MAKE YOUR OLD HOME YOUR SOLD HOME
September 18th, 2018 
Rosilyn Splitter
Sales Representative

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The 2009 Ontario Budget proposed a comprehensive package of tax changes. Central to this tax package is the proposed Harmonized Sales Tax for Ontario (HST), which, subject to legislative approval, would come into effect on July 1, 2010.

This Notice provides details of proposed measures that would build on Ontario's comprehensive tax package and help consumers and businesses transition to the HST.

The Notice provides general descriptions of transitional rules for the HST that will be proposed to be enacted in the federal Excise Tax Act (ETA). It also provides general descriptions of provincial measures that will be proposed to be enacted to wind down the applicable provisions of the Ontario Retail Sales Tax Act (RSTA).


Overview

It is proposed that, effective July 1, 2010, Ontario's Retail Sales Tax (RST) be replaced with the HST. The HST would have a combined tax rate of 13 per cent - combining the existing five per cent federal Goods and Services Tax (GST) and an eight per cent Ontario component. The HST would be administered by the Canada Revenue Agency.

Transitional rules are required to determine which tax - the existing RST or the Ontario component of the HST - would apply to transactions that straddle the July 1, 2010 implementation date for the HST.

The transitional rules would operate on the basis of the following dates:

  • July 1, 2010 - Implementation date for the HST.
    • May 1, 2010 - The HST would generally apply to consideration that becomes due, or is paid without having become due, on or after this date for property and services provided on or after July 1, 2010.
    • October 14, 2009 - The release date of this Notice. The HST would not apply to consideration that becomes due, or is paid without having become due, on or before October 14, 2009. Certain businesses and public service bodies may be required to self-assess the Ontario component of the HST on consideration that becomes due, or is paid without having become due, after October 14, 2009 and before May 2010 for property and services provided on or after July 1, 2010.
  • October 31, 2010 - This is the date on which any outstanding RST would become payable under the transitional rules to facilitate the efficient wind-down of the RST.

The transactions described in this Notice are generally those that, for purposes of the ETA, would be considered to be taxable supplies made in Ontario.

These transitional rules generally operate on the basis of the earlier of when consideration for a supply becomes due or is paid without having become due. Under the ETA, consideration for a supply becomes due on the earliest of the day the supplier first issues an invoice with respect to the supply; the date of the invoice; the day the supplier would have, but for undue delay, issued an invoice with respect to the supply; and the day the recipient of the supply is required to pay the consideration pursuant to a written agreement.

Unless otherwise stated, or the circumstances otherwise require, the definitions and concepts in the ETA would apply to the transitional rules described in this Notice.

Introduction of HST

This part of the Notice describes the general transitional rules for the introduction of the HST. These rules should be read in conjunction with the general transitional rules for the wind-down of the RST, as described in the RST wind-down part below. Taken together, the HST and RST transitional rules are complementary and would provide for a smooth transition to the HST.

Tangible Personal Property

This section describes general transitional rules for supplies of tangible personal property (i.e., goods) by way of sale, as well as specific transitional rules for subscriptions to periodical publications.

General Rules

The HST would generally apply to a supply of goods by way of sale to the extent that the goods are delivered, and ownership of the goods is transferred, to the recipient of the supply on or after July 1, 2010.

Consideration due or paid on or after July 1, 2010

The HST would generally apply to consideration that becomes due, or is paid without having become due, on or after July 1, 2010 for a supply of goods by way of sale, to the extent that the consideration is for goods that are delivered, and for which ownership is transferred, to the recipient of the supply on or after July 1, 2010.

Example 1: In May 2010, a person enters into an agreement to purchase furniture. Under the agreement, the person takes delivery of the furniture in July 2010, makes 12 monthly payments between July 2010 and June 2011, and receives ownership of the furniture when all the payments have been made. The HST would apply to the sale of the furniture.

Consideration due or paid on or after May 1, 2010 and before July 2010

The HST would generally apply to consideration that becomes due, or is paid without having become due, on or after May 1, 2010 and before July 2010 for a supply of goods by way of sale, to the extent that the consideration is for goods that are delivered, and for which ownership is transferred, to the recipient of the supply on or after July 1, 2010.

In such circumstances, the supplier would be required to account for the Ontario component of the HST in the GST/HST reporting period of the supplier that includes July 1, 2010. The recipient of the supply would be able to claim any available input tax credits with respect to the Ontario component of the HST in the GST/HST reporting period of the recipient that includes July 1, 2010.

Example 2: In June 2010, a person pays for a sailboat, but the sailboat will not be delivered, and ownership will not be transferred, to the person until August 2010. The HST would apply to the sale and the supplier would account for the Ontario component of the HST in the GST/HST reporting period of the supplier that includes July 1, 2010.

Consideration due or paid after October 14, 2009 and before May 2010

Persons who are not consumers - such as businesses and public service bodies - may be required to self-assess the Ontario component of the HST on consideration that becomes due, or is paid without having become due, after October 14, 2009 and before May 2010 for a supply of goods by way of sale, to the extent that the consideration is for goods that are delivered, and for which ownership is transferred, to the recipient of the supply on or after July 1, 2010.

The requirement to self-assess in these circumstances would generally apply only to:

  • non-consumers acquiring the goods for consumption, use or supply otherwise than exclusively in the course of their commercial activities (e.g., a business, such as a financial institution, that is acquiring the goods to make GST/HST-exempt supplies);
  • non-consumers acquiring the goods for consumption, use or supply exclusively in the course of their commercial activities but in circumstances where the goods would be subject to an input tax credit restriction or recapture (e.g., electricity subject to the proposed input tax credit restriction for large businesses that is described in the 2009 Ontario Budget);
  • non-consumers that use simplified procedures available under the ETA for calculating their net tax (e.g., certain charities, public service bodies, and small businesses); and
  • selected listed financial institutions, which use a special attribution method in determining their net tax.

A person who is required to self-assess in these circumstances would be required to account for the tax either: (i) in the GST/HST return of the person for the reporting period that includes July 1, 2010, if the due date for that return is before November 2010, or (ii) in any other case, in prescribed form and before November 2010.

Example 3: In February 2010, a selected listed financial institution (SLFI) that is a monthly GST/HST filer is invoiced for security equipment for which delivery occurs, and ownership is transferred, in July 2010. The SLFI must self-assess the Ontario component of the HST on the consideration for the equipment in its GST/HST return in which the self-assessed tax is required to be reported.

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