The Department of Finance recently announced proposed amendments to the Excise Tax Act (“ETA”) that may require registrants’ attention. One set of proposed amendments is in response to a recent decision by the Tax Court of Canada, in which a business was allowed to claim input tax credits related to GST that had been refunded to the business, by its suppliers, through the issuance of tax-included credit notes. In order to close this legislative loophole, amendments are being tabled to ensure that a person cannot claim input tax credits in respect of an amount of GST/HST that has already been recovered, by the person, from a supplier.
Recently, Finance Minister, the Honourable Jim Flaherty, announced proposed amendments to the ETA in order to provide an exemption to patients and visitors from the GST/HST now payable for hospital parking. Budget 2013 proposed an addition to Section 1, Part V.1, Schedule V of the ETA, by which the Ministry sought to clarify that the special GST/HST exemption for parking supplied by charities does not apply to supplies of paid parking that are made by way of lease, licence or similar arrangement in the course of a business carried on by a charity set up or used by a municipality, university, public college, school or a hospital to operate a parking facility. This measure was intended to ensure consistent tax treatment of supplies of paid parking made directly by municipalities, universities, public colleges, schools, hospitals and supplies made by charities set up or used by these entities to supply their parking.
After some consideration, the Ministry is proposing to have this additional tax burden lifted for hospital patients and visitors. In order for the relief to apply, a number of conditions must first be met as per new section 7, proposed to be added to Schedule V, Part V.1, including:
- first condition – one of the following must be true:
- if all of the parking spaces in the specified parking area in relation to the supply of the parking space are reserved for use by individuals who are accessing a public hospital; or
- if it is reasonable to expect, at the time when the supply of the parking space is made, that these parking spaces will be used, during the calendar year in which the supply is made, primarily by individuals who are accessing a public hospital.
- second condition – none of the following can be true:
- if all or substantially all of the parking spaces in the specified parking area in relation to the supply are reserved for use other than by individuals accessing a public hospital, otherwise than in a professional capacity; or
- if the supply of the parking space, or the consideration for the supply is conditional on the parking space being used by a person other than an individual accessing a public hospital, otherwise than in a professional capacity; or
- if the agreement for the supply is entered into in advance, the period over which parking spaces can be accessed under the supply is more than twenty-four hours, and the access to the specified parking area in relation to the supply is to be used by a person, other than an individual accessing a public hospital otherwise than in a professional capacity.
- third condition – no election has been made by the supplier of the parking space under section 211 of the ETA in respect of the property on which the parking space is situated, whereby the supply would be taxable under Part IX of the ETA.
These conditions essentially ensure that the relief of tax on parking spaces for those accessing a public hospital is granted to patients and visitors of the hospital and not to others, such as staff or students using the same spaces.
Special transitional measures have also been proposed in order for the amendment to apply retroactively to supplies made after March 21, 2013. In cases where a charity has collected tax on a supply which now qualifies as exempt, the charity is relieved from the obligation to remit the amount and, if the amount has already been remitted, the charity may recover the amount as a refund under section 261 of the ETA. Furthermore, if the charity does not qualify for a refund of the tax collected and remitted due to an assessment under section 296, a special rule will allow the charity to request in writing that the Minister of National Revenue assess, reassess or make an additional assessment of the net tax to take into account the changes that have been made. This request should be made within one year of the enactment of the new section 7, Part V.1, Schedule V.
In Information Bulletin 2014-2, “Harmonization of Tax Relief for Hospital Parking” issued January 24, 2014, Quebec’s Ministry of Finance confirmed equivalent changes would be made to the Quebec sales tax system so as to remain consistent with the GST/HST system.
The Ministry of Finance has provided the following explanatory notes: