The Canadian Goods and Services Tax/Harmonized Sales Tax (GST/HST) lacks clarity in some regions and is often subject to changes. In order to bring in some consistency, the federal budget released in early 2013, contained certain prominent measures related to the GST/HST taxation.
The corporate tax professionals at AG Tax have prepared a brief summary of these proposed changes which may be useful to GST/HST taxpayers.
Increased Services under Healthcare The GST/HST exempt home care services, provided to individuals requiring assisted living due to age, infirmity, or disability which includes cleaning, laundry, meal preparation, and child care services, under the proposed federal regulations will extend to include services such as: bathing, feeding, and assistance with dressing and medication.
Tax on Reports and Services for Non-Health Care Purposes The 2013 Budget also clarified that only services performed for use in the protection, maintenance or restoration of the health of a person or use in palliative care would be tax-exempt. For example, GST/HST would apply to reports, examinations and other services performed for the purpose of determining liability in a court proceeding or insurance policy investigation.
Pension Plan Issues
Employers participating in a registered pension plan now have the permission to jointly elect with the pension trust or corporation to treat a taxable supply by the employer to the pension entity as being for no consideration. This is applicable where the employer accounts for and remits tax on the deemed taxable supply, or be relieved from applying tax on deemed taxable sales if the GST/HST amount is equal to $5,000 or 10% of total net GST and the federal component of the HST, paid by all the pension entities of the pension plans in the preceding fiscal year.
The Economic Action Plan 2013 states, “An employer is not permitted to benefit from the full relief proposed under this measure for deemed taxable supplies made in a fiscal year of the employer where the employer has a join election in effect to not account for tax on actual taxable supplies made in that fiscal year.”
The new regulation could provide a great relief compared to the existing rules, under which, employers are deemed to have supplied and collected tax on certain property or services acquired for use in activities related to a registered pension plan operating for their employees. This rule applies even in situations wherein tax is being collected on the same transaction and employer’s participation in the operation of the pension plan is minimal
Stricter Business Information Requirement
The federal budget provides the CRA with the authority to withhold any GST/HST refunds claimed by a business until all required business information is provided. The information provided is related to taxpayer accounts used for the management of the business and to improve tax compliance. Currently the penalty of $100 is applied, which appears to be insufficient as a deterrent.
Paid Parking by Charities & Public Service Bodies (PSB)
The budget also clarified that the exemption provided to relieve charities and PSBs from charging GST/HST on certain supply of properties or services does not cover a paid-parking facility provided by way of lease, license, or similar arrangement, since it is a commercial activity carried on by a charity or PSB.
Consistent Excise Duty on All Tobacco Products
The federal budget proposes to eliminate the preferential excise duty rate that is applicable on manufactured tobacco to make it equivalent to the current excise duty of $5.3125 per 50 grams applicable on other tobacco products. Penalties & Criminal Offence Charges on Electronic Suppression of Sales (ESS) Software Sanctions
ESS software is used by some businesses to modify or delete transaction records in order to hide actual sales figure and evade GST/HST, and other taxes. The budget proposes the introduction of severe administrative monetary penalties and criminal offence charges on the possession, sale, purchase, manufacturing, development, et cetera, of these types of software.
Modification to Custom Tariff
The budget proposes to permanently eliminate all tariffs on baby clothes, sports (I.e. fees), and athletic equipment (other than bicycles), in an effort to promote physical fitness and healthy living consistent with past initiatives such as the Children’s Fitness Tax Credit.
AG Tax LLP can help
With the proposed government regulations making situations easier for some and more difficult for others, it is highly recommended that taxpayers consult a professional to take these reforms into account for future tax planning.
If you have any tax-related queries, need assistance with tax planning or filing your tax returns please contact us. Our team comprises of highly experienced tax professionals with extensive knowledge of U.S. and Canadian tax laws as well as cross-border compliance
Furthermore, as a full service accounting firm, AG Tax assures complete assistance with even your most complex tax needs.
We can assist with:
- Canadian Personal and corporate tax returns
- Cross Border Taxation and Business Planning
- U.S. Personal and Corporate Taxation
- Disclosure of Foreign Assets and other information filings
- Retirement planning
- State Sales Tax & E-commerce Taxation
- Estate Planning, Inheritance tax advice
To obtain a quote or to arrange for a consultation to discuss your tax related queries, please contact us at:
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