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Planning for transitioning from HST to GST/PST Diana Mau, C.A. 205-8833 Odlin Crescent, Richmond, B.C. Tel: 604-279-9270 www.dianamau.bc.ca.

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Presentation on theme: "Planning for transitioning from HST to GST/PST Diana Mau, C.A. 205-8833 Odlin Crescent, Richmond, B.C. Tel: 604-279-9270 www.dianamau.bc.ca."— Presentation transcript:

1 Planning for transitioning from HST to GST/PST Diana Mau, C.A Odlin Crescent, Richmond, B.C. Tel:

2 History of consumer taxes Prior to July 1, 2010 Federally, we have 5% GST Provincially, we had 7% PST Total 12%

3 History of consumer taxes On July 1, 2010, GST & PST combined together to become 12% HST (Harmonized Sales Tax) HST is a combination of Federal 5% GST plus BC portion of 7% to 12 HST basically follows the rules of GST with some minor allowances

4 April 1, 2013 revert to GST/PST HST drops from 12% to 5% GST PST of 7%

5 Mechanism of GST Multi-stage tax GST applies to a very broad base of most property & services, including real property Refund of GST to businesses through the Input Tax Credit (ITC) on taxable supplies Businesses collect GST on sales from its customers and claim back all its GST paid on purchases GST is truly a tax borne by final consumers Efficient Tax, avoid tax cascading

6 Exceptions to general taxable supplies- Zero-rated Instead of the general 5% GST, the 5% become 0% on certain items that the Govt consider necessary, such as Basic grocery, farm livestock, fishery Prescriptive drugs, drug dispensing fees Medical devices Exports International transportation except in North America

7 Exempt Goods & Services Under the exempt supply rules, businesses do not charge GST/HST on sales from the customers, but businesses cannot claim the GST/HST paid on the purchases.

8 Examples of Exempt Supplies Used residential housing- no HST on purchases of used homes Most health, medical and dental services performed by licensed physicians or dentists Child care services Educational services Music lessons Financial services

9 Elect to be Exempt Suppliers Small businesses with annual sales under $30,000 may elect not to be a taxable supplier, and be an exempt supplier Usually beneficial for those small businesses who deal with final consumers and who have little purchases on which GST/HST being paid, e.g. some small home-based businesses

10 Understanding PST Single (final) stage tax A much narrower base than GST Applies to most goods Real property and most services not taxable Notably are new home purchases, home repairs, restaurant services

11 PST Imposition General rate of 7% on tangible personal property (goods) Liquor – 10% Vehicles under $55,000 – 7%; $55,000 to <$56,000 – 8%: $56,000 to <$57,000- 9% & $57,000 or over - 10%. No graduation rate. Boats & aircrafts – 12%, no GST 7% on related services 7% on legal services Accommodation – 8% + 2% hotel tax

12 Tangible personal property - goods Tangible goods that you can see, weigh, measure, feel or touch Also included are gas, heat, electricity But does not include real property

13 Taxable Goods Alcoholic beverages Automobiles & parts Boats Building materials Clothing & footwear Furniture & appliances Natural gas, heat, telecommunications Office supplies & equipment

14 Taxable goods – Exemptions (1) All food for human consumption (basic groceries and restaurant meals) Bicycles Children-sized clothing & footwear Adult-sized clothing and footwear purchased for children under the age of 15 Used clothing & footwear under $100

15 Taxable goods – Exemptions (2) Books, newspaper & periodicals Medications (prescriptive & specific over- the counter medications) Vitamins School supplies Energy products for use in residential dwellings

16 Taxable Related Services Repair or maintain of taxable goods, such as automobiles, knives, watches TVs, stereos, office equipment or computers Apply protective treatments to taxable goods such as fabric protection, rust proofing Restore taxable goods such as furniture

17 Exempt Related Services Services to exempt goods such as repair bicycles Cleaning services Services to clothing & footwear Services to household appliances such as fridges, stoves, ovens, dishwashers, washers, dryers, freezers, vacuums, rug cleaners, curtains & drapes Services to animals

