Canada: Ontario HST Transition Rules Announced

The British Columbia and Ontario governments have each released a general description of transition rules for the upcoming replacement of the provincial sales tax in those provinces ("PST") with a sales tax (the "HST") harmonized with the federal GST. The General Transition Rules for the implementation of HST released by each province are nearly parallel. This update will focus on the Ontario rules.

Important Dates

July 1, 2010: As previously announced, the HST will be fully implemented in B.C. and Ontario. Goods or services received after this date will generally be subject to HST and not PST.

May 1, 2010: Suppliers will have to collect any applicable HST on amounts that are paid or payable on or after May 1, 2010 for goods or services delivered or provided on or after July 1, 2010.

October 14, 2009: Certain businesses and public service bodies (see below) may be required to self-assess the provincial component of the HST on amounts paid or payable by them after October 14, 2009 and before May 2010 for goods or services to be received after July 1, 2010.

October 31, 2010: All outstanding PST becomes payable under the transition rules to facilitate the wind-down of the PST regime.

Self-Assessment of HST

Certain persons may be required to self-assess the provincial component of the HST on amounts paid or payable by them after October 14, 2009 and before May 2010 for goods or services to be received after July 1, 2010.

This requirement to self-assess generally applies only to:

  • Non-consumers acquiring the goods or services for consumption or use otherwise than in the course of a commercial activity (that is, persons whose business includes making GST-exempt supplies, such as financial services or health care services).
  • Non-consumers that use the simplified accounting procedures under the GST legislation (such as certain charities, public service bodies, and small businesses).
  • Selected listed financial institutions.
  • Non-consumers acquiring the goods or services for use or consumption in their commercial activities where a restriction on input tax credit availability would apply (for example, certain entertainment expenses are subject to 50 percent input tax credit recapture; also, the 2009 Ontario budget proposed temporary restrictions on large businesses' ability to claim input tax credits on the provincial component of the HST payable on certain supplies, such as energy and telecommunications services).

Persons having to self-assess this tax will be required to account for it in their GST/HST return for the reporting period that includes July 1, 2010, if that return is due before November 2010; or, in any other case, in a special prescribed return due before November 2010.

Rules for Specific Types of Supplies

The General Transition Rules include a description of how the HST will apply to transactions that straddle the July 1, 2010 implementation date (for instance, payment for a supply is made before implementation, but delivery is made afterward) which work in tandem with rules announced for the wind-down of the PST regime. The following summarizes the application of both HST and PST to such transactions.

The general rules described under "Important Dates", above, apply to determine HST payment, collection or self-assessment obligations in respect of the following specific supplies.

Tangible Personal Property

  • PST will generally apply to the taxable sale of goods if possession or ownership of the goods is transferred to the purchaser before July 1, 2010.
  • HST will generally apply to goods if possession and ownership of the goods is transferred to the purchaser on or after July 1, 2010.
  • Notwithstanding the general rules above, goods purchased by consumers will remain subject to PST, regardless of when delivered, if the consideration for the goods is paid before May 1, 2010.
  • The general rules described under "Important Dates", above, apply to determine HST payment, collection or self-assessment obligations in respect of the foregoing supplies.

Services, Memberships and Admissions

  • PST will generally apply to the portion of taxable services performed before July 1, 2010.
  • HST will generally apply to the portion of services performed on or after July 1, 2010. Where a part of the service is performed before July 1, 2010, no HST is payable on that part (even if the consideration is paid after that date). Furthermore, if 90% or more of the service has been performed before July 2010, no HST (only PST) will apply to the service (even if the consideration is paid after July 1, 2010).
  • With the exception of lifetime memberships, for which special rules apply, memberships are treated in the same manner as services under the transition rules. Accordingly, the portion of a membership that is applicable to the period commencing July 1, 2010 and thereafter is subject to HST.
  • Admissions to places of entertainment, seminars or events that take place on or after July 1, 2010, are subject to HST.
  • Notwithstanding the general rules above, taxable services and admissions purchased by consumers will remain subject to PST, regardless of when delivered, if the consideration for the supplies is paid before May 1, 2010.
  • The general rules described under "Important Dates", above, apply to determine HST payment, collection or self-assessment obligations in respect of the foregoing supplies.
  • The General Transition Rules include special rules for funeral and cemetery services, passenger and freight transportation services, and subscriptions to newspapers, magazines and other periodicals.

Leases and Licenses

  • PST will continue to apply to a supply of taxable goods by way of lease, licence or similar arrangement for the part of a lease interval that occurs before July 1, 2010.
  • HST applies to the portion of a lease interval that occurs after July 1, 2010 (with the exception of a lease interval that begins before July 2010 and ends before July 31, 2010, in respect of which PST, but not HST, will apply).
  • The general rules described under "Important Dates", above, apply to determine HST payment, collection or self-assessment obligations in respect of the foregoing supplies.

Real Property Other than Residential Housing

HST will apply to a supply of real property (other than residential housing) by way of sale in Ontario if both ownership and possession of the property are transferred to the purchaser on or after July 1, 2010.

The General Transition Rules do not contain rules pertaining to residential housing. Transition rules for new residential housing are included in the Ontario government's Information Notice No.2, dated June 18, 2009.

Other Specific Transition Rules

The following supplies and circumstances are subject to special transition rules:

  • Supplies by, and inventory of, direct sellers and their independent sales contractors.
  • Continuous supplies made by wire, pipeline, satellite or telecommunications facility.
  • Budget payment arrangements (such as equal billing plans for utilities).
  • Combined supplies (where a portion of a single supply would be subject to HST under the transition rules, but another portion would not be).
  • Progress payments.
  • Goods and services brought into the province.
  • Imported goods and imported taxable supplies.
  • Returns and exchanges of goods.
  • PST paid on construction materials that are held in inventory on June 30, 2010.

Additional Rules Regarding the Wind-Down of PST

The Ontario and B.C. General Transition Rules differ somewhat in the specific details of the winddown of PST. The Ontario rules are described below.

  • On July 1, 2010, the existing PST will generally cease to apply.
  • Final PST returns are required to be filed by July 23, 2010.
  • Any PST collected after June 2010 is required to be accounted for in a supplemental PST return to be filed the following month.
  • All such supplemental PST returns must be filed no later than November 23, 2010, as all uncollected PST becomes payable on October 31, 2010.

The content of this article does not constitute legal advice and should not be relied on in that way. Specific 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
 
In association with
Related Topics
 
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