Information Bulletin: Transition to the New Provincial Sales Tax in British Columbia and the Harmonized Sales Tax in Prince Edward Island
This Information Bulletin is intended to help departments identify and prepare for changes to their financial systems and to tax rate references in departmental documents as a result of the changes that are being introduced to the taxation regime in British Columbia (B.C.) and in Prince Edward Island (P.E.I.)
Current Status
Currently, it is Government of Canada policy that departments collect the Goods and Services Tax (GST) and Provincial Sales Tax (PST), or the Harmonized Sales Tax (HST) on their taxable goods and services, and that they pay GST or HST on their taxable purchases. Pursuant to the Reciprocal Taxation Agreements between Canada and its provinces/territories, departments are exempt from paying PST on their taxable purchases.
In B.C., departments currently pay, charge and collect the HST, where applicable.
In P.E.I., departments currently charge and collect the GST and the PST, but are exempt from paying the PST on their taxable purchases.
Transition to the PST in British Columbia
On , the B.C. government announced that it would be reinstating its PST, as a result of the referendum on the elimination of the HST in that province. Effective , B.C.'s 12% HST, which consists of a 5% federal component and a 7% provincial component, will be replaced by the GST and B.C.'s PST.
In , the Canada Revenue Agency (CRA) issued GST/HST Notice 270: Elimination of the HST in British Columbia in 2013 - Questions and Answers, which detailed the transitional rules regarding the elimination of the HST. In , the CRA issued GST/HST Notice 276: Elimination of the HST in British Columbia in 2013 - Transitional Rules for Real Property Including New Housing, which detailed the transitional rules with respect to the sale and lease of real property.
In , the B.C. Ministry of Finance issued PST Notice 2012-010 - General Transitional Rules for the Re-Implementation of the Provincial Sales Tax (PDF Document – 457.66KB) outlining the transitional rules for re-implementing the PST in B.C.
1. General Rules Applicable to Departments
Government Sales
Registration
Departments that sell or lease taxable goods, or that sell taxable services in the normal course of business in B.C. are required to re-register with the Ministry of Finance in order to charge, collect and remit the PST.
Departments will be assigned new PST registration numbers; the numbers that were used before the HST regime came into effect are no longer valid. The new PST number will consist of 11 characters and will be in the following format: PST-1234-5678.
Registration for the new numbers can be done online, in person, by mail or fax.
Reporting
Starting , departments will be required to file a tax return to remit to the B.C. government the PST they collect on their taxable sales.
For detailed instructions on registration and reporting refer to the Government of British Columbia's website.
Government Purchases
As of , departments will be exempted from paying the PST on their taxable purchases in B.C. The exemption number - PST-1000-5001 will be used by all departments to claim the PST exemption in the province.
2. General Transitional Rules
HST will continue to apply if the tax becomes payableFootnote 1 or is paid before .
GST will apply to the payment in respect of the purchase of goods or services that becomes due on or after , and is not paid before .
Special transitional rules apply to sales of real property. For more information, refer to GST/HST Notice 276: Elimination of the HST in British Columbia in 2013—Transitional Rules for Real Property Including New Housing.
Transition to the HST in Prince Edward Island
On , Canada and P.E.I. entered into a Comprehensive Integrated Taxation Coordination Agreement (CITCA), which provides the framework for the harmonization of the GST and the PST in P.E.I.
As part of the CITCA, P.E.I. agreed to eliminate the PST and replace it with a modern, value-added tax, the HST. The HST in P.E.I. will be 14%, consisting of a 5% federal component and a 9% provincial component. The HST will be administered by the CRA.
On , P.E.I.'s Department of Finance, Energy and Municipal Affairs issued Revenue Tax Guide 185: Implementation of the Harmonized Sales Tax in Prince Edward Island (PDF Document – 248.01KB), which outlined the general rules and transitional measures that stem from the Canada–Prince Edward Island CITCA.
In , CRA issued: GST/HST Notice 278: Harmonized Sales Tax for Prince Edward Island—Questions and Answers on General Transitional Rules for Personal Property and Services, and GST/HST Notice 279: Harmonized Sales Tax for Prince Edward Island—Questions and Answers on Transitional Rules for Housing and Other Real Property Situated in P.E.I. These notices outlined the transitional rules and measures for taxable transactions of personal property, services and real property in relation to the , implementation date.
1. General Rules Applicable to Departments
Government Sales
As of , departments that supply taxable goods or services in P.E.I. will be required to charge and collect HST and to record the HST collected and collectible in the GST/HST Liability Account, Financial Reporting Account 21134. Additional information can be found in Section 7 of the Guideline on the Application of Goods and Services Tax / Harmonized Sales Tax.
Departments will also be required to submit to the CRA monthly returns of GST/HST collected and collectible for each reporting entity they administer. Detailed information on remitting the GST/HST can be found in Section 5 of the Guideline on the Application of Goods and Services Tax / Harmonized Sales Tax.
Government Purchases
As of , departments will be required to pay the HST at the rate of 14% on their taxable purchases and to record the HST paid or payable in the GST Refundable Advance Account. The number used for claiming the PST exemption will no longer be applicable.
In addition, when costing a major project or program in P.E.I. that will take place after , the HST should be included. Detailed information can be found in Section 6 of the Guideline on the Application of Goods and Services Tax/Harmonized Sales Tax.
2. General Transitional Rules
Goods
HST of 14% will generally apply to any payment that becomes due, or that is paid without having become due, on or after , for a sale of a good where the payment is for a good that is delivered and for which ownership is transferred to the recipient on or after .
GST of 5% will apply to any payment for a sale of a good where the payment is for a good that is delivered or for which ownership is transferred to the recipient before , regardless of when the payment becomes due or is paid without having become due.
Leases and Licences of Personal Property
HST of 14% will generally apply to any payment or part thereof that becomes due, or that is paid without having become due, on or after , for a supply of property by way of lease, licence or similar arrangement to the extent that the payment or part thereof is attributable to either (i) a lease interval that begins on or after ; or (ii) where a lease interval begins before and ends after , the portion of the lease interval that occurs on or after . In the latter case, the GST of 5% will apply to the part of the payment that is attributable to the portion of the lease interval that occurs before .
The GST will apply to any payment for a property made by way of lease, licence or similar arrangement where the payment is for a lease interval that begins before and ends before , regardless of when the payment becomes due or is paid without having become due.
For more information, refer to GST/HST Notice 278: Harmonized Sales Tax for Prince Edward Island—Questions and Answers on General Transitional Rules for Personal Property and Services.
Services
HST of 14% will generally apply to any payment that becomes due, or that is paid without having become due, on or after , for a service in cases where the service is entirely performed on or after .
However, if 90% or more of a service is performed before , only the GST will apply to any payment for the service, regardless of when the payment becomes due or is paid without having become due.
For a service where more than 10% of the service is performed on or after , the GST will apply to any payment or part thereof that is attributable to the portion of the service that is performed before . HST of 14% will apply to the payment or part thereof that is attributable to the portion of the service that is performed on or after . For more information, refer to GST/HST Notice 278: Harmonized Sales Tax for Prince Edward Island—Questions and Answers on General Transitional Rules for Personal Property and Services.
Intangible Personal Property (e.g., contractual rights, patents)
HST of 14% will apply if the payment for the sale of intangible personal property becomes due, or is paid without having become due, on or after . This rule will also apply to intangible personal property made by way of lease, licence or similar arrangement if the payments do not vary with the amount of use or profits from the property. For more information, refer to the "Leases and Licences of Personal Property" section of GST/HST Notice 278: Harmonized Sales Tax for Prince Edward Island—Questions and Answers on General Transitional Rules for Personal Property and Services.
Non-Residential Real Property - Progress Payments and Holdbacks
HST of 14% will generally apply to any progress payment on contracts to construct, renovate, alter or repair real property, ships or other vessels to the extent that the payment can reasonably be attributed to property delivered or services performed on or after .
A holdback is a part or percentage of the progress payment for a property or a service that a purchaser normally retains until the satisfactory completion of the work. HST of 14% will apply to a holdback from a progress payment to the extent that the progress payment can reasonably be attributed to property delivered or services performed on or after .
For more information, refer to the "Non-residential real property" section of the GST/HST Notice 279: Harmonized Sales Tax for Prince Edward Island—Questions and Answers on Transitional Rules for Housing and Other Real Property Situated in P.E.I.
Imported Goods
The federal component of the HST (5%) will apply to goods that are imported into P.E.I. by federal departments on or after .
3. Special Transitional Rules
Special transitional rules apply to items such as passenger transportation passes, memberships and admissions. These rules can be found in GST/HST Notice 278: Harmonized Sales Tax for Prince Edward Island - Questions and Answers on General Transitional Rules for Personal Property and Services.
Enquiries
Should you require further information about this Information Bulletin, please contact the following:
Financial Management Sector
Office of the Comptroller General
Treasury Board of Canada Secretariat
Email the Financial Management Sector or call 613-957-7233.
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