18 Exemptions specific to businesses Goods purchased for resale or lease Goods incorporated into goods for resale Eligible machinery & equipment for use in manufacturing, logging mining etc Specified goods purchased for use by qualifying farmers & fishermen

19 Exemptions - specific circumstances Goods shipped directly by the seller outside B.C. Eligible goods purchased from small seller Independent sales Contractor

20 Small Seller Located in BC but does not maintain an established business premises, such as home based is O.K. Sells taxable goods or services Gross annual taxable sales under $10,000 Not registered as a vendor

21 Independent Sales Contractor (ISC) Not an agent or employee of the direct seller Offer to sell exclusive products at temporary locations like PNE/fairs Pay PST on the suggested retail price when purchase from direct sellers Purchase exclusive products from a direct seller or another ISC for resale or personal use ISC charges & collects PST from customers & reimburse themselves for PST paid

22 Example of HST vs GST/PST Example 1 12% HST Example 2 5%GST /7%PST Legal service provided $1000 GST/PST collected $120 GST $50 PST $70 Expenses $600 HST GST/PST paid on expenses $72 GST $30 PST $42 Net GST/PST remittance $48 GST $20 PST $70 Amount of non-refundable PST $42 Consumer paid$1120

23 Bookkeeping for HST DR.CR. Cash$1,120 HST payable$ 120 Fee revenue$1,000 Cash$672 HST receivable$ 72 Office supplies/ Equip$600

24 Bookkeeping for GST/ PST DR.CR. Cash$1,120 GST payable$ 50 PST payable$ 70 Fee Revenue$1,000 Cash$672 GST Receivable$ 30 Office supplies/equip$642

25 Registration to collect PST Vendors of PST taxable products / services must register and collect PST Vendors include those who sell & lease taxable goods, provide related services, provide 4 or more short term accommodation, provide legal services, provide telecommunication services, direct sellers to independent sales contractor

26 Registration not required Person who does not make taxable sales Persons excluded from definition of vendor including  Small Seller  Independent Sales Contractor

27 Registration for Manufacturers & Wholesalers Manufacturers/Wholesalers who don’t make retail sales are not required to register. Required to provide exemption certificate on purchase of raw materials or goods for resale. Manufacturers/ Wholesalers who make retail sales are required to register unless make infrequent sales, can remit PST as casual remitter.

28 PST registration PST registration begins on Jan 2, 2013 PST registration done prior to April 1, 2013 New 11 digit PST numbers

29 When PST is due Earlier of date consideration is paid or is due For most businesses (other than exempt or small suppliers), consider making payments or getting invoice prior to April 1, 2013 to save PST even if not taking possession of goods before April 1, 2013

30 Housing, Transition Tax & Rebate What you need to know about HST/GST/PST on new housing transition tax, rebate & vendor information requirement

31 HST of 12% on new housing Until March 31, 2013, HST of 12% on new housing, comprising of Federal GST of 5% and B.C. portion of 7%

32 Federal GST Housing Rebate Federal Govt Rebate equals 36% of the 5% GST paid on the first $350,000 to a max of $6,300 ($350,000 x 5% x 36%) The GST rebate is phased out on a straight–line basis for homes priced between $350,000 and $450,000 No Federal rebate for homes priced at $450,000 or above

33 B.C. New Housing Rebate (1) From July 1, 2010 to March 31, 2012, BC rebate equals to 5% of new home price (or 71.43% of tax) up to a max of $26,250 (or 5% of $525,000) From April 1, 2012 to March 31, 2013, the max B.C. rebate is increased to a max $42,500 (or 5% of $850,000)

34 B.C. New Housing Rebate for owner built new homes (2) April 1, 2012, max rebate increased to $42,500 if HST is paid on land $28,475 if no HST is paid on land Rebate available on homes under construction at March 31, 2013, home must be occupied and rebate apply before April 2017

