Insurance Premiums (except auto)

Insurance Premiums (except auto)

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New Housing Rebate New Housing Rebate

Refunds for buyers of:

Refunds for buyers of:

New homes

New residential rental property

OVAT refund of up to $ 24,000

OVAT refund of up to $ 24,000

Regardless of the price of new home

Regardless of the price of new home

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GST / HST Basics GST / HST Basics

Recipient

Recipient

person liable to pay consideration for the supply

person liable to pay consideration for the supply

Supply

Supply

provision of property or a service in any

provision of property or a service in any manner, including sale, transfer, barter, manner, including sale, transfer, barter, exchange, license, rental, lease, gift or disposition exchange, license, rental, lease, gift or disposition

Consideration

Consideration -

includes any amount that is payable

includes any amount that is payable for a supply by operation of law for a supply by operation of law

GST/HST is payable by the

GST/HST is payable by the recipient recipient on the earlier of:

n the earlier of:
The day the

The day the consideration consideration for a for a supply supply is paid, and is paid, and

The day the

The day the consideration consideration for the supply becomes due for the supply becomes due

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Consideration Becomes Due Consideration Becomes Due

Earliest of the following days:

Earliest of the following days:

The date of the invoice for the amount of the

The date of the invoice for the amount of the supply; supply;

The day the supplier first issues the invoice for the

The day the supplier first issues the invoice for the amount; amount;

If there is an undue delay in issuing the invoice,

If there is an undue delay in issuing the invoice, the day the supplier would have issued the the day the supplier would have issued the invoice; and invoice; and

The day the client is required to pay the amount

The day the client is required to pay the amount under a written agreement. under a written agreement.

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General Transition Rule General Transition Rule

Supply on or after July 1 Supply on or after July 1st

st, 2010

, 2010 and and Consideration due or paid without becoming due Consideration due or paid without becoming due (A) (A) (B) (B) (C) (C) (D) (D)

Oct. 14th
Oct. 14th

May 1st May 1st July 1st July 1st 2009 2009 2010 2010 2010 2010

A. A.

No OVAT, ORST applies No OVAT, ORST applies

B. B.

Certain purchasers required to self Certain purchasers required to self-

assess OVAT (

assess OVAT (eg

eg. financial

. financial institutions, those using simplified accounting methods), ORST a institutions, those using simplified accounting methods), ORST applies pplies

C. C.

Vendors required to collect OVAT, no ORST applies Vendors required to collect OVAT, no ORST applies

D. D.

HST rules apply HST rules apply

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Requirement to Self Assess OVAT Requirement to Self Assess OVAT

Certain purchasers (other than consumers) are

Certain purchasers (other than consumers) are required to self required to self-

assess the OVAT if:

assess the OVAT if:

The supply is:

Not used exclusively in commercial activities, (e.g. exempt

Not used exclusively in commercial activities, (e.g. exempt supplies) or supplies) or

Subject to ITC restriction or recapture

Or, the purchaser:

Uses simplified procedures to calculate net tax under the ETA

Uses simplified procedures to calculate net tax under the ETA (e.g. Quick Methods), or (e.g. Quick Methods), or

Is a selected listed financial institution using the special

Is a selected listed financial institution using the special attribution method to calculate net tax attribution method to calculate net tax

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Transitional Rule Transitional Rule – – Sale of Goods Sale of Goods

Sale of goods where goods are Sale of goods where goods are delivered and ownership is transferred delivered and ownership is transferred to the purchaser to the purchaser

n or after July 1
n or after July 1st

st, 2010

, 2010

Does any part of the amount for the goods become due or is paid without having become due on or after July 1st, 2010? Does any part of the amount for the goods become due or is paid without having become due on or after May 1st, 2010 and before July 2010? HST applies to that part of the amount Does any part of the amount for the goods become due or is paid without having become due after October 14th, 2009 and before May 2010? HST applies to that part of the amount

GST applies to any part of an amount that becomes due or is paid without having become due on or before October 14th, 2009 GST applies to that part of the amount but certain non-consumers have to self-assess the provincial part of the HST on that part of the amount

Yes No No Yes Yes No

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Transitional Rule Transitional Rule – – Lease of Goods Lease of Goods

