Canada: Tax Letters: 2016 Canadian Federal Budget – Sales And Excise Tax Measures

SALES AND EXCISE TAX MEASURES

GST/HST

The Budget proposes a number of GST/HST amendments, including the following.

De minimis financial institutions — Under section 149 of the Excise Tax Act (ETA), a person whose revenues from financial activities exceed a minimum threshold may be considered a financial institution for GST/HST purposes. More specifically, a person earning more than $1 million in interest income from bank deposits in a taxation year is generally considered to be a financial institution for the following taxation year.

To allow a person to engage in basic deposit-making activity without incurring such consequences, the Budget proposes to exclude from the determination of the $1 million threshold, interest earned from demand deposits, term deposits, and GICs with a maturity period of less than one year. This measure applies to a person's taxation years commencing on or after Budget Day. For the purposes of determining whether a person is required to file Form RC7291 (the Financial Institution GST/HST Annual Information Return), this measure applies to a person's fiscal year that straddles that date.

Application of GST/HST to cross-border reinsurance — The ETA requires financial institutions with a branch or subsidiary outside Canada to self-assess and remit GST/HST for certain expenses incurred outside Canada that relate to its Canadian activities.

Amendments to the ETA would clarify that the following components of imported reinsurance services would not form part of the tax base that is subject to these self-assessment provisions:

  • Ceding commissions, and
  • Margin for risk transfer.

In addition, the Budget proposes to set out specific conditions under which the special rules for financial institutions do not impose GST/HST on reinsurance premiums charged by a reinsurer to a primary insurer. These measures will apply retroactively to any specified year of a financial institution that ends after November 16, 2005. Transitional rules would allow a financial institution to request a reassessment to determine its tax owing under the GST/HST imported supply rules for a past specified year, but only for the purpose of taking this measure into account. A financial institution will have one year after the date the enacting legislation receives Royal Assent to request a reassessment.

Closely related test — The ETA allows closely related corporations to make group relief elections under certain circumstances to treat supplies between them as if they were made for no consideration.

Generally, this measure will take effect one year after the Budget Day. However, this measure applies as of March 23, 2016, for determining whether the requirements for the closely related test requirements are met for elections under subsection 150(1) and subsection 156(2) of the ETA, where such elections are filed after Budget Day and take effect after that date.

GST/HST on donations to charities — Under current GST/HST rules, if a person makes a donation and receives property or services in return, GST/HST generally applies on the full value of the donation. In contrast, the Income Tax Act allows for "split-receipting." This allows a charity to provide a donation receipt for the donation amount less any the value of any property or service received by the donor.

The Budget proposes to introduce similar split-receipting rules for the ETA. Specifically, if a charity provides property or services and an income tax receipt may be issued for a portion of the donation, GST/HST applies only to the value of the property or services supplied to the donor. This measure applies to supplies made after Budget Day. However, transitional relief is available for charities that did not collect GST/HST on the full value of donations for supplies made after December 20, 2002, and on or before Budget Day.

Eligible capital property — As noted above (see Business Income Tax Measures — Eligible capital property), the Budget proposes to repeal the ECP regime and replace it with a new CCA class (Class 14.1), effective January 1, 2017. As a result, all ECP will become capital property under the Income Tax Act.

To ensure the application of GST/HST in this area is not affected, the Budget proposes to amend the definition of capital property under the ETA to exclude property in new Class 14.1. Therefore, property that was ECP under the Income Tax Act will continue to be excluded from capital property for GST/HST purposes. The Budget also makes consequential amendments to the Streamlined Accounting (GST/HST) Regulations. These amendments will take effect on January 1, 2017.

Health Measures — The Budget proposes to add the following medical and assistive devices to the list of zero-rated medical devices:

  • Insulin pens and insulin pen needles, and
  • Intermittent urinary catheters, supplied on the written order of a medical doctor, registered nurse, occupational therapist, or physiotherapist for use by a consumer named in the order.

Zero-rating applies to any supplies of insulin pens and insulin pen needles made after Budget Day. In addition, zero-rating applies to any such supplies made on or before the Budget Day, unless the supplier charged, collected, or remitted GST/HST for that supply on or before that date. Zero-rating applies to any supply of an intermittent urinary catheter made after Budget Day.

In addition to the above-listed measures, the Budget amends the ETA to clarify that GST/HST applies to supplies of purely cosmetic procedures provided by all suppliers, including registered charities. This amendment applies to supplies made after Budget Day.

Exported call centre services — Zero-rating will apply to certain exported supplies of call centre services. Specifically, zero-rating will apply to a supply of providing technical or customer support to individuals by means of telecommunications if:

  • The supply is made to a non-resident who is not a GST/HST registrant, and
  • It is reasonable to expect the technical or customer support will be provided to individuals outside Canada at that time.

This measure applies to supplies of such call centre services made after Budget Day. In addition, zero-rating applies to any such supplies made on or before Budget Day, unless the supplier charged, collected, or remitted GST/HST for that supply on or before that date. Zero-rating does not apply to supplies of advisory, consulting, or professional services, or a supply of a service of acting as an agent of the non-resident person.

Reporting of grandparented housing sales — Currently, builders are subject to special reporting requirements for housing sales that were "grandparented" for HST purposes. The Budget proposes to limit such reporting requirements to sales of $450,000 or more. In addition, a builder would be entitled to make an election to report all past grandparented housing sales for which the consideration was $450,000 or more, thereby allowing a builder to correct any past misreporting and avoid potential penalties.

Excise Tax

The Budget contains several amendments relating to excise tax levied under the ETA.

Heating oil — Currently, an excise tax exemption applies in respect of diesel fuel that is consumed to produce heat for any purpose, including industrial processes. The Budget proposes to limit relief to diesel oil consumed exclusively to provide heat to a home, building, or similar structure. This measure will generally apply to fuel delivered or imported after June 2016.

Electricity generation — While excise tax generally applies to diesel fuel consumed for motive purposes, an exemption applies for diesel fuel used in or by a vehicle to generate electricity, if certain conditions are met. The Budget proposes to eliminate this exemption. Excise tax will therefore apply to diesel fuel used to produce electricity in any vehicle, regardless of purpose. This measure will generally apply to fuel delivered or imported after June 2016.

Excise Act, 2001

The Budget proposes to enhance certain security and collection provisions in the Excise Act, 2001.

Security — The Excise Act, 2001 requires manufacturers of tobacco products to hold a license. It also requires stamping for all tobacco products destined for duty-paid entry into Canada, thus indicating that duty has been paid. In order to be issued a license or duty-paid stamps, tobacco manufacturers and other persons that import tobacco products must post security with the Canada Revenue Agency (CRA). Currently, the maximum amount of security required is $2 million.

The Budget proposes to increase the maximum amount of security from $2 million to $5 million. This measure will take effect on the later of:

  • The date the enacting legislation receives Royal Assent, and
  • The date that is three months after Budget Day.

Collection — Currently, if a person objects to or appeals an assessment of excise duty payable, the CRA may not take collection actions while a decision or judgment is pending. The Budget introduces amendments that would allow the minister to require a person to post security for assessed amounts and penalties exceeding $10 million, to the extent the amount remains uncollected. If the person fails to post security, the minister may take collection action to recover an amount equal to the amount of required security.

These measures apply to amounts assessed and penalties imposed after the day on which the enacting legislation receives Royal Assent.

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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
Miller Thomson LLP
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Miller Thomson LLP
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions