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Title: Agenda


1

2
Agenda
  • Legislative Changes Proposals
  • January 26, 2007 Legislative Proposals for
    Financial Institutions
  • March 19, 2007 Federal Budget
  • April 1, 2007 Standardized Accounting Initiative
  • October 30, 2007 Economic Statement GST Rate
    Reduction
  • February 26, 2008 Federal Budget
  • Administrative Policy Changes (New Policies
    Updated Policies)
  • ITC Documentation Requirements GST Registry
  • Standardized Accounting
  • GST Voluntary Disclosures
  • Exported Intangible Personal Property
  • Pension Plan Rebate General Motors Decision
  • Vacation Properties Acquired Used by
    Individuals
  • Corporate Reorganizations GST Traps
  • Part I Excise Tax Provincial Premium Taxes on
    Insurance

3
January 26, 2007 Legislative Proposals
forFinancial Institutions
  • ITC Allocation Methodologies (Qualifying FIs
    Non Qualifying FIs)
  • Imported Taxable Supply Rules
  • Intra-Company Supplies between Branches (s. 220)
  • Annual Information Return for Financial
    Institutions
  • Pension Plan Trust Rebate

4
March 19, 2007 Federal Budget (Bills C-52 C-28)
  • Exports of Intangible Personal Property (s. 10.1
    of Part V of Schedule VI) made to Unregistered
    Non-Residents Except
  • Supplies to individuals (unless outside Canada at
    time of supply)
  • Supplies which relate to real property or
    tangible personal property ordinarily in Canada
    or services supplied in Canada that are not Z/R
  • IPP that may only be used in Canada
  • Certain Telecom facilities
  • Remittance Filing Thresholds
  • Election threshold for Yearly filers increased to
    1.5 mil from 500,000 (s. 248)
  • Installment threshold for remittances increased
    to 3,000 from 1,500 (s. 237)

5
March 19, 2007 Federal Budget (Bills C-52 C-28)
  • Foreign Convention Tour Incentive Program (s.
    167.2 s. 252.1 through 252.4)
  • Green Levy on Fuel-Inefficient Vehicles (s. 6 of
    Schedule I to ETA)
  • Taxes of 1,000 to 4,000 per passenger vehicle
    based on fuel consumption rating
  • End-User Refunds for Excise Tax on Diesel Fuel
    (s. 68.01)
  • ITCs for Meal Expenses of Truck Drivers (s.
    236(1))

6
April 1, 2007 Standardized Accounting Initiative
(Bill C-13 Budget Implementation Act, 2006)
  • Replaced 6 yearly penalty with higher interest
    rate (T-bill, rounded up plus 4)
  • New late filing penalties (280.1) 1 plus 0.25
    per month (maximum 12 months)
  • Interest payable by CRA equals T-bill, rounded up
    plus 2
  • Non-deductibility for Income Tax
  • S.18 (i)(t) of ITA (interest)
  • S.67.6 of ITA Reg. 7309(GST penalties)

7
October 2, 2007 Legislative Proposals November
13, 2007 NWM Motion (Bill C-28)
  • Imported Taxable Supply of Zero-Rated IPP
    (paragraph 217(c.1) 218.1)
  • Meal Expenses for Truck Drivers
  • Filing Frequency Installment Threshold
  • Minor amendments to Non-Taxable Importation
    Schedule resulting from increase in 48-hour
    exemption to 400
  • Repealing Excise Tax Exemption for Renewable Fuels

8
October 30, 2007 Economic Statement (Budget and
Economic Statement Implementation Act, 2007)
  • GST Rate Reduction effective January 1, 2008
  • Various Consequential amendments Resulting from
    rate reduction including
  • Basic tax content for Selected FIs
  • Taxable benefits (clause 173(1)(d)(vi)(B))
  • New Residential Real Property rebate formulas
  • Rate change for Excise Tax on tobacco products to
    offset GST reduction
  • Rate change to Air Travelers Security Charge to
    provide benefit of rate reduction to consumer
  • Other Formulas that are impacted
  • Allowances Reimbursements
  • Price Adjustments, coupons and rebates

