Canada: Sales And Excise Tax Measures

Improving the Application of the GST/HST to the Health Care Sector

Acupuncturists' and Naturopathic Doctors' Services

As the professional services of acupuncturists and naturopathic doctors are now regulated as a health profession in at least five provinces, the Budget proposes that acupuncturists and naturopathic doctors be added to the list of health care practitioners whose services rendered to individuals are exempt from GST/HST.

It is proposed that this measure will apply to supplies made after Budget Day.

Designing Training for Individuals with Disorder or Disability

Training that is specially designed to assist individuals with a disorder or disability is currently exempt from GST/HST. The Budget proposes to expand the exemption to services of designing such training. Effective to supplies made after Budget Day, the service of designing such training will be exempt if:

  • it is supplied by a government or the cost of the service is  fully or partially subsidised by a government program; or
  • a recognized health care professional whose services are exempt certifies in writing, in the course of a professional relationship with an individual with a disorder or disability, the design service as being for training that is an appropriate means to assist, alleviate or eliminate the effects of the disorder or disability.

Eyewear Designed to Enhance Vision by Electronic Means

Recently developed electronic eyewear is being used to treat certain vision impairment. However, such eyewear does not currently qualify to be GST/HST zero-rated similar to other corrective devices such as eyeglasses or contact lenses. Therefore, the Budget proposes that eyewear specially designed to treat or correct vision by electronic means, if supplied on written order of a physician or optometrist for use by a consumer named in the order, will be added to the list of GST/HST zero-rated medical and assistive devices. This measure will apply to supplies made after Budget Day.

GST/HST Election for Closely Related Persons

Under section 156 of the Excise Tax Act, an election is available to deem most supplies between Canadian-resident registrants who are members of a closely related group and engaged exclusively in commercial activities to be made for nil consideration, thus attracting no tax. A closely related group is generally a group of corporations or partnerships with at least 90% common ownership. Currently, a new corporation or partner cannot avail itself of the election at the time of initial acquisition of assets from another member of its closely related group if the new corporation or partner has no other property before making the election and has not made any taxable supplies. The Budget proposes to extend the availability of the election to new members of a closely related group that have not yet acquired any property, provided that such members continue as going concerns engaged exclusively in commercial activities.

Additionally, effective January 1, 2015, parties to a new section 156 election will be required to file the election in a prescribed manner with the CRA. Currently, there is no requirement for the election to be filed. Generally, the deadline for filing will be the first day on which any of the parties to the election is required to file a return for the period in which the election becomes effective. Parties to an existing election that is in effect on January 1, 2015 will also be required to comply with this filing requirement, but will have until January 1, 2016 to do so.

Finally, the Budget proposes that parties to a section 156 election (or persons who conduct themselves as if such an election is in force) be subject to a joint and several (or solidary) liability provision with respect to any GST/HST liability arising out of supplies made between them on or after January 1, 2015.

Joint Ventures

Participants in a joint venture are permitted to make a joint election designating one of the participants as the person responsible for accounting for GST/HST in respect of the joint venture's activities. Currently, the joint venture election is available only if the activities of the joint venture are prescribed by regulation as eligible activities for the purposes of the election. Eligible activities are generally restricted to exploration or exploitation of mineral deposits, the construction of real property and activities relating to the sale of lease of real property. To permit more commercial joint ventures activities and participants access to the benefits of the joint venture election, the Budget proposes to broaden eligible activities to allow participants in any joint venture to make the election as long as the activities of the joint venture are exclusively commercial activities and the participants are engaged exclusively in commercial activities. Complementary anti-avoidance measures will also be introduced.

To ensure that those who will be affected by these proposed measures have an opportunity to provide input, draft legislation will be released later in the year and stakeholders will be invited to make submissions prior to the tabling of the enacting legislation.

Strengthening Compliance with GST/HST Registration

Under the current legislation, a business that does not register for GST/HST as required cannot be compelled to do so. The Budget proposes that the Minister of National Revenue be given the discretionary authority to register the business and assign it a GST/HST registration number where a person fails to comply with the requirement to register even after being notified by the CRA. If attempts to contact the non-compliant business by the CRA are unsuccessful, the CRA will issue a formal notification and the person will be registered for GST/HST effective 60 days from the date of the notice.

This measure is expected to improve the CRA's effectiveness of GST/HST compliance efforts and level the playing field for businesses that are complying with their GST/HST obligations.

This measure will apply on Royal Assent to the enacting legislation.

Other Excise Tax Measures

The Budget proposes various changes to restore the effectiveness of the excise duty to tobacco products such as increasing the rate of duty on cigarettes from $0.425 to $0.52575 for each five cigarettes to account for inflation, indexing tobacco taxes to the consumer price index, and proposing changes to the inventory tax on cigarettes.

The Budget also proposes to add a new administrative monetary penalty and to amend the criminal offences for the making of false statements or omissions in an excise tax return (applicable to the non-GST/HST portion of the Excise Tax Act). These provisions will be consistent with the GST/HST portion of the Excise Tax Act.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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