Canada: Tax Newsflash - October 19, 2009

HST Transitional Rules Released

The 2009 Ontario Budget proposed to harmonize the Ontario Retail Sales Tax ("RST") with the federal goods and services tax to create a Harmonized Sales Tax for Ontario ("HST").

On October 14, 2009, the Ontario Ministry of Revenue released Information Notice No. 3, containing general transitional rules for the Ontario HST. The general rule is that the HST regime comes into force on July 1, 2010, HST will be payable for various types of consideration paid after May 1, 2010, to the extent that the consideration pertains to that part of a supply that is supplied after July 1, 2010, and there may be some self-assessment requirements on select non-consumers after October 14. 2009.

Transitional Rules for Goods, Services, Leases and Licences

The transitional rules with respect to the sale of tangible personal property, provision of services and leases, licences or similar arrangements is summarized in the following table. As may be evident from the table, consideration pertaining to a period after the harmonization date will generally be subject to the HST.


Date Consideration Due or Paid

After July 1, 2010 (Harmonization Date)

After May 1, 2010 and Before July 1, 2010

After October 14, 2009 and Before May 2010

Tangible Personal Property (goods)

HST applicable to consideration for goods delivered and ownership transferred on or after Harmonization Date

HST applicable to consideration for goods delivered and ownership transferred on or after Harmonization Date

Self-assessment requirement on select non-consumers for consideration for goods delivered and ownership transferred on or after Harmonization Date

Services (including general memberships)

HST applicable to consideration paid for part of service performed on or after Harmonization Date

HST applicable to consideration paid for part of service performed on or after Harmonization Date

Self-assessment requirement on select non-consumers for consideration paid for part of service performed on or after Harmonization

Leases, Licences or Similar Arrangements

HST applicable to consideration for part of lease interval occurring on or after Harmonization Date (with certain exceptions)

HST applicable to consideration for part of lease interval occurring on or after Harmonization Date (with certain exceptions)

Self-assessment requirement on select non-consumers for consideration for part of lease interval occurring on or after Harmonization Date (with certain exceptions)

The Information Notice also addresses situations pertaining to specific types of tangible personal property, services or leases and licenses. These are:

(a) Newspapers, magazines & periodicals;

(b) Funeral or cemetery services;

(c) Passenger and freight transportation services;

(d) Commercial parking passes;

(e) Ordinary club memberships

Intangible Personal Property

Generally, HST will apply to consideration that becomes due, or is paid without having become due, on or after July 1, 2010 for a supply of intangible personal property by way of sale.

The Information Notice addresses certain specific situations for the following:

(a) Lifetime memberships;

(b) Admissions;

(c) Passenger transportation passes

Real Property (Excluding Residential Housing)

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

Other Transitional Rules

Other transitional rules have been provided for the following categories:

(a) Direct sellers;

(b) Continuous supplies;

(c) Budget payment arrangements;

(d) Combined supplies;

(e) Progress payments and holdbacks;

(f) Property and services brought into Ontario;

(g) Imported goods;

(h) Imported taxable supplies.

In each case, the rules follow the general date guidelines set out above.

Transitional RST Inventory Rebate for Residential Real Property Contracts

An RST rebate will be available with respect to the RST embedded in construction materials used in residential real property contracts subject to HST.

The rebate will be available to:

(a) real property contractors for the RST paid on construction materials purchased or produced for the contractor's own use,

(b) held in inventory at the end of the day on June 30, 2010, and

(c) used in a residential property contract to which the HST will apply.

The rebate will not be available with respect to inventory for which the RST is otherwise recoverable by the contractor or any other party.

Contracts to improve land and items permanently attached to land and residential real property contracts for repair or improvements to rental housing, condominiums, apartment buildings, and long-term residential care facilities may qualify for this rebate.

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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