9
GST Rate Reduction Transition Rules
  • Generally same transition rules as July 1, 2006
    Rate Reduction
  • Based primarily on day tax becomes payable and
    Not time of supply (s. 168 152)
  • Specific transitional rules for
  • Real property Contracts entered into after
    October 30, 2007 (both ownership and possession
    must pass after December 31, 2007)
  • New residential complexes sold pursuant to
    Pre-October 31, 2007 Agreements taxed at 6 or 7
    but Transitional Rebate available to Purchaser
    (Rebate not assignable to builder).

10
GST Rate Reduction Transition Rules
  • Specific transitional rules for
  • Imported Goods (date of importation)
  • Imported Taxable Services Intangibles (date tax
    is paid or payable) but special rules for FIs
    based on fiscal year-end and percentage of days
    in 2007
  • New Quick Method Remittance Formulas
  • No Changes to PSB Rebate Percentages

11
February 26, 2008 Federal Budget
  • New Exemption for Training that is specially
    designed to assist individuals to cope with the
    effects of a disorder or disability (e.g. autism)
  • Expanding exemption for Nursing Services to
    include those performed outside an institutional
    or residential setting (Nurse-patient
    relationship)
  • Expanding zero-rating for prescription drugs to
    include drugs prescribed by health professionals
  • Expanding zero-rating of medical and assistive
    devices
  • Exemption for health care services provided
    through a corporation

12
February 26, 2008 Federal Budget
  • Application of GST to Long-Term Residential Care
    Facilities
  • Eligible for New Residential Rental Property
    Rebate
  • Self-assessment Required on substantial
    completion (Legislative response to North Shore
    Health Region decision)
  • Head Leases to Operator of facility Now Exempt
  • Subsequent Sale of Facility Exempt (provided
    Builder Self-assessed GST)
  • Equal GST Treatment for all care facilities
  • No Tax on Property Leases and Licenses for use in
    generating or evaluating the feasibility of
    generating electricity from the sun or wind (s.
    162)

13
Administrative Policy Update
  • GST Rate Reduction Policies
  • Notice 226 - Proposed GST/HST Rate Reduction in
    2008 (Nov. 13, 2007)
  • GI-043 - The 2008 GST/HST Rate Reduction and
    Purchases of New Housing
  • GI-042 - Applying the 2008 GST/HST Rate Reduction
    to Price Adjustments, Adjustments for GST/HST
    Overcharged, and Returned Goods
  • GI-041 - The 2008 GST/HST Rate Reduction and
    Streamlined Methods of Accounting for Small
    Businesses
  • GI-040 - Applying the 2008 GST/HST Rate Reduction
    to Prepaid Funeral and Cemetery Arrangements
  • GI-039 - Applying the 2008 GST/HST Rate Reduction
    to Allowances and Reimbursements
  • - Tax is deemed to have been paid on day
    Allowance is paid (s. 174)
  • - Tax is deemed to have been paid on day of
    Reimbursement (s. 175)
  • - Administrative Formula of 4/104ths for
    reimbursements paid on or after January 1, 2008
  • GI-038 - The 2008 GST/HST Rate Reduction

14
Administrative Policy Update
  • Newly Published Policies
  • TIB-100 Standardized Accounting
  • TIB-099 Application of Section 141.02 to
    Financial Institutions That Are Not Qualifying
    Institutions
  • TIB-098 Application of Section 141.02 to
    Financial Institutions That Are Qualifying
    Institutions
  • TIB-097 Determining Whether a Financial
    Institution is a Qualifying Institution for
    Purposes of Section 141.02
  • TIB-095 Import Rules for Financial Institutions
    Under Section 217.1 and Dealings Between
    Permanent Establishments Under Section 220
  • GST Form 59E GST/HST Return for Imported Taxable
    Supplies and Qualifying Consideration
    non-registrants