35 B.C. New Housing Rebate (3) In addition, during the HST period from July 1, 2010 to March 1, 2013, B.C. Govt estimates that there would be about 2% savings on the PST otherwise payable on building cost that may be passed to home owners. Hence for lower cost homes (max $850,000), there should be no increase in B.C. portion of taxes

36 B.C. First Time Home Buyer $10,000 Refundable Tax Credit Effective between February 21, 2012 to March 31, 2013 For B.C. residents who are first-time home buyers ( has never previously owned a primary residence anywhere in the world) and who purchase an eligible new home as primary residence

37 B.C. First Time Home Buyer $10,000 Refundable Tax Credit For new homes purchased from a builder. a written agreement of purchase and sale is entered into on or after Feb 21, 2012 and sale is completed prior to April 1, 2013 HST is payable on the home No one else has claimed the $10,000 bonus

38 B.C. First Time Home Buyer $10,000 Refundable Tax Credit For owner-built homes, a written agreement of purchase is entered on or after Feb 21, 2012 and construction of the home is completed or occupied before April 1, 2013 No one else has claimed the $10,000 bonus

39 How is the credit calculated 5% of the home price to a max of $10,000 Claw back if single individual net income 20 cents per every dollar, zero at net income of $200,000 Claw back for couples net income > 10 cents per every dollar, zero at net income of $250,000

40 No PST on New Housing, but 2% B.C. Transition Tax Effective April 1, 2013, no 7% of B.C. portion of HST on new homes 2% B.C. transition tax on substantially renovated or new housing where 10% or more is completed as of April 1, 2013 and the sale occurs before April 1, 2015 No tax if less than 10% completed on April 1, 2013

41 Rebate to builders for work done after March 31, 2013 Intended to compensate builders for PST paid on materials after March 31, 2013 Rebate based on % completion

42 Transition Rebate to Builders % completed-April 1, 13 Rebate as % of sales price - Less than 10%No transition tax - 10% - < 25%1.5% - 25% - < 50%1.0% - 50% - < 75%0.5% - 75% - < 90%0.2% - 90% or morenone

43 Transition Rebate to Builders To claim the transition rebate, builder will be required to certify that the builder paid PST on substantially all of the building materials that were incorporated on or after April 1, 2013 into the construction The builder will be required to keep receipts fro audits

44 Example on B.C. Transition Tax Builder enters into a sale agreement to sell a newly constructed home for $600,000 Ownership & possession date June 1, 2013 The home is 80% completed on April 1, 2013

45 Example on B.C. Transition Tax Builder has to collect 5% GST on $600,000 to Federal Govt Builder has to collect 2% B.C. transition tax = $600,000 x 2% = $12,000 Builder can claim builder’s rebate of 0.2% = $600,000 x 0.2% = $$1,200 Builder can make a net remittance of $ ($12,000- $1,200) to B.C.

46 Other transition provision for contractors Contractors subject to PST self- assessment on materials purchased prior to April 1, 2013 but used after March 31, 2013 to improve property on both residential & commercial real property

47 Builder Disclosure Requirements Applicable to agreement made on or after Feb 17, 2012 with closing after Dec 31, 2012 Disclosure must include no 7% B.C. portion of the HST and 2% B.C. transitional tax for ownership & possession of newly constructed or substantially renovated housing between April 1, 2013 and April 1, 2015 Must provide disclosure to purchaser at later of Jan 2, 2013 or the date agreement signed

48 Builder Disclosure Requirements Additional information required for sales closing after March 1, 2013 on  Consideration for GST purposes  Whether transition tax applies and if so, the amount of B.C. transition tax  % of completion as of April 1, 2013  Amount of B.C. transition rebate claimed

49 Builder Disclosure Requirements Failure to comply Builder Disclosure Requirements, builder is subject to penalties of  1% to a max of $10,000 per home  Penalty quadruples of willful default or gross negligence

