BC PST: Transitioning Back. Vancouver Board of Trade 24 January 2012

Transcription

1 Vancouver Board of Trade 24 January 2012

2 Agenda How We Got Here What We Know What We Can Anticipate/Expect Issues to Consider in Transitioning What Do You Need to Do? Administrative Recommendations Questions & Discussion Page 2

3 BC PST: TRANSITIONING BACK How We Got Here Page 3

4 How We Got Here March 2009 July 2009 Spring 2010 July 1, 2010 August 2010 Ontario Announces Harmonization British Columbia Announces Harmonization Bill Vander Zalm s Petition Under the Recall & Initiative Act BC & Ontario Harmonize Petition Successful September 2010 Matter referred to Vote under the Recall & Initiative Act Voting Date: September 23, 2011 Fall 2010 February 2011 March 2011 August 26, 2011 Gordon Campbell Resigns as Premier Christy Clark Becomes Premier Moves Vote from Recall & Initiative Act to Referendum Act 55% Vote in Favour of Extinguishing HST & Restoring PST Page 4

5 BC PST: TRANSITIONING BACK What We Know Page 5

6 What We Know: BC Government s Stated Intentions CITCA minimum 18 months notice period BC will repay $1.599 Billion to Federal government April 1 st, 2013 current target date for reinstatement of PST PST will be in same form / same exemptions as existed June 30, 2010, with possible administrative improvements Other taxes phased out with PST will be reinstated (i.e. Hotel Room Tax) Low income HST credit of $230/yr replaced by PST credit of $75/yr Income tax relief introduced with HST will be reversed Page 6

7 What We Know: BC to register 100,000 businesses for PST 30,000 with no PST experience Quarterly update reports: second quarterly report November 2011 Provincial deficit in FY2011/12: $3.1billion (a record deficit) Estimated revenue loss: $531 million in 2013/2014 and $645 million in 2014/2015 Minister of Finance consultations Expert Panel on Tax announced: January 10, 2012 BC Budget Date: February 21, 2012 Page 7

8 What We Know: Process to Transitioning Back The process includes: Rules to transition back to a two-tax system from the HST; Providing notice of the transition rules; Drafting, introducing and passing legislation to wind down the HST in British Columbia (federal government responsibility) Re-implement the PST and hotel room tax (HRT) (provincial government responsibilities); and Resourcing provincial administration. As well, businesses will need to change their systems and processes to assess, collect, report and remit the PST and other related taxes to the provincial government. Page 8

9 BC PST: TRANSITIONING BACK What We Can Anticipate/Expect Page 9

10 What We Can Expect: Key Dates Implementation Date: April 1, 2013 (?) Pre-collection Date: (?) Vendors will be required to collect PST on sales made after this date, but delivered after implementation date. Likely January 1, 2013 or February 1, 2013 Transition Date: (?) Businesses may be required to self-assess PST on purchases made after Transition Date. For taxable goods & services delivered after Implementation Date where vendor didn t charge PST For taxable goods purchased between Transition Date and Implementation Date and still on hand at Implementation Date Residential real property transitional/grandfathering date: (?) Page 10

11 What We Can Expect: Transition Date Impact Dentist Restaurant / Retailer Manufacturer Each purchased equipment between Transition Date and Implementation Date (i.e. during HST period) and still have equipment on hand at PST Implementation Date Paid 12% HST, but not eligible for ITCs Paid 12% HST, but claimed full ITCs Paid 12% HST, but claimed full ITCs Not required to selfassess 7% PST on Implementation Date (?) Required to self-assess 7% PST on Implementation Date (?) Not required to selfassess 7% PST on Implementation Date (PM&E exemption) (?) Page 11

12 BC PST: TRANSITIONING BACK Issues to Consider Page 12

13 Issues to Consider: Will businesses be required to self-assess PST on taxable capital equipment on hand April 1, 2013 purchased after August 26, 2011? Will HST-paid equipment be considered tax paid for rollover purposes in business transfers? Will the Construction Industry be required to self-assess PST on inventory & construction materials on hand April 1, 2013? New housing rebates and transition rules. Incentive for consumers to delay purchasing newly constructed residential property until after April 1, Page 13