15
Administrative Policy Update
  • Newly Published Policies (Continued)
  • TIB-096-GST/HST Rate Reduction and Real Property
    Note deals with July 1, 2006 rate reduction
  • RC4405 GST/HST Rulings  Experts in GST/HST
    Legislation
  • RC4418 Taxpayer Bill of Rights 2007-05-28A
    Taxpayer Bill of Rights Questions and Answers
  • RC4420 Information on CRA  Service Complaints,
    Includes Form RC193 Service Related Complaints
    Form

16
Administrative Policy Update
  • Newly Published Policies (Continued)
  • GI-025 The GST/HST and the Purchase, Use and Sale
    of Vacation Properties by Individuals
  • GI-026 Visitor Rebate Program  Accommodation
    Rebate for Non-Residents
  • GI-027 GI-033 Foreign Convention and Tour
    Incentive Programs
  • GI-044 Foreign Convention Tour Incentive
    Program Tour Packages What is an Eligible
    Package
  • Notice 221 Questions and Answers on the
    Cancellation of the Visitor Rebate Program and
    the New Foreign Convention and Tour Incentive
    Program (August 31, 2007)
  • GI-034 Exports of Intangible Personal Property
  • GI-035 Annual Information Schedule for Financial
    Institutions
  • GI-036 Beverages
  • GI-037 Children's Camps Operated by Public
    Sector Bodies

17
Administrative Policy Update
  • Updated Policies
  • Notice No. 24 Draft Policy Statement The
    GST/HST Implications of Constructing, or
    Purchasing and Operating a Residential Care
    Facility (September 2007)
  • Draft GST/HST Memorandum 3.3.1 Drop Shipments
    (September 2007)
  • IC 00-1R2 Voluntary Disclosures Program (October
    22, 2007)
  • Information Circular 07-1 Taxpayer Relief
    Provisions (May 31, 2007)
  • P-125R Input Tax Credit Entitlement for Tax on
    Imported Goods (June 1, 2007)
  • P-194R2  Application of Penalty and Interest
    When a Return and/or Rebate Application, and/or
    Another Return, is Received After the Due Date
    (August 27, 2007)
  • P-196R  Whether Administrative Overhead Costs
    Fall under Subsection 186(1) of the Excise Tax
    Act (August 9, 2007)

18
Administrative Policy Update
  • Updated Policies
  • P-218R - Tax Status of Damage Payments, Whether
    or not Within Section 182 of the Excise Tax Act
    (August 9, 2007)
  • - When Does section 182 Apply to Deem GST to be
    included in Payment
  • - When is Damages Payment Non-Taxable
  • 19.3.8 - New Housing Rebates and the HST
  • 19.3.1.2 - Stated Price Net of Rebate - GST at 5
  • RC4231 - GST/HST New Residential Rental Property
    Rebate (December 2007)
  • RC4160 Rebate for Tour Packages, Foreign
    Conventions, and Non-Resident Exhibitor Purchases
  • Notice 228 - Notice of Change - GST/HST Memoranda
    4.4, Agriculture and Fishing
  • Notices 219 220 Notice of Change GST/HST
    Memoranda 4.3 Basic Groceries (April May 2007)

19
Administrative Policy Update
  • New Excise Taxes and Special Levies Notices
  • ETSL67 Notice to all Air Carriers Rate
    Reductions for the Air Travelers Security Charge
  • ETSL65 Statutory End-User Refund Program and
    Elimination of Excise Tax Exemption for Renewable
    Fuels
  • ETSL64 Imposition of Excise Tax on
    Fuel-Inefficient Vehicles
  • EP-003 - Application of Excise Tax to Diesel Fuel
    Used in the Generation of Electricity for the
    Provision of Hotel Services on Vehicles

20
Administrative Policy Update
  • New Excise Taxes and Special Levies Notices -
    (Continued)
  • Form E638A Statement of Availability or
    Declination From Authorized Insurers Tax on
    Insurance Premiums (Part I of the Excise Tax Act)
  • Form E638 Application for Exemption from
    Insurance Premium Taxes Imposed Under Excise Tax
    Act Part 1
  • News 2008/02 - CRA - ETSL-068 Frequently Asked
    Questions Regarding Part I of the Excise Tax Act

