Transition to HST in Ontario and British Columbia, New Place of Supply Rules and Increase to HST Rate in Nova Scotia

Date: April 2010

To: Chief Financial Officers, Deputy Chief Financial Officers and Functional Heads of Administration

Subject: Transition to HST in Ontario and British Columbia, New Place of Supply Rules and Increase to HST Rate in Nova Scotia

Further to the HST Bulletin for Ontario and British Columbia sent by my office on February 25, 2010, we would like to share additional information and updates received since then. Please note that certain provisions could apply as of May 1, 2010. Departments with complex HST issues are encouraged to join the Commodity Tax Working Group, see below.

Transition to HST in Ontario and British Columbia

Following are items of particular interest to federal departments.

Employee Reimbursements paid on or after July 1, 2010

The factor rates for the calculation of the amount of HST on reimbursable expenses are as follows:

a) 12/112ths (or 10.71%) of the total amount of reimbursable expenses incurred in Ontario

a) 11/111ths (or 9.91%) of the total amount of reimbursable expenses incurred in British Columbia

Employee Allowances paid on or after July 1, 2010

The factor rates for the calculation of the amount of HST on allowances are as follows:

a) 13/113ths (or 11.50%) of allowances paid for expenses incurred in Ontario;

b) 12/112ths (or 10.71%) of allowances paid for expenses incurred in British Columbia

Municipal Rebates

Since September 1, 1992, the federal government registrant has been designated as a municipality for the purposes of section 259(1) of the Excise Tax Act, i.e., for the making of the supplies described in sections 22 and 23 of Part VI of Schedule V ( water, sewer and drainage services). As a result of this designation, a 100% rebate is available for the GST and the federal part of the HST paid or payable on inputs consumed, used or supplied in the course of the designated activities that involve making these exempt supplies.

With respect to the provincial part of the HST paid or payable on inputs consumed, used or supplied in the course of the designated activities that involve making these exempt supplies, the HST rebate available for the provincial part for municipalities located in Ontario is 78% while the HST rebate for the provincial part for municipalities located in British Columbia is 75%.

New Place of Supply Rules For HST

The Department of Finance has 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.

CRA has published GST/HST Technical Information Bulletin B103 that explains these proposed rules. The bulletin is available here. (PDF, 533 KB)

Note that the new place of supply rules explained in this publication would, subject to legislative approval, apply to any supply made on or after May 1, 2010, and any supply made after February 25, 2010 and before May 1, 2010, if the consideration for the supply has not become due, and has not been paid, before May 1, 2010.

Increased HST Rate in Nova Scotia

Effective July 1, 2010, the HST rate in Nova Scotia will be increased to 15 per cent.

Under a new Comprehensive Integrated Tax Co-ordination Agreement with the federal government, the provincial portion of the HST will change from 8 per cent to 10 per cent. The provincial government has released transitional rules to prepare both consumers and suppliers for this rate change and other HST adjustments. The rules are found here (PDF, 947 KB)(disponible seulement en anglais).

Please note that the increased rate could apply as of May 1, 2010.

Employee Reimbursements paid on or after July 1, 2010

The new factor rate for the calculation of the amount of HST on employee reimbursements is 14/114ths (or 12.28%) of the total amount of reimbursable expenses incurred in Nova Scotia.

Employee Allowances paid on or after July 1, 2010

The new factor rate for the calculation of the amount of HST on allowances paid for expenses incurred in Nova Scotia is 15/115 or 13.04%.

Municipal Rebate

Since September 1, 1992, the federal government registrant has been designated as a municipality for the purposes of section 259(1) of the Excise Tax Act, i.e., for the making of the supplies described in sections 22 and 23 of Part VI of Schedule V ( water, sewer and drainage services). As a result of this designation, a 100% rebate is available for the GST and the federal part of the HST paid or payable on inputs consumed, used or supplied in the course of the designated activities that involve making these exempt supplies. Note that Nova Scotia has not changed the rebate factor for municipalities for the provincial part of the HST; it remains 57.14%.

Commodity Tax Working Group

A working group has been created to deal with commodity tax issues. The first meeting will be held on the afternoon of April 29, 2010 and will focus on HST implementation issues. If you wish to attend this meeting, please contact Anna Marinelli for additional information.