News and Insights

Department of Finance Releases Proposed Amendments for Public Comment 

Tax Development May 30, 2014

As part of an ongoing effort to ensure that tax legislation is unambiguous and reflects the underlying policy intent, the Department of Finance has issued some proposed technical amendments to the Excise Tax Act (ETA).  These proposals include amendments to:

  • implement real property technical amendments that provide for the consistent treatment of different types of housing and ensure that the special valuation rule for subsidized housing works properly with the GST/HST place of supply rules and in the context of a GST/HST rate change;
  • clarify the application of GST/HST public service body rebates in relation to non-profit organizations that operate certain health care facilities; 
  • relieve the GST/HST on services of refining precious metals supplied to a non-registered non-resident;
  • codify relieving provisions related to the tax treatment of Canadian goods on which GST/HST has already been paid upon re-entry into Canada; and
  • simplify the tax treatment of the temporary importation of certain railcars.  

Due to the existing definition of the term “builder”, unlike other types of housing, residential condominium units substantially renovated for resale or rental are currently not subject to GST/HST.  In order to remedy this inconsistency, the definition of “builder” will be revised to include persons that substantially renovate residential condominium units.  In addition, the definition for “substantial renovation” will be amended to apply to the “all or substantially all” test, with respect to the whole or part of a residential complex in which one or more residential units are located, not just to the entire building.   

Another proposed amendment includes the special rule for subsidized housing in subsection 191.1(2) so that the GST/HST payable in respect of housing inputs for the purposes of this rule, is equal to the total GST/HST that would have been payable on the acquisition of those housing inputs if:

  • the GST/HST rate applicable for the housing inputs was the GST/HST rate applicable at the time of self-supply; and '
  • the housing inputs had been acquired in the province in which the housing is situated.

An exception would be available to a self-supply of subsidized housing, where construction had commenced before the Announcement Date of April 8, 2014.   

The definition of “charity” in section 259(1) includes non-profit organizations that operate non-profit “health care facilities”, making these organizations eligible for the same public service body (PSB) rebates as a charity.  New subsections 259(4.11) & 259(4.12) will clarify that rebates will only be available to the extent that the GST/HST incurred is related to consumption or use in these specific health care facility operations for the relevant time.   

New section 6.3 of Part V of Schedule VI of the ETA  will zero-rate services provided to an unregistered non-resident person for refining a metal to produce a precious metal.  Transitional rules around the April 8, 2014 announcement date will apply.   

The regulations for non-taxable imported goods have been updated to include a definition for “tax-relieved supply”, which is defined to mean “a supply of goods in respect of which tax is relieved generally because the goods are exported or because the supply was made outside Canada”.  In addition,  various amendments were made to Section 3, including new paragraph (n), which sets out the conditions for goods returned to Canada to qualify for GST/HST relief upon importation into Canada. 

For detailed information, you may review the Legislative Proposals relating to Income Tax and Sales Tax or the Explanatory Notes to Legislative Proposals Relating to Income Tax and Sales Tax.