21
Most Common GST Audit Issues (GST Rulings)
  1. Year End ITC Adjustments (s. 236 Meals
    Entertainment)
  2. Bad debts (s. 231)
  3. ITC Documentation
  4. ITC Allocation Methods (Financial Service
    Providers)
  5. Proof of Exports to Non-Residents
  6. Inter-Company Transactions ITCs being claimed
    by Wrong Entity
  7. Clerical Errors Accounting System Errors
    (Failure to Add)
  8. GST on Additional Rent Paid by Tenants
  9. Foreign Currency Translations

22
ITC Documentation Requirements Use of
Web-Based GST Registry
  • S. 169(4) ITC Not to be claimed unless obtained
    sufficient evidence in such form containing such
    information as will enable the amount of the
    input tax credit to be determined, including any
    such information as may be prescribed.
  • Systematix Technology Consultants (FCA) ITC
    documentary requirements are Mandatory.
  • Input Tax Credit Information Regulations require
  • Name of Supplier GST Registration Number
  • Recipients Name, name in which it carries on
    business or name of its agent
  • Various other information

23
ITC Documentation Requirements Use of
Web-Based GST Registry
  • GST Web-based GST Registry enables you to confirm
    suppliers GST registration number
  • Confirmation should be maintained on file
    Periodically Verified
  • GST should not be paid if supplier not registered
    has not provided sufficient ITC Documentation
  • Prior to GST Registry
  • Ribkoff ITC available Registration Number
    Seemingly Belongs to Supplier
  • Pointe Claire Unless CRA provides Verification
    Mechanism ITC is valid where GST Number is
    Invalid
  • Owraki Decision Relevant time for documentation
    is at time of claiming, Not at time of Audit (but
    onus is on ITC Claimant)

24
TIB 100 Standardized Accounting
  • Withholding of Net Tax Refunds Rebates if any
    outstanding tax filings
  • Interest on Net Tax Refunds for reporting periods
    ending on or after April 1, 2007 accrues 30 days
    after later of (i) filing of return and (ii) one
    day after end of reporting period.
  • Interest on Rebates accrues 30 days after filing.
  • New Prescribed Interest rate paid (2 premium on
    refunds)
  • Automatic offsets of refunds/rebates against
    other liabilities
  • 6 Penalty Replaced with premium interest
    (T-Bill, rounded up, plus 4)

25
TIB 100 Standardized Accounting
  • Non Deductibility of Interest and Penalties in
    Taxation Years beginning on or after April 1,
    2007
  • Question 3 specifies that 6 GST penalty
    pertaining to an amount of GST due before April
    1, 2007 may be deducted in a subsequent year when
    penalty is imposed in a subsequent taxation year
  • New Late Filing Penalties (s. 280.1)
  • 1 plus 0.25 per complete month, up to a maximum
    of 12 months (i.e. max 4)

26
TIB 100 Standardized Accounting
  • Wash Transaction Policy (Waive interest in excess
    of 4 of tax amount)
  • Due Diligence for New Late Filing Penalty but not
    premium interest
  • 12 Frequently Asked Questions
  • Notice of Assessment issued when refunds withheld
  • Intentionally filing Nil returns to avoid late
    filing penalties may result in gross negligence
    penalties

27
Voluntary Disclosures Update
  • IC 00-1R2 (October 22, 2007)
  • Relief from all penalties but interest relief
    only available with respect to assessments for
    years preceding the 3 most recent years
  • VDP Not applicable for elections
  • Only enforcement action which would likely have
    uncovered information being disclosed
    invalidates disclosure
  • Enforcement action is broadly defined to include
    those undertaken by CRA and any other authority
    or administration
  • Taxpayers generally entitled to utilize VDP only
    one time unless circumstances beyond the
    taxpayers control
  • 4 Conditions to Make a VD (Voluntary Complete
    Penalty and 1 Year Old)
  • Voluntary Disclosures Program (VDP) Taxpayer
    Agreement (Form RC199)

