On August 26, 2011, British Columbia announced the results of a referendum where voters decided that the province would eliminate the HST and reinstate the PST in conjunction with the GST. Today, the federal government announced that the 12% HST in British Columbia will be replaced with a combination of 5% GST and a British Columbia PST, effective April 1, 2013.
The federal government also released the proposed transitional rules to eliminate the HST in British Columbia, as part of this announcement. However, it should be noted that these rules do not provide any guidance on the provincial measures that will be required to reinstate the PST in British Columbia. The Department of Finance also cautions that these rules must be applied in conjunction with any transitional rules issued by British Columbia to reintroduce the PST.
General Transitional Rules
Generally, where tax becomes payable, or is paid without becoming payable, on supplies of taxable goods and services before April 1, 2013, HST will apply to the transaction. Conversely, where tax becomes payable after March 31, 2013, provided it is not paid on or before that date, HST will not apply to the transaction.
The Excise Tax Act has special rules that govern when GST/HST becomes payable. These rules are known as the timing of liability rules. Under the general timing of liability rule, tax on the consideration for a supply is payable on the earlier of the day payment is made and the day the supplier issues an invoice. The payment terms on an invoice are irrelevant. However, if there is an undue delay in issuing an invoice, tax becomes payable when the invoice would have been issued if there had been no delay. In addition, if either the date of an invoice or the payment date under a written agreement is earlier than the date the invoice is issued, tax becomes payable on the earlier date.
In addition to the general transitional rules above, there are specific transitional rules that will apply to the following types of transaction and situations, as outlined in the news release:
- imported goods;
- imported services and intangible personal property;
- apportionment for the provincial component of HST for financial institutions;
- participating employers and pension entities of pension plans for periods that begin before April 1, 2013 and end after March 31, 2013;
- taxable benefits, input tax credits in respect of passenger vehicles and aircraft and employee/partner rebates; rebates for public service bodies;
- remittance rates for businesses using streamlined accounting methods;
- time limits for refunds and rebates;
- returns and exchanges of goods;
- tax on self-supplies of subsidized housing;
- basic tax content calculations;
- performance bonds; and
- transitional housing rebates.
Look for a detailed analysis of the transitional rules related to the elimination of the HST in British Columbia in the upcoming issue of the Ryan Sales Tax ReviewTM.
Further details on the transitional rules announced today can be found on the Department of Finance Canada website at: Transitional Rules - Elimination of BC HST.