New Canadian Harmonised Sales Tax (HST)
Are your clients prepared for the new Harmonized Sales Tax (HST) rules? Effective July 1, 2010 the province of Ontario and British Columbia will harmonize their sales taxes with the 5% federal Goods and Services Tax (GST). The effective rate of the combined HST in Ontario will be 13% and the rate in British Columbia will be 12%.
Every person including non-residents who makes a taxable supply in Canada in the course of a commercial activity engaged in by the person in Canada is required to register for the GST/HST. Clients should be implementing the necessary changes to their accounting systems to ensure they charge the new tax on a timely basis and ensure they recover their input tax credits.
The HST comes into force on July 1, 2010, however the HST will also apply to consideration that become due on or is paid without having come due, on or after May 1, 2010 for services provided on or after July 1, 2010. For example, a landscape maintenance company invoices its customer for maintenance services in May 2010 for the period from May 1 - September 30, 2010; 60% of the service will be provided after June 2010. The HST would apply to 60% of the consideration for that service and the supplier would be responsible for collecting the Ontario component of the HST even before the July 1, 2010 enforcement date.
There are complicated transitional rules for HST. These transitional rules may require certain non-consumers to self-assess the HST for part of a service performed on or after the Harmonized date. It is also essential to determine the place of supply in Canada where HST will apply. This becomes important when you consider that the rate of tax is different depending on which Harmonized province you deal with. The province of Nova Scotia is proposing to increase its HST to 15% on July 1, 2010.
Schwartz Levitsky Feldman LLP, Toronto, Canada can help your client manage the transition. Please contact
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