28
Voluntary Disclosures Update
  • No Name disclosures (IC 00-1R2 April 27, 2007
    Notice)
  • Non Binding Discussions
  • VDP Officer may confirm that nothing set out in
    information will disqualify taxpayer from
    benefits of program
  • CRA can advise without prejudice on the
    possible tax implications but no final and
    determinative decision until taxpayer is
    identified
  • Identity of taxpayer must be given within 90 days
    of effective date (no extensions)
  • Verification Enforcement Division (Audit)
    handles all VDs
  • Ontario VDs initiated through St. Catherines Tax
    Services Office

29
Voluntary Disclosures Update
  • Standardized Accounting will significantly reduce
    number of VDs
  • No 6 Penalty post April 1, 2007
  • Penalty must be payable to initiate valid
    disclosure
  • CRAs refusal to waive premium interest and 4
    interest for wash transactions
  • Assessments should be Requested where Recipient
    entitled to claim ITCs period covered by
    disclosure extends beyond 4 years (extends ITC
    claim period
  • No Positive Obligation to initiate Voluntary
    Disclosure
  • VD Jurisprudence of Note
  • - Karia 2005 FC 639 Wong 2007 FC 628 Palonek
    2007 FCA 281

30
Exported IPP GI 034
  • Prior to s. 10.1, Zero-Rating only applicable to
    Services and Intellectual Property
  • Dawns Place decision highlights limitations
  • Characterization of Supplies was Extremely
    Important
  • TIB 90 Electronic Commerce
  • Manrell Income Tax Decision (Non-compete
    agreement not a supply of property)
  • Phillips 2006 GTC 171 (prepaid expenses)
  • Reliance on Place of Supply rules in paragraph
    142(2)(c) was used to avoid absurd result of GST
    being payable by non-residents who access
    web-sites (e.g. agreement prohibited
    non-residents from using IPP in Canada)
  • IPP Deemed Supplied Outside Canada if the
    Property may not be used in Canada

31
Exported IPP GI 034
  • New s. 10.1 applies retroactively unless supplier
    charged or collected GST
  • Examples of Zero-Rated IPP
  • Subscriptions to Web sites that provide
    subscribers with a right to access and use
    digitized content on the site, such as
    information in a database or images, and that may
    also include a right to download a copy of the
    digitized content
  • Subscriptions to interactive Web sites that
    provide subscribers with a right to access and
    use digitized content, such as games, music and
    videos, on the sites while they are online
  • Digitized information, such as news items or
    stock market data, that is delivered
    electronically on a periodic basis to subscribers
    based on their personal preferences
  • Digitized products, such as music, images, and
    books, that are downloaded from Web sites and
    paid for individually.

32
Exported IPP GI 034
  • Recipient must be a non-resident who is not
    registered
  • CRA will generally accept an on-line self
    declaration provided additional verification
    methods are used to verify residency such as (i)
    comparing billing address with self-declared
    address or (ii) use of geo-location software
  • Sample Declaration in Appendix B to GST
    Memorandum 3.4 Residence
  • Exclusions in Paragraphs 10.1(a) through (e)
    including supplies to individuals physically
    located in Canada at time of supply
  • CRA will accept geo-location software to verify
    location of individuals at time of supply (note
    deeming rules in s. 133 and s. 136.1)
  • Reliance on Place of Supply Rules Still
    beneficial
  • Restrict access rights of non-resident customers
    (physically and/or legally)

33
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  • Steven K. D'Arcy, Michael Firth, Brent F. Murray
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    coverage of all developments, including
    legislation and proposed legislation, detailed
    commentary and analyses, and all related
    government documents.
  • Special discount 190 off any single-user
    license
  • Discount ends March 31, 2008
  • Please contact your CCH Account Manager at 1 800
    268-4522 and press "2" for "Product information
    or to order a subscription".
  • 2 - GST and E-Commerce Planning and Risk
    Management
  • Brent Jay, BComm, LLB
  • This book is indispensable for commodity tax
    practitioners and for anyone carrying on
    business in Canada or providing goods and
    services to Canadians by electronic means.
  • Special discount (book) 75 (Regular price
    99.95)
  • CCH code GSTEC621
  • Discount ends June 30, 2008