Lease of goods when a lease interval begins before July 2010 and Lease of goods when a lease interval begins before July 2010 and ends on or after ends on or after July 31 July 31st

st, 2010

, 2010

Does the lease payment become due or is paid without having become due on or after May 1st, 2010? Does the lease payment become due

r is paid without having become due on or

after October 14th, 2009 and before May 2010? GST applies to the part of the lease payment for the portion of the lease interval that is before July 2010; HST applies to the part of the lease payment for the portion of the lease interval that is on or after July 1st, 2010

GST applies GST applies but certain non-consumers have to self-assess the provincial part of the HST

No No Yes Yes

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Transitional Rule Transitional Rule -

Services

Services

Services performed during the period that includes July 1 Services performed during the period that includes July 1st

st, 2010

, 2010

Is more than 10% of the service performed on or after July 1st, 2010? Does any part of the amount for the service become due or is paid without having become due on or after May 1st, 2010 GST applies to the full amount due for the service, regardless of when an amount becomes due

r is paid without having become due

GST applies to any part of the amount for the portion

f the service performed before July 2010

HST applies on any part of the amount for the portion of the service performed on or after July 1st, 2010 Does any part of the amount for the service become due or is paid without having become due after October 14th, 2009 and before May 2010?

No Yes Yes No No

GST applies but certain non-consumers have to self -assess the provincial part of the HST on the portion of the service performed on or after July 1st, 2010 GST applies

Yes

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Transitional Rule Transitional Rule – – Intangible Intangible Personal Property Personal Property

IPP includes contractual rights, intellectual IPP includes contractual rights, intellectual property, rights to acquire a membership, property, rights to acquire a membership, etc. etc.

Consideration is subject to HST if it

Consideration is subject to HST if it becomes due, or is paid without becoming becomes due, or is paid without becoming due, on or after July 1 due, on or after July 1st

st, 2010

, 2010

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Transitional Rule Transitional Rule – – Non Non-

Residential

Residential Real Property Real Property

HST applies if ownership and possession are HST applies if ownership and possession are transferred on or after July 1 transferred on or after July 1st

st, 2010

, 2010

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Transitional Rules Transitional Rules – – Special Cases Special Cases

Subscriptions

Memberships

Lifetime Memberships

Admissions

Freight Services

Passenger Services

Transportation Passes

Prepaid Funeral Arrangements

Direct Sellers

Continuous Supplies

Budget Payment Arrangements

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Transitional Rules Transitional Rules– –Combined Supply Combined Supply

Property supplied will be deemed to be a separate Property supplied will be deemed to be a separate supply: supply:

if property and/or services are supplied together as

if property and/or services are supplied together as a single supply a single supply

Ownership or possession of the property has

Ownership or possession of the property has transferred to the recipient before July 2010, and, transferred to the recipient before July 2010, and,

The property is not subject to OVAT under the

The property is not subject to OVAT under the general transitional rules if it were supplied separately general transitional rules if it were supplied separately

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Transitional Rule Transitional Rule – – Progress Payments Progress Payments

Progress Payments Progress Payments (to construct, renovate, repair RP, ships etc) (to construct, renovate, repair RP, ships etc) and and Consideration due or paid without becoming due: Consideration due or paid without becoming due: (A) (A) (B) (B) (C) (C)

Oct. 14th
Oct. 14th

July 1st July 1st 2009 2009 2010 2010

A. A.

No OVAT No OVAT

B. B.

Vendor required to collect OVAT on progress payments Vendor required to collect OVAT on progress payments

C. C.

HST rules apply HST rules apply Holdbacks from a Progress Payment are subject to the same alloca Holdbacks from a Progress Payment are subject to the same allocation rule as the tion rule as the Progress Payment even if paid or payable after June 2010. Progress Payment even if paid or payable after June 2010.

