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New Harmonized Sales Tax is Being Launched
The HST commences April 1, 1997, in Nova Scotia, New Brunswick, and Newfoundland and
Labrador (the "participating provinces") will apply at a single rate of 15% to the same base of goods and services as the GST. This rate will consist of a 7% federal component, and an 8% provincial component. The
federal government will administer the HST.
Businesses registered for the GST across Canada will automatically be registered for HST purposes, and will be required to collect and remit the 15% tax on any
taxable (other than zero-rated) supplies they make in the participating provinces, including supplies shipped or mailed to recipients in the participating provinces. Registrants will also be entitled to claim input
tax credits for HST paid on purchases they make in relation to their commercial activities.
When reporting the tax, registrants will generally not have to identify the federal and provincial components of
the HST separately. Also, registrants will not have to separately track tax collectible or payable at the 7% GST rate or the 15% rate, and can use the regular GST return to calculate their net tax. Current GST
reporting requirements for the remittance of tax, returns, fiscal periods, and reporting periods will apply under the harmonized system.
HST On Supplies Made in a Participating Province
The following place-of-supply rules will ensure that the HST will apply to goods, services and intangible personal property consumed, used or supplied in the participating provinces. If, under these rules, a
supply is made in a non-participating province, 7% GST will apply rather than the HST.
Supplies of Goods
In the case of sales of goods, the supply will be considered to be made in a participating province if the goods are delivered or made available in a participating province
(including by means of mail, courier, or common carrier retained by the supplier) to the recipient of the supply.
Rentals & Leases
Supplies of goods by way of rental for (3 months or less) are considered to be made in a participating province if possession or use of the goods is made available in a
participating province.
Supplies by way of lease, license or similar arrangement for more than 3 months, will be considered to be a series of separate supplies for each payment period. The supply will be
considered to be made in a participating province if the ordinary location of the property at the beginning of the payment period is in a participating province.
Supplies of Services
Generally, a supply of a service will be regarded as having been made in a participating province if all or substantially all (i.e., 90% or more) of the service is performed
in that province. Supplies of real property and services in relation to real property. A supply of real property will be considered to be made in a participating province if the property is situated entirely in that
province. Generally, a service in relation to real property will be regarded as being supplied in a participating province if all or substantially all of the property is situated in that province.
RECOVERY OF TAX
Input Tax Credits
Registrants, regardless of where they operate, will be able to claim input tax credits for the HST paid or payable on their purchases of goods or services to the extent that
they were acquired for consumption, use or supply in their commercial activities.
TRANSITIONAL RULES
Sales of Goods
Generally, where goods are sold in a participating province, and both ownership and possession are transferred on or after April 1, 1997, HST will apply. The HST will not
apply where ownership or possession of goods is transferred before April 1, 1997.
Services
Generally, the HST will apply to payments for services performed on or after April 1, 1997. Where all or substantially all of the service is performed before April 1, 1997,
the HST will not apply to payments that are made or become due before August 1, 1997. The HST will apply to payments becoming due on or after August 1, 1997, regardless of when the service was performed, except for
certain legal and other specified services performed before April 1, 1997, where, under certain circumstances, payment is prevented from becoming due before August 1, 1997.
Prepayments for Goods and Services
The HST will not apply to prepayments for goods or services that are made or become due on or before October 23, 1996.
The HST will apply to prepayments by
non-consumers, which become due after October 23, 1996, but before February 1, 1997, where ownership and possession of the goods supplied in a participating province are transferred or the services in a
participating province are performed on or after April 1, 1997.
In this case, the purchaser will be subject to the self-assessment rules as if the goods were brought into the participating provinces by the
person on or after April 1, 1997, or the services were acquired primarily for consumption, use or supply in that province. If self-assessment is required, the provincial component of the HST must be accounted for
and remitted by the due date of the purchaser's first return due on or after April 1, 1997, or before August 1, 1997, whichever is earlier.
The HST will be payable to the supplier on prepayments for goods
and services becoming due on or after February 1, 1997, but before April 1, 1997, where ownership and possession of the goods are transferred, or the services are performed on or after April 1, 1997. The provincial
component of the HST will be considered to have become collectible by the supplier on April 1, 1997.
Prepayments for newspaper, magazine, or other periodical subscriptions will be treated in the same manner
as prepayments for services.
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