14 Issues to Consider: Transitional rules for prepaid contracts, deposits, software. Transitional rules for returns, price adjustments, cancelled services. Impact on MUSH & NPOs rebates & budgeting. Sales to Federal government non-taxable? Tax on designated property - sale of private vehicles. PST on multi-jurisdictional vehicles. Double tax on legal services. Page 14

15 BC PST: TRANSITIONING BACK What Do You Need to Do? Page 15

16 What Do You Need to Do?: Short-term: Begin developing a de-harmonization plan. Determine which business units, systems, processes and procedures will be impacted. Consider how cash flow, budgeted costs, purchasing & pricing will be impacted. Consider accelerating capital purchases and deferring real property purchases. Watch for further info releases and announcement of transitional rules. Make your issues/concerns known to the Expert Panel. Page 16

17 What Do You Need to Do?: Long-term: Review transitional rules & determine impact on sales and purchases. Determine if additional PST costs will be absorbed or passed on via increased prices. Update systems, processes and procedures to reflect transitional rules. Product / billing systems Accounts payable systems Accounting systems / GL accounts / tax codes / removal of RITC processes PST self-assessment processes Expense reporting systems Budgeting and purchasing systems Page 17

18 What Do You Need to Do?: Long-term: Review long-term contracts that straddle reversion date. Tax clauses Vendor negotiations Develop internal training plans for impacted business units. Develop external communication plan for customers and suppliers. Register / re-register for PST purposes. Self-assess and remit PST as required on property on hand at time of reversion. Page 18

19 BC PST: TRANSITIONING BACK What Is Being Recommended Page 19

20 Administrative Recommendations: Co-ordination with GST/HST rules: Use the CRA business number as the BC PST registration number. Reporting periods and filing deadlines for GST and PST purposes should coincide for ease of administration. Harmonize the PST registration requirements with GST. Harmonize the PST place of supply rules with the current GST/HST place of supply rules avoid double taxation. Simplify application of PST to goods brought into province for temporary use follow the 1/60 customs rule. Page 20

21 Administrative Recommendations: Reduce the ownership threshold for tax-free inter-corporate transfers (Reg. 3.14) to 90% of voting shares to be consistent with the GST nilconsideration election (ETA s.156). Deem partnerships to be a person for PST purposes, similar to the GST deeming provision and treat a partnership interest as a financial instrument. Simplify rules for taxation of goods sold to non-resident commercial customers for export follow GST zero-rating provisions when sold in BC. Match administrative policies on exemption for supplies to First Nations, including individuals, partnerships, corporations, bands, etc. with the GST policies. Page 21

22 Administrative Recommendations: Other PST-unique recommendations: Modify the definition of purchase price so that PST is calculated on the sale price whether or not the taxable property or service is purchased in the province or outside the province. Assets (both capital and in house inventory) acquired in the HST era should not be subject to any form of transitional tax. However, such assets should be considered tax paid for purposes of applying Reg Applying the PME exemption to an integrated manufacturing concept as opposed to directly in manufacturing. The integrated manufacturing concept provides that the inputs to manufacturing should be PST exempt. Page 22

23 Administrative Recommendations: Allow tax refunds to be netted against tax liabilities, rather than claiming separate refunds. Eliminate the 50% maximum depreciation rule for the importation of goods from other provinces. Broaden and modernize taxation of software & other technology to reflect current state. Simplify taxation of extended warranty & maintenance contracts. Page 23

24 Administrative Recommendations: Modify the exemptions for children's clothing exemption to be based on size only and not certification. Update the list of exempt school supplies and safety equipment to reflect the 21 st century needs. Exempt charities from requirement to collect PST on sales of used or donated tangible personal property; such sales are currently GST exempt. More flexibility with collection/maintenance of supporting documentation for PST exemptions (i.e. registration numbers, etc.). Page 24

25 Administrative Recommendations: If luxury tax on passenger vehicles re-introduced, increase threshold. Tax hotel accommodation under the SSTA rather than separate HRTA. Leave PST audit responsibilities with Federal government and/or implement joint audits. Page 25

26 Questions & Discussion

27 Thank You Deidre Feist Senior Manager Indirect Tax Ernst & Young LLP (604) Page 27