GOODS AND SERVICES TAX (GST) AND HARMONIZED SALES TAX (HST)

Transcription

1 GOODS AND SERVICES TAX (GST) AND HARMONIZED SALES TAX (HST) GENERAL 1. With the exception of exempt activities, all NPF operations are considered to be "commercial activities. All "commercial" revenue (e.g. Mess/membership dues, sales, door admissions, additional charges for mess functions/mess dinners, etc) are subject to GST/HST. All GST/HST paid for "commercial" inputs are eligible for ITCs. 2. Ordinarily, an NPF operation will pay GST/HST on its purchases, claim this GST/HST as ITCs, and collect GST/HST on all of its consumer sales. There are cases however, where this general procedure does not apply or applies only in part. Transfers and wholesale sales between NPF activities are internal transactions and GST/HST is not normally charged. There are other cases that require special mention due to their unique nature. Special cases are dealt with separately in the following paragraphs. PUBLIC SECTOR EXEMPTION DENIED 3. NPF operations are considered to be entirely commercial and are not entitled to public sector exemptions (e.g. charities, non-profit organizations) normally provided under Schedule V, Part VI of the Excise Tax Act. 4. Therefore, exemption from the collection of GST/HST is not allowed for the following goods and services: a. recreation programs, including those for children 14 years of age or less; b. municipal type activities (e.g. selling animal licences) of community councils; and c. proceeds from sales, admissions, bets, bingo cards, etc. for all NPF activities, even if registered as a charity or non-profit organization (e.g. chapels and museums). INTERNAL TRANSACTIONS 5. In general, transactions that occur between NPF activities of the same unit (i.e. base/station/ship) or between NPF activities of different units are not subject to GST/HST. These transactions (transfers or wholesale sales) are internal transactions. Exceptions to this general policy may be made when it is more practical to charge the GST/HST. The following are examples of transactions and their GST/HST application: c. when a mess buys goods from CANEX, whether or not the CANEX is located at the same unit, the transaction is internal and will not carry any GST/HST charges. The GST/HST will be collected on 8B-1

2 the sale when it takes place in the mess. Any tax paid on the original purchase by CANEX will be claimed by CANEX as an ITC. Because the mess did not pay any GST/HST on its purchase (transfer from CANEX), it cannot claim an ITC d. when a ship purchases from CANEX at a base, the transaction is internal and is effected through the use of an NPF Invoice (CF 1221), and therefore not subject to GST/HST. When a ship purchases from a Base Fund or mess at a different unit, the transaction is internal, is effected through a MR (CF 603), and is not subject to GST/HST; e. when a mess makes petty cash purchases from a CANEX outlet, the transaction is effected as a consumer sale through the cash register at the point of sale. In this case, even though it is an internal transaction, it is more practical for CANEX to charge the GST/HST and for the mess to pay the GST/HST and claim it as an ITC; and f. sales made to small canteens, that are not official NPF activities (e.g. section coffee funds that do not pay CFCF levies or collect taxes on sales), are considered to be external and GST/HST shall be charged. 6. This general rule applies only when the two entities involved in the transaction are commercial in nature. When the NPF purchasing activity is a GST/HST exempt activity, this rule does not apply. These exempt activities are dealt with separately below. DAYCARES 7. Daycare services have been legislated to be exempt activities. Daycares will pay GST/HST on their purchases, and cannot claim ITCs for the GST/HST paid. On the other hand, daycares will not charge GST/HST on the daycare services provided. Since, NPF daycares are not eligible for the GST/HST rebate available to some daycares, the cost of doing business will increase by 7 percent. Daycare centres may have to consider increasing their fees to recoup the additional costs. 8. Internal transactions between activities, where one of these activities is a daycare, attract GST/HST. The selling activity must charge the daycare GST/HST and GST/HST is to be added to the NPF Invoice or MR. HOUSING RENTALS 9. Where NPF operations are involved in housing rentals, the rent will be provided exempt. Tax paid on purchases made by these NPF activities are not eligible to be claimed as ITCs. Again, when these activities purchase from other 8B-2

