What’s new in commodity tax across Canada?

Commodity Clips / Issue 1 / April 2014
From Indirect Tax Services
What’s new in commodity
tax across Canada?
This edition of Commodity Clips describes recent commodity tax developments with respect to:
 GST/HST
 British Columbia
 Manitoba
 Quebec
 Saskatchewan
 Customs
It also includes:
 PwC events
 Let’s talk (PwC contacts)
GST and HST
2014 Federal budget
The February 11, 2014 federal budget proposed
the following changes to the Goods and Services
Tax/Harmonized Sales Tax (GST/HST).
Health-related services and medical assistive
devices
For supplies made after February 11, 2014:

the exemption for training that is specially
designed to assist individuals with a disorder
or disability will be expanded to also exempt
the services of designing that training
www.pwc.com/ca/commodityclips
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
acupuncturists and naturopathic doctors will be added to the list of health-care
practitioners whose professional services are exempt
eyewear specially designed to treat or correct vision by electronic means will be a
zero-rated medical and assistive device, if supplied on the written order of a physician
or optometrist for use by the consumer named in the order
GST/HST election for closely related persons
Under the GST/HST, a group relief election, generally referred to as the ‘nil consideration
election,’ relieves registrants that are resident in Canada and engaged exclusively in
commercial activities and members of a closely related group from accounting for
GST/HST on certain taxable supplies. Effective January 1, 2015:


availability of the group relief is extended to new members that have not yet acquired
any property, if they continue as going concerns engaged exclusively in commercial
activities
parties to a group relief election will be required to file the election with the Canada
Revenue Agency (CRA) in prescribed manner (by January 1, 2016, if elections are
already in place on January 1, 2015)
Joint ventures and GST/HST
Participants in certain joint ventures can make a joint venture election that simplifies the
GST/HST accounting obligations in respect of their joint venture activities.
To give more commercial joint venture activities and participants access to the GST/HST
simplification benefits available under the joint venture election, the government will
propose new joint venture election measures, as well as complementary anti-avoidance
measures, that will allow joint venture participants to make the election, if the:


joint venture’s activities are exclusively commercial, and
participants are engaged exclusively in commercial activities
Strengthening compliance with GST/HST registration
The Minister of National Revenue will be given discretionary authority to register and
assign a GST/HST registration number when a person fails to comply with the
requirement to register, even after having been notified of this requirement by the CRA.
This will apply upon royal assent to the enacting legislation.
Notices
GST/HST Notice 284, Bare Trusts, Nominee Corporations and Joint Ventures provides
the CRA’s administrative policy regarding participants in joint ventures who have elected
under section 273 for a nominee corporation or bare trust to be the operator of the joint
venture, if the nominee corporation or bare trust:


does not have the managerial or operational control, and
is not considered to be a participant in accordance with its policy statement (P-106)
Auditors have been advised not to assess for any GST/HST owing when an assessment
could be raised because the bare trust or nominee corporation is not a participant for
purposes of section 273. This administrative tolerance is:



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contingent upon confirmation that all returns have been filed, all amounts have been
remitted and the joint venture participants are otherwise fully compliant
in place with the understanding that, going forward, the joint venture will arrange its
affairs to ensure that a participant, as defined in GST/HST Policy Statement P-106,
who is a GST/HST registrant, is the operator of the joint venture
available for reporting periods ending before January 1, 2015
PwC
See our Tax Insights, ‘Bare trusts, nominees and joint ventures: Temporary
administrative leniency.’
GST/HST Notice 257, The GST/HST Rebate for Pension Entities defines terminology
used in GST/HST Technical Information Bulletin B-108, Changes to GST/HST Rules for
Pension Plans – New Section 157 and Amendments to Section 172.1, which the CRA
released in February 2014. The bulletin explains legislative amendments introduced in
the March 21, 2013 federal budget to simplify GST/HST pension plan rules for employers.
The changes were included in Bill C-60, which received royal assent on June 26, 2013.
British Columbia
Notices and bulletins
Notice 2013-021, Motor Fuel and Carbon Tax – New Online Services explains how to
access eTaxBC for all motor fuel and carbon tax accounts effective January 6, 2014.
Bulletin CT 002, Carbon Tax Refunds for Purchasers has been revised to include
information on carbon tax exemptions and refunds available for farmers who purchase
coloured gasoline and coloured diesel on or after January 1, 2014, for an authorized use.
Bulletin CTB 001, Bad debts replaces Bulletin GEN 001 Refunds of Tax Paid or Remitted
on Sales Written Off as Bad Debts.
Bulletin CTB 004, Statistical Sampling. This new bulletin explains statistical sampling
and how it may be used during a consumer tax audit.
Bulletin CTB 006, Board Member’s Liability. This new bulletin explains how a board
member of a corporation may be liable for taxes that the corporation does not collect or
remit as required.
Bulletin MFT-CT 003, Coloured Fuels has been updated to provide information on a
carbon tax refund for farmers who use clear gasoline or diesel in a farm truck while
operating internationally for a farm purpose. It also provides information about
submitting the Dye Stock Report online using eTaxBC.
Bulletin MFT-CT 004, Registered Consumers has been updated to include information on
filing and paying returns using eTaxBC.
Bulletin MFT-CT 007, Refunds for Deputy Collectors and Retail Dealers has been revised.
It provides information for retail dealers on how they can apply for a carbon tax refund
on the difference between the security paid on coloured gasoline or coloured diesel and
the tax collected, if the fuel is sold to a qualifying farmer on or after January 1, 2014.
Bulletin PST 105, Software has been rewritten to include more detailed information on
how the provincial sales tax (PST) applies to intangible software (e.g. provided over the
Internet, including by email, File Transfer Protocol (FTP), download or other electronic
means).
Bulletin PST 111, Mining Industry has been revised to clarify that de-watering pumps do
not qualify for the production machinery and equipment (PM&E) exemption and are
taxable. Additional information on improvements to real property and affixed machinery
is also provided.
Bulletin PST 112, Logging Industry has been revised to clarify how to calculate
depreciated value for change in use.
Bulletin PST 114, Oil and Gas Industry – Exploration, Discovery and Development is a
new bulletin.
Bulletin PST 116, Motor Vehicle Dealers and Leasing Companies.
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Bulletin PST 122, Caterers, Event Planners and Party Supply Stores. This new bulletin
provides information to help caterers, event planners and party supply stores understand
how the PST applies to their businesses.
Bulletin PST 127, Veterinarians and Pet Stores. This new bulletin provides information on
how the PST applies to the businesses of veterinarians, pet shop owners, kennel operators
and breeders.
Bulletin PST 135, Multijurisdictional Vehicles (MJV) has been revised to provide
information about the intention to introduce legislation at the earliest opportunity to
amend the PST Act retroactive to April 1, 2013, to impose the exit tax only when an MJV
is licensed for use solely within BC.
Bulletin PST 136, Concrete is a new bulletin that explains how the PST applies to readymixed concrete and precast concrete.
Bulletin PST 140, Funerals.
Bulletin PST 209, Exemption for Prototypes.
Bulletin PST 302, Delivery Charges has been revised to provide additional information on
non-taxable delivery charges.
Bulletin PST 309, PST and Non-Residents is a new bulletin that explains how the PST
applies to non-residents of BC.
Bulletin PST 313, Administrative Materials.
Bulletin PST 315, Rentals and Leases of Goods.
Bulletin PST 317, Tax Payment Agreements. This new bulletin provides information on
voluntary tax payment agreements (TPAs) that eligible businesses may apply to enter into
with the Ministry of Finance. A TPA allows an eligible business to defer paying PST when
it acquires or leases certain items for business use, and to self-assess and remit the PST
due on any items later used for a taxable purpose.
Bulletin PST 319, Partnerships is a new bulletin that provides information on how the
PST applies to partnership assets.
Bulletin PST 401, PST Refunds on PAC-Funded Purchases. This new bulletin provides
information on the PST refund available for certain goods and software purchased with
funds raised by parents' advisory councils (PACs).
Forms now available
Fin 125 – Collector’s Return has been updated for the April 1, 2014 tax rate change.
Fin 143 – Application for Refund of Carbon Tax Deputy Collector or Retail Dealer has
been revised to allow claims for bad debts.
Fin 152 – Application for Refund of Motor Fuel Tax Deputy Collector or Retail Dealer has
been revised to allow claims for bad debts.
Fin 225 – Retail Dealer’s Inventory Return has also been updated for the April 1, 2014 tax
rate change and will be sent by mail only or may be completed online using eTaxBC.
Fin 227 – Wholesale Dealer’s Inventory Return has been updated for the April 1, 2014 tax
rate change.
Fin 384 – Application for Tax Payment Agreement (TPA) is available for eligible
businesses to apply to enter into a voluntary tax payment agreement with the ministry.
Fin 472 – Application for Refund of Provincial Fuel Tax for Persons with Disabilities has
been revised to include the 2014 calendar year for fuel receipts.
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Other information
Motor fuel, carbon and tobacco tax accounts now have access to the new online system,
eTaxBC, which allows taxpayer’s to access and update their account information,
correspond with ministry staff, file tax returns and pay taxes.
Manitoba
Bulletins
Bulletin No. 114 – Taxation Changes – 2014 Budget contains information on the tax
changes announced in the March 6, 2014 budget.
Notices
Notice RST 13-03 – New Vendor Calls discusses the information service provided when a
business that registers as a retail sales tax (RST) vendor requests a Taxation Division
representative to visit its business and review the application of sales tax and its
responsibilities as a vendor.
Notice RST 14-01 – Important Retail Sales Tax Tips provides information to help
businesses comply with their RST collection and payment requirements.
Quebec
Forms now available
FP-2626-V, Election or Revocation of the Election by a Public Service Body to Have an
Exempt Supply of Real Property (an Immovable) Treated as a Taxable Supply.
Saskatchewan
Bulletins
Saskatchewan PST Rulings manual has been updated with recent rulings.
PST-46 – Information for Service Enterprises has been revised.
PST-72 – Information for Rental Businesses is a new bulletin that outlines the application
of PST for rental and service businesses.
Notices
Information Notice regarding PST Outreach Reviews and Outreach Review Supplemental
PST Return Form announces the launch of a new Outreach Review program to provide
additional assistance to taxpayers conducting business in the province. An outreach
supplemental PST Return form has also been made available.
Information Notice Regarding Requirements to Collect PST and Craft and Trade Shows in
Saskatchewan provides guidance to participants in Saskatchewan craft and trade shows
regarding the requirement to collect PST on the sales of taxable merchandise.
Customs
Canada-Korea free trade agreement
Canada has concluded negotiations on a free trade agreement with Korea. Officials
indicate that the agreement could be implemented within the year.
The government has released limited information regarding the agreement. Many duty
rates that are not currently duty-free will remain in place after the agreement is
implemented, and will be phased out over as many as 15 years (more typically – it
appears – over three to five years).
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No details are provided regarding the rules of origin that will be used to determine
whether goods are eligible for preferential duty rates under the agreement, although the
government has disclosed that Canadian vehicle manufacturers will be able to source key
inputs in the United States to qualify vehicles under the Canada-Korea agreement. The
government information does not say whether these US-sourced parts would be required
to have any Canadian content.
Domestic producers will still be able to launch anti-dumping and countervailing duty
investigations. In addition, the agreement provides for temporary safeguard measures
when a ‘surge’ of imports following a duty rate reduction causes, or threatens to cause,
injury to a domestic industry.
More information is available on the Government of Canada website.
2014 Federal budget
Duty removed on certain vessels
Changes to the Customs Tariff will create two new tariff items in Chapter 89 that provide
duty-free entry for certain types of vessels used for certain purposes. The two new tariff
items replace the Mobile Offshore Drilling Units Remissions Order, 2004. As a result, the
following will enter Canada duty-free on a most favoured nation basis:

drilling platforms (including jack-ups and semi-submersibles) used in drilling activity
for exploration, delineation or development of offshore projects
 drill-ships used in drilling activity for exploration, delineation or development of
offshore projects
The changes will apply to goods imported into Canada on or after May 5, 2014, the day
after the Mobile Offshore Drilling Units Remissions Order, 2004 expires.
No changes were proposed to the Coasting Trade Act, which states that: ‘… no foreign
ship or non-duty paid ship shall, except under and in accordance with a licence, engage in
the coasting trade.’
Cross-border price discrimination
The government is investigating whether duty cost reductions resulting from duty
elimination on baby clothing, and certain sports and athletic equipment in the previous
budget has been passed on to consumers. It expects to have a report by the end of 2014,
which ‘will guide future decisions on tariff reductions.’
The government will also introduce legislation to address price differences that are not
justified by higher operating costs in Canada. No details are provided in the budget.
Cost-sharing arrangements
Canadian companies that have arrangements with foreign companies to share research
and development costs should be aware of the recent Canadian International Trade
Tribunal decision in Skechers USA Canada, Inc. v. Cross Border Services Agency.
The Tribunal upheld the Canada Border Services Agency’s policy of including these
payments in the value for duty, and further determined that these payments should be
regarded as part of the price paid or payable for imported goods even if the research and
development did not result in goods’ actually being placed into production.
Although the importer in this case made payments to the party from which it purchased
the goods, the decision may also have implications for importers that purchase imported
goods from a party that does not receive payments under a cost-sharing arrangement.
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PwC
PwC events
PwC Insurance EyeOpener – High profits, high stakes: The future of
insurance companies in wealth management
(Tuesday, April 8, 2014 – Toronto, Ontario)
In today's economic market, many insurance companies are entering or expanding their
wealth management offerings to continue generating growth opportunities.
Join us as we discuss the key themes insurers must consider: channel distribution
models, ongoing regulatory and risk management and defining themselves in a fiercely
competitive market.
Let’s talk
For a deeper discussion of how these commodity tax issues might affect your business,
please contact:
Mario Seyer, Montreal
National Indirect Tax Leader
+1 (514) 205 5285
[email protected]
Audrey Diamant, Toronto
+1 (416) 687 8933
[email protected]
Zaheer Jamal, Vancouver
+1 (604) 806 7221
[email protected]
Eric Paton, Toronto
+1 (416) 869 2878
[email protected]
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Try it today at www.ca.taxnews.com or 1 866 Tax News (1 866 829 6397).
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