The 8% Ontario sales tax and the 5% GST are being
combined into a
single 13% value-added sales tax that will be federally administered,
starting July 1, 2010.
What is Taxable?
Consumers will now have to pay 13% HST on all goods and
services on which they previously paid 5% GST, except for several items which are currently
RST exempt and will
not be subject to the provincial portion of the HST.
The following are some made-in-Ontario components:
Books, children's clothing and footwear, diapers,
children's car seats and car booster seats, and feminine hygiene
products would be exempt from the 8% provincial portion of the tax.
Purchasers of newly constructed homes under $400,000
will not be subject to an additional tax burden. Buyers of new
homes valued between $400,000 and $500,000 can claim a proportional
rebate.
New rental housing rebate, similar to the enhanced
new housing rebate, for new residential rental properties.
Up to $400 million in one-time sales tax credits will
be provided to help small businesses make changes to point-of-sale
and accounting systems.
Provincial portion of the tax rate on transient
accommodation, such as hotel rooms, will rise from 5% to 8%.
Approximately $40 million a year will be allocated to support
destination marketing in Ontario tourism regions once these are
established.
Qualifying prepared food and beverages that are
ready for immediate consumption and are sold for a total price of
not more than $4.00
Used vehicles purchased privately (not
from an HST registrant) will still be subject to a retail sales
tax (RST) of 13% (increased from 8%).
Ontario RST will continue to apply at 8% on
certain types of insurance, including house insurance,
group insurance, contributions paid into funded plans or on
benefits paid out of unfunded plans as well as payments made into
insurance schemes or compensation funds established under an Act
of Canada or Ontario. This is in addition to the Premium Tax
on certain insurance premiums. See Ontario
HST - Insurance Premiums and Premium
Tax on the Revenue Ministry website.
The Ontario Ministry of
Revenue has a page titled "What's
Taxable Under the HST and What's Not?". The tables on this
page show in detail which items will be subject to a higher tax under the
HST, and which ones will not.
Input Tax Credits
Businesses which are registered to collect GST or HST can
claim input tax credits to recover the GST or HST that they have paid,
with certain temporary exceptions for large businesses (see below). The change to HST will mean a significant savings and boost in
productivity for businesses in Ontario,
because:
they will no longer have to pay PST
they will no longer have to prepare PST remittances
they will save on consulting costs - the PST rules
are very complicated, and frequently require professional advice in
their interpretation
employees will spend much less time trying to find
the answers to PST questions
PST audits will be eliminated
There will be a temporary restriction on input
tax credits on certain items for large businesses
(generally, those with over $10 million of taxable, including
zero-rated, sales) and financial institutions. The restriction
will only apply to the provincial portion of the HST. For more
information see the following on the Ministry of Finance website:
As part of the sales tax reform, cash payments will be provided to Ontario
tax filers, in each of June and December 2010, and June
2011.
Eligible families with income of less than $160,000 would
receive 3 payments totalling $1,000.
Eligible individuals who earn less than $80,000 would get
3 payments totalling $300.
To qualify for the 2 payments in 2010, a 2009 tax return
would have to be filed.
Individuals who turn 18 prior to December 1, 2010, or who
have a spouse or common-law partner or live with a dependent child on May 31
or November 30, 2010, will qualify for 1 or 2 of the 2010 payments.
To qualify for the 2011 payment, a 2010 tax return would
have to be filed.
Tax Tip: Make sure
you file your 2009 and 2010 tax returns to get this benefit.
Proposed General
Transitional Rules for Ontario HST
Transitional rules are required to determine which tax
- the existing Retail Sales Tax (RST) or the Ontario component of the HST
- would apply to transactions that straddle the July 1, 2010
implementation date.
October 14, 2009
Certain purchasers that are non-consumers have
to self-assess the Ontario component of the HST on consideration that becomes
due, or is paid, after October 14, 2009 and before May 1, 2010 for goods and services provided on or after July 1, 2010.
This would not apply if the non-consumer is a GST registrant and would
therefore be entitled to an input tax credit.
Note: Consumer means an individual
who acquires goods or services for the individual's personal consumption
or use or for the personal consumption or use of another individual.
See the detailed information in Canada Revenue Agency's Notice
247 regarding this topic.
A GST registrant in BC or Ontario should not be
collecting the provincial portion of the HST prior to
May 1, 2010, for goods or services provided in BC or Ontario, even
if the goods or services are to be provided on or after July 1, 2010.
Prior to May 1, only the 5% GST should be collected for these goods or
services.
May 1, 2010
The HST would generally apply to consideration that
becomes due or is paid on or after this date, for property and services
provided on or after July 1, 2010.
Tax Tip: The
provincial portion of the HST can be avoided in most circumstances by
prepaying prior to May 1, 2010 for services to be provided on or after
July 1, 2010.
Some items addressed in the proposed HST transitional
rules:
Funeral services - HST will not apply to
funeral services where the contract is entered into before July 1,
2010.
Transitional RST inventory rebate for
residential contracts - A rebate will be available for RST
embedded in construction materials purchased before July 1, 2010, but
used in residential property contracts on or after July 1, 2010.
Subscriptions to newspapers, magazines and
other periodical publications - HST will not apply to subscriptions
paid before July 1, 2010.
Passenger transportation services - HST will
generally not apply to round-trip journeys that commence before July
1, 2010.
Freight transportation services - HST will
generally not apply to the cost of a freight transportation service
performed on or after July 1, 2010 if the service is part of a
continuous freight movement of goods that begins before July 2010.
For further information on the
HST and proposed transitional rules, see the following:
The information on this site is not intended to be a
substitute for professional advice. Each person's situation differs, and
a professional advisor can assist you in using the information on this web
site to your best advantage.
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