50 Impacts for consumers Whether PST will increase or decrease the cost of purchases for consumers?

51 What’s not taxable under PST HSTGST + PST Most newspaper12%5% GST, no PST Certain school supplies12%5% GST, no PST Most magazines12%5% GST, no PST Thermal insulation, weather stripping, caulking 12%5% GST, no PST First aid kits12%5% GST, no PST Smoke detector <$25012%5% GST, no PST Food producing plants12%5% GST, no PST

52 What’s not taxable under PST HSTGST + PST Adult sized clothing for children 12%5% GST, no PST Shoe repairs12%5% GST, no PST Tailoring services12%5% GST, no PST Dry cleaning12%5% GST, no PST Used clothing or footwear for less than $100 12%5% GST, no PST Snack foods12%5% GST, no PST Prepared foods12%5% GST, no PST Restaurant meals12%5% GST, no PST

53 What’s not taxable under PST HSTGST + PST Basic cable TV services12%5% GST, no PST Local residential phone12%5% GST, no PST Services to household appliances as fridges 12%5% GST, no PST Cleaning services12%5% GST, no PST Home security monitoring12%5% GST, no PST Services to real property – painting, roofing plumbing, electricity 12%5% GST, no PST Landscaping to real property 12%5% GST, no PST

54 What’s not taxable under PST HSTGST + PST Computer software repairs service, software installation 12%5% GST, no PST Taxi fares12%5% GST, no PST Camping sites12%5% GST, no PST Domestic air12%5% GST, no PST Newly constructed homes 12%5% GST, no PST New homes where construction begins before April 1, %5% GST, + 2% B.C. transition tax Real estate commission12%5% GST, no PST

55 What’s not taxable under PST HSTGST + PST Drugs & medications e.g. Cough syrups, flu remedies 12%5% GST, no PST Vitamin & supplements12%5% GST, no PST Admission fees, movies12%5% GST, no PST Memberships, golf /sports12%5% GST, no PST Bicycles12%5% GST, no PST Safety helmets12%5% GST, no PST Children’s ski gloves, boots 12%5% GST, no PST Adult’s sized ski boots for children < age 15 12%5% GST, no PST

56 What’s not taxable under PST HST GST + PST Massage therapy12%5% GST, no PST Fitness training services12%5% GST, no PST Hair/barber services12%5% GST, no PST Veterinarian services12%5% GST, no PST Accounting services12%5% GST, no PST Interior design services12%5% GST, no PST Wedding planning12%5% GST, no PST Funeral services12%5% GST, no PST

57 What’s not taxable under PST for consumers HST GST + PST Cigarettes5% GST, no PST Cigars5% GST, no PST Chewing Tobacco5% GST, no PST Nicotine Replacement products 5% GST, no PST

58 What’s going up in PST for consumers B.C. first time new home buyers’ refundable tax credit up to $10,000 For purchase agreement entered into on or after February 21, 2012 and sales completed prior to April 1, 2013, i.e.sales subject to 12% HST Beneficial for new home buyers of homes under $850,000

59 What’s going up in PST for consumers Purchase or lease of vehicles HST GST + PST Under $55,00012%5%GST+ 7%PST $55,000 to <$56,00012%5%GST+ 8%PST $56,000 to <$57,00012%5%GST+ 9%PST $57,000 and over12%5%GST+ 10%PST

60 What’s going up in PST for consumers HSTGST + PST Children’s disposable diapers 5%5% GST+7%PST Alcoholic beverages12%5%GST+10%PST Short term hotel accommodation 12%5%GST+ 8%PST

61 Impacts for Businesses Consider whether your business is taxable or exempt Most businesses are taxable suppliers, the PST will increase their cost of doing business. Buy or pay before April 1, Exempt businesses may realize savings. Buy after March

62 Need more information ? CTB (Consumer Taxation Branch)  Phone: or   Website: gov.bc.ca/pst  Website: sbr.bc.ca


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