HST Transitional Rules
On February 17, 2012 the Department of Finance released transitional rules for the elimination of the Harmonized Sales Tax (HST) in British Columbia. As you may recall, the Government of British Columbia announced the reinstatement of the Provincial Sales Tax (PST) in favour of the federally administered HST back in August 2011, following a referendum held in the province.
Effective April 1, 2013 the HST of 12% will be replaced by the Goods and Services Tax (GST) of 5% and PST of 7%. Although the tax rates will be the same, the application of GST and PST will not be the same for many goods and services. Taxpayers will have to re-learn the new (old!) PST rules that existed prior to harmonization on July 1, 2010. In addition, taxpayers will need to understand how the transitional rules will apply. Perhaps the biggest change will be that businesses will no longer be able to claim Input Tax Credits (ITCs) for HST paid, and will be subject to PST on goods and services purchased.
The transitional rules provide guidance for how HST will cease to apply to transactions taking place around April 1, 2013. As a general rule, if tax becomes payable or is paid before April 1, 2013, HST will apply. If tax becomes payable after March 31, 2013 and has not been paid before April 1, 2013, HST will NOT apply, rather GST and PST will apply. However, complex transitional rules are in place for many other circumstances, including:
- Goods and services brought into B.C.,
- HST refund and rebate claims,
- Returns and exchanges of goods,
- and more.
With respect to real property transactions, most notably, transitional rules have been announced for new home sales. For newly built homes where construction begins before April 1, 2013, but ownership and possession take place after, purchasers will no longer pay the 7% provincial portion of HST but instead, will pay a provincial “transition tax” of 2% of the full home price. Other transitional rules have also been announced for self-assessments on real property transactions, new homeowner rebates, and other circumstances.
For more details and assistance with navigating the HST transitional rules, please contact us at Facet Advisors LLP.
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