1. Generally there will be 12% HST on the sale of all goods and services after July 1, 2010.
Under the proposed rules, HST will apply to sales of goods where ownership and delivery are transferred to the purchaser on or after July 1, 2010. If either ownership or delivery of the goods occurs before July 1, 2010, the sale will not be subject to HST regardless of when the customer is invoiced for or pays for the purchase.
HST will apply to services that will be performed on or after July 1, 2010. However, if substantially all (90 percent) of the service is performed before July 2010, HST will not apply. If services are performed over a period that straddles July 1, 2010, only the portion of the payment that relates to the services performed on or after July 1, 2010 will be subject to HST. Specific rules are proposed for funeral and cemetery services, passenger transportation services, and freight transportation services.
2. Obligation to charge HST may start as early as May 1, 2010.
Vendors will be required to charge HST on prepayments received on or after May 1, 2010 in respect of goods where delivery and ownership will transfer on or after July 1, 2010 and in respect of services that will be performed on or after July 1, 2010 (unless substantially all of the service is performed before July 2010).
3. Many products should go down in price.
Because farmers, manufacturers, and other businesses will receive a 12% tax credit (GST + HST) for the HST they pay, the cost of making their products will go down. Economic research has shown that in other jurisdictions where an HST has been implemented, the overall prices paid by consumers on many products went down, as these lower costs were passed along to customers.
4. All businesses, including small, neighborhood businesses will benefit from reduced paperwork and lower costs by combining two taxes into one.
5. Electronic filing of HST/GST returns
Commencing July 1, 2010 you will be able to file your HST/GST returns electronically. For certain businesses this will be mandatory:
- Those with annual sales greater than $1.5 million
- Certain companies that are required to recapture the provincial portion of HST
- Builders affected by the transitional measures applicable to housing.
6. Low income individuals and families will receive a cheque four times a year to reimburse them for the HST they spend for a total of $230. Income must be under $20,000.
7. Rebate on Brand new homes
Homes sold by a builder to the first owner of up to $525,000 will receive a 5% rebate on the provincial portion of the HST, and new homes over $525,000 will be eligible for an HST rebate of $26,250. Re-sales of existing homes that are simply changing hands will not have HST applied to the purchase price.
8. There are Point of Sale Rebates for 7% of HST. This is Unique to BC.
Some of these are:
- Motor Fuels
- Children’s clothing, footwear diapers, car seats
- Feminine hygiene products
9. There are complex transitional rules for:
- Leases and licences.
- Certain prepayments are not subject to HST
- Sales of Intangible Personal Property
- Grandparenting of Home sale contracts entered into prior to November 18., 2009.
- PST paid on construction costs prior to July 1, 2010.
- Discretionary Investment Management Services paid after December 15, 2010.
10. Self assessment is required for Certain contracts from October 14 , 2010.
In certain circumstances, businesses will be required to self-assess the provincial component of the HST with respect to prepayments made between October 14, 2009 and May 1, 2010:
- where businesses use the quick method of accounting to account for their net tax;
- where inputs are acquired for use in making exempt supplies; and
- where a business whose annual taxable sales are greater than $10 million acquires inputs that are subject to ITC restrictions.
There are negative impacts on certain businesses that are exempt such as Health Care Professionals.
Sources of information on the HST:
- Canadian Tax Foundation Article on Transitional Rules here
- Deloitte Canada website
- Point of Sale rebates see Deloitte pdf here
- New housing rebates see Deloitte pdf here
- Health care professionals face special problems according to Deloitte
- Sales tax harmonization material from PriceWaterHouseCoopers is found here
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