34
GST Pension Plans
  • General Motors Case heard in January 2007
    (Decision Just Released)
  • TIB 32R- Registered Pension Plans
  • Multi-Employer Pension Plan Rebate (s. 261.01)
  • January 26, 2007 Proposed GST Rebate for Pension
    Plan Trusts

35
General Motors Case
  • Investment Management Services Acquired by
    General Motors in capacity as the administrator
    of employee pension plans (defined benefit plans)
  • ITC claimed by General Motors on basis that (i)
    Recipient and (ii) engaged exclusively in
    commercial activities
  • Issues to be Decided
  • Does GM Meet Requirements in S. 169 to claim ITC
  • - Did Tax Become Payable by GM (Is it the
    Recipient)?
  • - Did GM Acquire the Services
  • - Were the Services Acquired for Use in GMs
    Commercial Activities?
  • Rebate for Tax Paid in Error (Exempt Financial
    Service)?

36
General Motors Case
  • General Motors Entitled to Claim ITCs
  • GM acquired Investment management Services
    (s.267.1 not applicable)
  • GM is recipient (person contractually liable to
    pay tax)
  • Services acquired for use in the Course of
    Commercial Activities of GM.
  • In the Course of only requires the Smallest
    Connection
  • Defined Benefit Plan so GM liable for any pension
    plan financial short falls and the only person
    that can use the services
  • Profitable Pension Plan furthers GMs Capacity to
    complete in the Market
  • Obiter Comments on GST Status of Discretionary
    Investment Management Services
  • Not an Exempt Financial Service

37
TIB 32R Registered Pension Plans
  • Pension Plan (Plan Trust) eligible to register if
    a listed FI
  • Limited ITCs available to Plan Trust (Only if
    engaged in Commercial activity)
  • Pension Plan Expenses to be Categorized into 2
    Buckets
  • (i) Employer Expenses (establishment and
    administrative expenses) and
  • (ii) Plan Trust Expenses (investment expenses)
  • ITCs available for Employer on Employer Expenses
    provided employer engaged in commercial
    activities

38
TIB 32R Registered Pension Plans
  • Re-Supply of Expenses
  • Plan Trust expenses invoiced to and paid for by
    the employer
  • ITC available to employer but must collect GST
    on FMV of re-supply.
  • Employer expenses invoiced to and paid for by the
    Plan Trust
  • Plan Trust can claim ITC and charge GST on
    re-supply to employer or if the Plan Trust is not
    a registrant then ITC may be claimed by Employer
    ITC documentation requirements will be
    satisfied even though invoice in name of Plan
    Trust
  • No Re-Supply of Expenses when No Amount Charged
    No ITC Claimed on Original Expense
  • General Motors case Recent Rulings Nos. 58290
    59990 No re-supply by Employer to Plan Trust of
    expenses acquired in fiduciary capacity of
    administrator of the plan thus no ITCs to
    employer.

39
Proposed New Rebate for Pension Plan Trusts
  • Current Rules for Single Employer Pension Plans
    (TIB 32R) Not Clear and may not provide
    Equitable Results
  • Multi-Employer Pension Plans entitled to 33
    Rebate (s. 261.01) on supplies acquired in
    respect of the plan
  • Single Rebate System to be implemented for all
    employer - sponsored pension trusts
  • No requirement for Pension Plan to be registrant
  • Not available if 10 of contributions are made by
    listed Fls
  • Applies to all pension related expenses
    (administrative investment)
  • 33 rebate for all expenses
  • ITCs available to employer for all pension
    related expenses but deemed resupply and
    collection of GST

