FEDERAL REG

SOR/2016-4: Regulations Amending Various GST/HST Regulations, No. 7 (Newfounland and Labrador — Rebate for Municipalities)

REGISTRATION OF FEDERAL REGULATION - VIA OIC DATABASE, PRIOR TO PART II OF THE GAZETTE

Registered
January 26, 2016


REGULATORY IMPACT ANALYSIS STATEMENT (This statement is not part of the Regulations.) Issues On April 30, 2015, the Government of Newfoundland and Labrador announced its intention to introduce a partial public service body (PSB) rebate of the provincial component of the Harmonized Sales Tax (HST) for municipalities in Newfoundland and Labrador. In order to facilitate the introduction of a PSB reb... (Click for more)


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Published on January 26, 2016

Bill Summary

SOR/2016-4: Regulations Amending Various GST/HST Regulations, No. 7 (Newfounland and Labrador — Rebate for Municipalities)

REGULATORY IMPACT ANALYSIS STATEMENT (This statement is not part of the Regulations.) Issues On April 30, 2015, the Government of Newfoundland and Labrador announced its intention to introduce a partial public service body (PSB) rebate of the provincial component of the Harmonized Sales Tax (HST) for municipalities in Newfoundland and Labrador. In order to facilitate the introduction of a PSB rebate for municipalities, the Government of Newfoundland and Labrador announced transitional rules on July 15, 2015, and December 14, 2015. These rules specify the rebate eligibility of transactions that straddle the implementation date of January 1, 2016. With the passage of the Provincial Choice Tax Framework Act on December 15, 2009, Parliament approved mechanisms to facilitate the application of the harmonized value-added tax system by way of regulations. Amendments to existing Goods and Services Tax/Harmonized Sales Tax (GST/HST) regulations are therefore required in order to implement Newfoundland and Labrador’s decision to introduce a PSB rebate for municipalities. Objectives The Regulations Amending Various GST/HST Regulations, No. 7 (Newfoundland and Labrador — Rebate for Municipalities) [the Regulations] amend existing GST/HST regulations made under the Excise Tax Act to formalize and give legal effect to Newfoundland and Labrador’s decision to introduce a PSB rebate for municipalities. Description The Regulations contain rules relating to the harmonized value-added tax system. Specifically, the Regulations include amendments to the following regulations: — Public Service Body Rebate (GST/HST) Regulations; — Streamlined Accounting (GST/HST) Regulations; and — New Harmonized Value-added Tax System Regulations. Public Service Body Rebate (GST/HST) Regulations Under the GST/HST, PSBs such as hospitals, schools, universities, public colleges, municipalities, charities and substantially government-funded non-profit organizations are entitled to claim full or partial rebates of the GST/HST paid on their purchases of property and services for use in non-commercial activities. The Excise Tax Act sets out the rules relating to these rebates and provides the authority to prescribe the rebate rates applicable to the provincial component of the HST for each class of PSB, the property and services in respect of which rebates are disallowed, and rules for calculating the rebates. These Regulations contain these prescribed rates and rules. Under the HST framework, participating provinces have the flexibility to determine the PSB sectors to which rebates of their provincial component of the HST are to be provided and the respective provincial rebates rates. Consequential to the different PSB rebates rates, these Regulations also provide rules for determining the appropriate PSB rebates of the provincial component of the HST for a PSB that carries on more than one PSB activity or that is resident in, and carries on activities in, more than one province. These Regulations are amended to implement a PSB rebate of the provincial component of the HST in Newfoundland and Labrador. In particular, a rebate at a rate of 25% of the provincial component of the HST is generally available to municipalities, effective January 1, 2016, increasing to 57.14% effective January 1, 2017. Streamlined Accounting (GST/HST) Regulations These Regulations provide small businesses and eligible PSBs optional simplified methods (i.e. a Quick or Special Quick Method) of calculating their GST/HST remittances. These methods allow the business or PSB to remit an amount of tax that is a percentage (the “remittance rate”) of its eligible GST/HST-included sales. This allows the entity to avoid having to separately keep track of the GST/HST paid on purchases and collected on sales. Certain transactions are excluded from these rules (e.g. the sale or purchase of real property). In such cases, the tax must be accounted for separately under the normal GST/HST rules. In the case of eligible PSBs, since a portion of the GST/HST paid on purchases will still be effectively recoverable through a PSB rebate, the remittance rates are determined by taking into account the level of the applicable PSB rebate. These Regulations are amended to provide for new remittance rates under the streamlined accounting methods, consequential to the introduction of a PSB rebate for municipalities in Newfoundland and Labrador. New Harmonized Value-added Tax System Regulations These Regulations contain various rules that relate to the harmonized value-added tax system under the Excise Tax Act. To facilitate an orderly transition to the new partial PSB rebate of the provincial component of the HST in Newfoundland and Labrador for municipalities and to protect the integrity of the tax system, these Regulations are amended to include an anti-avoidance rule. This rule could reduce the amount of a new PSB rebate otherwise available in respect of certain specific transactions, such as a sale and buyback of property, which was originally acquired before the introduction of the new PSB rebate, where the transactions were entered into without a bona fide purpose other than benefiting from the new PSB rebate. “One-for-One” Rule The “One-for-One” Rule does not apply to these amendments, since there is no change in the administrative costs to business. Small business lens The small business lens does not apply, as these amendments impose no costs on small business. Consultation The Regulations are designed to reflect the rules announced by Newfoundland and Labrador on July 15 and December 14, 2015, which were developed in consultation with the Government of Newfoundland and Labrador. Rationale The Regulations are required as a result of the Government of Newfoundland and Labrador’s decision to introduce a PSB rebate for municipalities in Newfoundland and Labrador, effective January 1, 2016. The Regulations formalize and give legal effect to previously announced amendments. Contacts François Beaulieu Sales Tax Division Department of Finance Canada 90 Elgin Street Ottawa, Ontario K1A 0G5 Telephone: 613-369-3789 Patrick McKinnon Excise and GST/HST Rulings Directorate Canada Revenue Agency 16th Floor, Place de Ville, Tower A 320 Queen Street Ottawa, Ontario K1A 0L5 Telephone: 613-954-7959 Footnote a S.C. 1993, c. 27, s. 125(1) Footnote b S.C. 2009, c. 32, s. 37(1) Footnote c R.S., c. E-15 Footnote 1 SOR/91-37; SOR/2010-152, s. 3 Footnote 2 SOR/91-51; SOR/2006-162, s. 5 Footnote 3 SOR/2010-117

This Bill does not amend any statutes.

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