3 NPF activities, they will be treated like outside organizations, and will be charged GST/HST on those purchases. The housing rental activity will absorb this GST/HST paid on purchases as a cost of doing business. Supplies of parking spaces for use in connection with residential premises are also exempt. DONATIONS AND GIFTS 10. Donations and gifts given to any NPF activity (e.g. chapels, museums) do not attract GST/HST. MEMBERSHIP DUES 11. All parts of mess dues (i.e. general, entertainment, and gift fund assessments) dues attract GST/HST. Membership dues for all other NPF activities are also subject to GST/HST. RESERVE FORCES 12. The reserve force is subject to the GST/HST legislation in the same manner as the regular force. Each reserve unit that sells merchandise must register with Revenue Canada as a separate reporting entity, and will submit a monthly report, regardless of their volume of sales. Those reserve units which do not have sales but whose NPF operations consist solely of the receipt and expenditure of public grants may register in order to claim ITCs. VISITING FORCES 13. The issue concerning how the GST/HST legislation affects visiting forces is not yet finalized. NPF operations will treat visiting forces as outside organizations, and members of visiting forces will be required to pay GST/HST on their purchases. CONCESSIONS 14. Rents paid under commercial leases are subject to GST/HST. NPF will be considered a commercial landlord and will collect and remit the tax on all such commercial rents. Any purchases of goods or services relating to the provision of commercial space for lease will be eligible for ITCs. 15. When a concessionaire purchases goods from an NPF activity, for resale or otherwise, the purchase will be subject to GST/HST. In this regard, concessions will be treated as outside organizations. COMMISSION FEES 16. All commission fees are subject to GST/HST. 8B-3

4 TRANSACTIONS BETWEEN NPFAND PUBLIC FUNDS 17. Although NPF is an integral part of DND and transactions between them would normally be internal transactions, the following will apply: a. Public purchases from NPF (i.e. MSE purchases of gasoline from CANEX). The public will be treated as an outside organization and will pay GST/HST; b. NPF purchases from the public. (e.g. public food services catering in messes) NPF will be treated as an outside organization and will pay GST/HST; c. The reimbursement for assessment for damage through Barrack Damage or Servicing Report (CF 164) is not a taxable supply in the case of liability assessments under QR&O 38. The reimbursement for assessment for damage is not a supply to the individual and is a result of a penalty process, hereby making it a tax exempt supply. In the case of Utilities and Maintenance cost recovery maintenance credit, the unit will claim the ITC from Revenue Canada and submit reimbursement to CFO only in an amount net of GST/HST; and d. Cost sharing of construction projects. Whenever possible, the GST/HST should be added to the public share of the construction costs, especially for projects involving exempt activities (i.e. daycare centres). For other than exempt activities, any GST/HST assessed by the public (normally through DCC) will be claimable by the activity as ITCs. FINANCIAL SERVICES 18. Any financial service that is provided by CFMWS to bases/stations or vice versa, or activities within the same base, will not be subject to GST/HST since it is considered an internal transaction. Any GST/HST paid in relation to a financial service will be claimed as an ITC. THIRD PARTY EXPENSES 19. The procedures for processing travel claims for NPF employees shall be the same wherever possible as those used for military personnel. These procedures eliminate the requirement to itemize GST/HST calculations on each claim. 20. For travel claims with expenses incurred solely within Canada, claim 4/104 of the total cost of the claim as a GST ITC and 12/112 for an HST ITC or current rates in use in specific province. All rates should be identical to the public claims system. 8B-4

5 21. For travel claims with expenses incurred solely outside Canada, no GST/HST will have been paid by the employee and therefore there is no entitlement to an ITC. 22. For travel, claims with expenses incurred both within and outside Canada, the procedure to be followed depends upon where the majority of the expenses were incurred. Where 75 percent or more of the expenses were incurred within Canada, 4/104 or 14/114, as applicable, of the total cost of the claim shall be claimed as an ITC. However, where less than 75 percent of the expenses were incurred within Canada, no GST/HST paid will be claimed as an ITC. All rates should be identical to the public claims systems. 23. For other than the ordinary travel claim, such as moving expense claims that may encompass a mixture of taxable and non-taxable items, the supporting documentation must be scrutinized to determine the exact amount of GST/HST that has been paid. Only the actual amount of GST/HST paid shall be claimed as an ITC. 24. Only 50% of the actual cost (or meal allowance) may be claimed as an ITC. TRUST ACCOUNTS 25. Transactions with NPF activities that are accounted for through NPF trust accounts are internal transactions. Organizations and groups such as section party funds, even when the RAM/NPFAS provides accounting services shall pay GST on their purchases and cannot claim ITCs under the NPF registration number as they are not considered to be NPF activities. FIELD UNITS 26. Internal transactions where a field unit is the purchaser must be treated as transactions to an outside organization. The selling activity, such as a warehouse, will charge the field unit GST/HST. The field unit will have to absorb the GST/HST as a cost of doing business. If the field unit wishes to claim the GST/HST paid on its purchases, it will also have to collect and remit GST/HST on any sales it makes. UN AND EUROPEAN OPERATIONS 27. Goods and services acquired or purchased on behalf of UN or European operations are considered goods and services for export, and are therefore zerorated. To pay zero percent at the time of purchase, the supplier must be satisfied of the following: a. NPF exports the property as soon as the property is delivered; b. the property is not acquired by NPF for consumption, use, or supply in Canada; 8B-5