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Recaptured Input Tax Credits Recaptured Input Tax Credits

Similar to Quebec restrictions

Similar to Quebec restrictions

Apply to:

Apply to:

Large business, > $ 10 million threshold amount

Financial institutions

Apply for 8 years, with a 3 year phase out

Apply for 8 years, with a 3 year phase out

Do not apply to resale or resupply

Do not apply to resale or resupply

Do not apply to public sector bodies or farming

Do not apply to public sector bodies or farming

Do not apply to production use

Do not apply to production use – – use use of proxies

f proxies
Allocation and data capture

Allocation and data capture

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Recaptured ITC Recaptured ITC’ ’s s -

continued

continued

Energy

Energy

Telecommunications

Telecommunications

Road Vehicles

Road Vehicles

Fuel for Road Vehicles

Fuel for Road Vehicles

Food, beverages, and entertainment

Food, beverages, and entertainment

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New Place of Supply (POS) Rules New Place of Supply (POS) Rules

Place of supply Place of supply Goods by way of sale: Goods by way of sale:

Goods delivered or made available in

Goods delivered or made available in Particular Province Particular Province a particular province a particular province Goods by way of lease Goods by way of lease

Goods in a particular province at

Goods in a particular province at Particular Province Particular Province commencement of lease interval commencement of lease interval Services Services – General Rules General Rules

Where recipient

Where recipient’s address is known and is s address is known and is Particular province Particular province situated in a particular province situated in a particular province

Where recipient

Where recipient’s address is unknown and the s address is unknown and the Participating province in which Participating province in which Canadian portion of the service is performed Canadian portion of the service is performed most of the service performed most of the service performed primarily in the participating provinces primarily in the participating provinces

Where the recipient's address is unknown and

Where the recipient's address is unknown and A non A non-participating province participating province the Canadian portion of the service is performed the Canadian portion of the service is performed primarily outside the participating provinces primarily outside the participating provinces

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New Place of Supply (POS) Rules New Place of Supply (POS) Rules -

continued

continued

Place of supply Place of supply Intangibles Intangibles – General Rules General Rules

Where property can be used only

Where property can be used only primarily in the particular participating primarily in the particular participating province province

Where property can be used only in a

Where property can be used only in a Particular participating province Particular participating province particular participating province particular participating province

Where property can be used in more

Where property can be used in more Participating province in which Participating province in which than one participating province than one participating province most rights would be used if most rights would be used if all rights were used all rights were used

Where property can be used only

Where property can be used only primarily outside participating provinces primarily outside participating provinces

Non Non-participating province participating province

Where use of property not geographically

Where use of property not geographically specific: specific:

Where address of the recipient is know

Where address of the recipient is know Province in which address is situated Province in which address is situated

Where address of recipient is unknown

Where address of recipient is unknown The participating province with the The participating province with the highest rate highest rate

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Winding Down the ORST Winding Down the ORST

Small business transition credit

Small business transition credit

ORST transitional rules

ORST transitional rules

Final ORST returns

Final ORST returns

ORST refunds and rebates

ORST refunds and rebates

Returns and exchanges

Returns and exchanges

Transitional ORST inventory rebate

Transitional ORST inventory rebate

Anti

Anti-

avoidance

avoidance

Additional information

Additional information

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Transitional Rule Transitional Rule -

ORST

ORST

Supply of Goods, Services, Admissions Supply of Goods, Services, Admissions (supplied on or after July 1 (supplied on or after July 1st

st, 2010

, 2010 and and Consideration due or paid without becoming due Consideration due or paid without becoming due (A) (A) (B) (B) (C) (C) (D) (D)

Oct. 14
Oct. 14th

th

May May 1st

1st

July 1 July 1st

st

July 31 July 31st

st

2009 2009 2010 2010 2010 2010 2010 2010

A. A.

ORST applies (No OVAT) ORST applies (No OVAT)

B. B.

ORST applies ( ORST applies (except except if used exclusively in commercial activities, or purchaser requi if used exclusively in commercial activities, or purchaser required to self assess OVAT* ) red to self assess OVAT* )

C. C.

No ORST applies (vendor required to collect OVAT* ) No ORST applies (vendor required to collect OVAT* )

D. D.

No ORST applies (HST rules apply* ) No ORST applies (HST rules apply* ) * Except on services performed substantially all before July 2010 * Except on services performed substantially all before July 2010, and lease intervals beginning before July 2010 and , and lease intervals beginning before July 2010 and ending before July 31 ending before July 31st

st, 2010.

, 2010.