40
Use of New Cos Flipping of Assets
  • ITCs only available to GST Registrants only to
    extent engaged in commercial Activities
  • Registration only Permitted if Engaged in
    Commercial Activity
  • Aviva decision Buying Selling Assets is not a
    Commercial Activity
  • GST Impact First Sale Taxable, Flip of Assets
    Exempt No ITC Available
  • Structure Transaction Accordingly Newco to use
    assets in operating
  • Business

41
Use of NewCos Flipping of Assets
  • CRA Administrative Policy
  • Section 167 Election Not Available if Vendor
    Amalgamates Immediately Prior to Asset Transfer
    (February 27, 2003 Q A)
  • Newco not entitled to register for GST (thus no
    ITCs). If it Amalgamates Immediately after
    Acquisition of Assets ( March 3, 2005 QA)
  • P-045 Butterfly Transactions only available if
    Purchaser is wound-up after Asset Transfer

42
Special Remittance Rule for Real Property
  • s. 221(2) - Vendor not to collect GST where
    supply is sale and either
  • The vendor is a non-resident or
  • The purchaser is registered and the property is
    not a residential complex supplied to an
    individual (i.e., most business acquisitions)
  • s. 228 (4) Purchaser's obligations
  • Self-assess on regular return, or
  • File form GST 60
  • Risks to Vendor if Purchaser not registered

43
Purchase, Use and Sale of Vacation Properties by
Individuals (GI-025 February 2007)
  • GST generally payable on acquisition
  • Used properties only taxable if ITC claimed by
    vendor
  • Used properties also taxable where property not
    used primarily as a place of residence and 90 of
    rentals are for periods of less than 60 days
  • Sale by non-registrant vendor taxable if property
    is capital property use primarily in a rental
    income business
  • Self-Assessment of GST on Purchase of used
    Properties (if Registered) but not New Properties
  • ITCs Entitlement Determination of Use in
    Commercial Activities
  • Days used compared to days actually rented
  • Unoccupied days cannot be attributable
    exclusively to commercial use
  • Navaho Inn Case is apparent Justification (1995
    Tax Court)

44
Purchase, Use and Sale of Vacation Properties by
Individuals (GI-025 February 2007)
  • Factors Relevant in Determination of Use
  • Is the vacation property capable of being rented
    (e.g., is it suitably equipped for rental
    purposes)?
  • Does the market for short-term taxable rentals
    extend throughout the year?
  • Is it reasonable to expect, at the time the
    property is acquired, that it will be used for
    taxable short-term rental and not primarily for
    the owner's personal use?
  • Will the property be available for personal use?
  • What impact does personal use have on the
    potential for rental use?
  • To what extent is the property available to rent
    for consideration and what are the terms of any
    applicable rental pool contract?
  • What is the extent of the owner's personal use
    (including friends and relatives)?
  • How often has the property been rented on a
    taxable short-term basis in the past?

45
Part I Excise Tax on Insurance Premiums from
Unlicensed Insurers
  • Old Tax with Increasing CRA Focus
  • 10 Tax Levied on Canadian Residents by whom or
    on whose behalf Insurance is placed with
    Unlicensed Insurers (e.g. Global Parent obtaining
    insurance for Group of Companies from U.S.
    Insurer)
  • Insured to File Return (Form B243) by April 30th
    of following year
  • Broker/Agent assisting in placing insurance to
    file return by March 15th
  • Exemption to the extent that the insurance is
    not, in the opinion of the Commissioner,
    available within Canada To be supported by 5
    letters of declination and/or Form E638A

46
Insurance Premiums PST and Premium Taxes
  • PST Payable on Insurance
  • Ontario (8)
  • Quebec (9)
  • Newfoundland (15)
  • Premium Tax Payable by Licensed Insurers
  • Amounts in Lieu of Premium Taxes Payable by
    Insured when bought from Unlicensed Insured
  • Ontario (3)
  • BC (7)
  • Quebec (3)
  • Saskatchewan (10)
  • Yukon (2)
  • Alberta (50)
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