6 c. the property is not further processed; and d. NPF maintains satisfactory evidence of the exportation. 28. Satisfying the suppliers of the above is essential when the overseas operation is paying the supplies directly, since there is no method currently in place to allow the operation reimbursement of any GST/HST paid. A sample letter to be provided to Canadian companies for taxation exemption is attached at Annex B - Appendix When the NPF operation pays the supplier and invoices the overseas operation for reimbursement, any GST/HST assessed by the supplier may be claimed as an ITC. HER MAJESTY'S CANADIAN SHIPS (HMCS) 30. HMC Ships will adhere to all parts of this chapter except where specific accounting instructions to the contrary have been issued. HMC ships will claim ITCs for any GST that has been paid on their purchases, and will apply a predetermined multiplier on overall sales to calculate tax payable. This multiplier will be reviewed annually by MARCOMHQ and adjusted when necessary. HMC Ships should normally be in a refund position. MARCOMHQ shall maintain liaison with Customs and Excise with respect to the multiplier and unique reporting requirements. CADET ORGANIZATIONS 31. Cadet organizations and cadet camps must pay GST/HST on their purchases since they are not NPF activities. 32. The Lord Strathcona Trust Fund (LSTF) is an NPF trust held at CFMWS/ CFO and as such, ITCs may be claimed for any GST paid on purchases paid for by the local supporting bases on behalf of LSTF provincial committees. NPFASs will process LSTF payment requests upon presentation of original invoices supported by an LSTF authorization form and minutes as necessary, claim a GST/HST ITC and submit the original documents to CFO for reimbursement. The amount to be reimbursed, by TV, will be the amount of the purchases less GST/HST. SALE OF NPF FIXED ASSET 33. The sale of NPF fixed assets to non-npf organizations or individuals is subject to GST. BAD DEBTS 34. Where amounts owed to NPF for credit sales become uncollectible and are written-off, an adjustment to the GST/HST and applicable PST previously remitted on the total sale may be made. 8B-6

7 35. The formula to calculate the amount of the adjustment is - A x B/C where: A is the amount of tax paid, B is the amount of the uncollectible accounts receivable written-off, and C is the total amount of the original transaction including GST/HST and PST. SALES TO ABORIGINALS 36. Special rules apply to supplies made to Indians, Indian bands and bandempowered Entities. In general, GST and QST are not Charged if appropriate documentation is Presented and one of the following five conditions is met: a. Property was purchased on a reserve or delivered to a reserve by the vendor or the vendor's agent (and, in the case of a bandempowered entity, the property was for band management activities). b. Services were provided entirely on a reserve, to an Indian, in respect of property located on the reserve at that time. c. Services were provided entirely on a reserve to an Indian who was on the reserve at that time. d. Transportation services between locations on a reserve were provided to an Indian. e. Services were acquired on or off a reserve by an Indian band or band-empowered entity for band management activities. You should refer to either the GST or your provincial tax manual for additional information not falling into para 34 conditions. SALES TO DIPLOMATS GST and QST must be charged and collected on taxable sales to diplomatic missions, consular posts or international organizations, diplomatic agents, consular officers and designated officials of international organizations, whether they make purchases on their own behalf or on behalf of their organization. Representatives of foreign governments and their dependants cannot avoid paying GSTand QST simply by showing the vendor their diplomatic identification cards issued by the federal or provincial governments. 8B-7

8 VENDING MACHINES The sales of food and beverages from vending machines is subject to GST - PST. The price of these supplies generally includes GST and PST, which are considered to have been paid at the time of sale. However, the GST and PST must be taken into account for the reporting period that includes the day the money is removed from the machine. GST and PST are calculated on the money collected from the vending machine. Vending-machine operators (operator means owner of the machine) do not have to calculate GST and PST on items sold through mechanical coinoperated devices that only accept a single coin for each transaction if the total amount deposited for each transaction is a single coin of $0.25 or less. In the majority of NPF outlets, all machines belong to a company that pays a commission fee on the revenues. This fee is now taxable. Since April 24, 1996, the right to use a washing machine or clothes-dryer located in a common area of a residential building has been exempt from GST and PST. Annex B - Appendix 1 - Exemption Letter UN/Deployed Operations 8B-8