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Final ORST Returns Final ORST Returns

No ORST vendor

No ORST vendor’ ’s compensation for returns s compensation for returns filed for periods ending after March 31 filed for periods ending after March 31st

st, 2010

, 2010

Final ORST returns are required to be filed by

Final ORST returns are required to be filed by July 23 July 23rd

rd, 2010

, 2010

Supplemental ORST returns are required to be

Supplemental ORST returns are required to be filed by the 23 filed by the 23rd

rd day of the month following for

day of the month following for any ORST collected or payable after June 2010 any ORST collected or payable after June 2010

All supplemental ORST returns are required to

All supplemental ORST returns are required to be filed by November 23 be filed by November 23rd

rd, 2010

, 2010

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ORST Refunds and Rebates ORST Refunds and Rebates

Time limits for claims remain in effect until

Time limits for claims remain in effect until the earlier of expiry or June 30 the earlier of expiry or June 30th

th, 2014

, 2014

Existing assessment, objection and

Existing assessment, objection and enforcement provisions under the RST Act enforcement provisions under the RST Act apply to past transactions (until expiry) apply to past transactions (until expiry)

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ORST Returns and Exchanges ORST Returns and Exchanges

Goods Goods subject to ORST subject to ORST bought (before July 2010) bought (before July 2010) and returned (after June and Before November and returned (after June and Before November 2010) for: 2010) for:

Full refund

Full refund – – ORST* refunded ORST* refunded

Straight exchange

Straight exchange – – no ORST or OVAT effect no ORST or OVAT effect

Exchange with partial refund

Exchange with partial refund – – partial ORST* refund partial ORST* refund

Exchange with an additional payment

Exchange with an additional payment – – HST applies HST applies to the additional payment to the additional payment * + applicable GST * + applicable GST

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ORST Returns and Exchanges ORST Returns and Exchanges -

continued

continued

Goods Goods not subject to ORST not subject to ORST bought (before bought (before July 2010) and returned (after June 2010 and July 2010) and returned (after June 2010 and before November 2010): before November 2010):

For full refund

For full refund – – ORST N/A ORST N/A – – no ORST refund no ORST refund

OVAT applies to the full consideration for the OVAT applies to the full consideration for the replacement property for a: replacement property for a:

Straight exchange

Exchange with partial refund

Exchange with additional payment (+ GST)

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ORST Returns and Exchanges ORST Returns and Exchanges -

continued

continued

No point

No point-

of
f-
sale ORST adjustments for goods

sale ORST adjustments for goods returned on or after November 1 returned on or after November 1st

st, 2010

, 2010

HST applies to the full consideration for the new

HST applies to the full consideration for the new item for any exchange item for any exchange

Purchaser can file a refund claim for:

Purchaser can file a refund claim for:

ORST paid in error

GST paid on the initial transaction

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Preparing for HST Preparing for HST

Invoice and billing systems

When to charge/pay 5% vs. 13%

A/P systems:

Ability to track purchases and self

Ability to track purchases and self-

assessment requirements

assessment requirements

Review contracts/leases that straddle July 1

Review contracts/leases that straddle July 1st

st, 2010

, 2010

Review prepayments

Planning for acceleration or deferral of purchases

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Impact of HST On Impact of HST On… …. .

Manufacturers

Manufacturers

Retailers

Retailers

Builders

Builders

Non

Non-

Profit Sector

Profit Sector

Financial Institutions

Financial Institutions

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Non Non-

Profit Sector Rebates

Profit Sector Rebates

Public Service Body Rebates Public Service Body Rebates Rebate % of HST Paid Rebate % of HST Paid OVAT OVAT GST GST Municipalities Municipalities 78% 78% 100% 100% Universities and colleges Universities and colleges 78% 78% 67% 67% School boards School boards 93% 93% 68% 68% Hospitals Hospitals 87% 87% 83% 83% Charities and Charities and NPO NPO’ ’s s 82% 82% 50% 50%

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Mandatory Electronic Filing Mandatory Electronic Filing

For all reporting periods ending on or after July 1 For all reporting periods ending on or after July 1st

st, 2010

, 2010 for: for:

GST/HST registrants (except charities) with greater than

GST/HST registrants (except charities) with greater than $1.5 million in annual taxable supplies (including those $1.5 million in annual taxable supplies (including those

f their associates
f their associates

GST/HST registrants required to recapture ITC

GST/HST registrants required to recapture ITC’ ’s in s in Ontario and B.C. Ontario and B.C.

Builders affected by the HST transitional housing

Builders affected by the HST transitional housing measures in Ontario and B.C. measures in Ontario and B.C.

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