HST Information - Prince Edward Island · 2013. 2. 26. · Effective April 1 st, 2013 HST rate - 14% • Federal component - 5% • Provincial component – 9% Point of sale rebates

HST Information

Appraisal Institute of Canada - PEI

December 6, 2012

HST Facts Tax System Comparison Real Property Contracts, GST/PST – Current Status Real Property Contracts, HST Residential Construction, GST/PST example Residential Construction, HST example Non-Residential Construction, GST/PST example Non-Residential Construction, HST example HST Additional Information

Presentation

2Appraisal Institute of Canada - PEI

Effective April 1st, 2013 HST rate - 14%

• Federal component - 5%• Provincial component – 9%

Point of sale rebates• Heating oil, children’s clothing, children’s footwear and books

Rebate program for low and modest income households Administered by the Canada Revenue Agency In general, GST rules will apply to HST

HST Facts


Input Tax Credits (ITCs) Input tax credits (ITCs) are credits for the GST/HST paid

or payable on most goods and services acquired for consumption, use or supply in a commercial activity.

ITCs are generally based on extent of use in commercial activities.

To claim an ITC, a person must be a GST/HST registrant.

ITCs are reported on a GST/HST return.

HST Facts

Appraisal Institute of Canada - PEI 4

Supplies A ‘supply’ is the provision of goods or services in any manner Taxable, zero-rated or exempt Small suppliers [≤$30,000 revenue ($50,000 for public service bodies) from

taxable supplies, including zero-rated supplies]

Taxable Supplies Taxable at the HST rate for the participating province (PEI - 14%) Businesses who make taxable supplies can claim “input tax credits” for tax

paid or payable on inputs acquired to make those supplies

HST FactsApplication of HST


Zero-rated Supplies Taxable at the rate of 0% Businesses who make zero-rated supplies can claim “input tax credits” for

the tax paid or payable on inputs acquired to make those supplies. Zero-rated supplies are effectively tax free



Exempt Supplies Exempt supplies are not subject to the HST Businesses making exempt supplies cannot claim “input tax credits” for the

tax paid on inputs acquired to make those supplies Tax paid on inputs is an additional cost of doing business



Exempt Suppliers and Small Suppliers(*): The business will not be able to claim input tax credits for

HST paid by the business• HST expense (e.g. HST applied to electricity, rent, etc.) will increase

costs for these businesses which may have to be passed on to customers

(*) Small suppliers [i.e., those whose revenue from taxable supplies, including zero-rated supplies is ≤$30,000 ($50,000 for public service bodies) who choose not to register for GST/HST].

HST Facts


Provincial Sales Tax (PST) – A Cascading Tax Example Tourist accommodation operator pays PST on items such as

construction materials, repairs and maintenance, computer equipment and systems, accounting fees, office supplies and accommodation supplies used in providing guest accommodations

Operator embeds the PST paid into the cost of accommodations Customer pays GST and PST on cost of accommodations Customer pays tax on tax

• GST and PST on the tax embedded into the cost of accommodations• PST on top of GST on cost of accommodations

Tax System Comparison


Harmonized Sales Tax (HST) – A Value Added Tax Example Tourist accommodation operator pays HST on items such as

construction materials, repairs and maintenance, computer equipment and systems, accounting fees, office supplies and accommodation supplies used in providing guest accommodations

Operator receives an input tax credit for all HST paid Operator does not embed tax into the cost of accommodations Customer pays HST on cost of accommodations Customer does not pay tax on tax

Tax System Comparison


Subject to GST at 5% Purchase of building materials used in real property contracts Most purchases of land Subcontracts Purchase of most goods and services used by contractors in their

operations

Real Property ContractsGST/PST – Current Status

Expenses


Subject to PST at 10.5% (effective rate) Purchase of building materials used in real property contracts Purchase of goods and services used by contractors in their

operations

Exempt from PST Purchase of land Subcontracts (*)

(*) Subcontractor does have PST embedded in cost of contract


Expenses


Input tax credits for GST (5%) payable on purchases Purchase of building materials used in real property contracts Purchase of land Subcontracts Purchase of goods and services used by contractors in their operationsPST at 10.5 % (effective rate) Embedded in Contract Purchase of building materials used in real property contracts Purchase of goods and services used by contractors in their operations


Expenses


Real Property ContractsHST – Expenses

Subject to HST at 14% Purchase of building materials used in real property contracts Most purchases of land Subcontracts Purchase of most goods and services used by contractors in their

operations


Input tax credits for HST (14%) payable on purchases Purchase of building materials used in real property contracts Purchase of land Subcontracts Purchase of goods and services used by contractors in their

operations

Real Property ContractsHST – Expenses


Real Property ContractsHST

ExampleExpense Type: Building materials

Under GST/PST

Cost $77,500

GST – 5% 3,875

PST – 10% 8,137

89,512

Input tax credit 3,875

Net Cost $ 85,637

Under HST

Cost $77,500

HST – 14% 10,850

PST 0

$88,350

Input tax credit 10,850

Net Cost $77,500

Savings $ 8,137


GST/PST and HSTSummary


Contractors will experience tax savings under HST Tax savings can be used to:

• Increase bottom line• Re-invest in business and enhance economy• Reduce prices

Reference:The Impact of Sales Tax Reform on Ontario Consumers: A First Look at the EvidenceMichael Smart (http://www.fin.gov.on.ca/en/taxchange/smart.html)

Benefits of HST


http://www.fin.gov.on.ca/en/taxchange/smart.html�

Subject to GST at 5%Real property contracts

Exempt from PST at 10.5% (effective rate) Real property contracts


Sales


Real Property ContractsHST – Sales

Subject to HST at 14% Real property contracts


Residential Construction New Build or

Substantially RenovatedGST/PST - Current System

Materials Labour Land Other Total

Cost (before tax) 118,589 70,460 39,000 5,883 233,932

GST 5,929 1,950 294 8,173

124,518 70,460 40,950 6,177 242,105

PST 12,451 617 13,068

136,969 70,460 40,950 6,794 255,173

Input Tax Credits -5,929 -1,950 -294 -8,173

Total Cost 131,040 70,460 39,000 6,500 247,000

Profit 13,000

Selling Price 260,00021Appraisal Institute of Canada - PEI


Substantially RenovatedGST/PST - Current System

Note Total

Selling Price $260,000

GST 13,000

GST/HST New Housing Rebate

36% of GST paid (maximum $6,300)

- 4,680

Net Purchase Price $268,320

Tax Paid by Purchaser Net GST ($8,320) + embedded PST

$ 21,388



Substantially RenovatedHST

(Profit $ Constant)


Cost (before tax) 118,589 70,460 39,000 5,883 233,932

HST 16,602 5,460 824 22,886

135,191 70,460 44,460 6,707 256,818

PST 0 0 0

135,191 70,460 44,460 6,707 256,818

Input Tax Credits -16,602 -5,460 -824 22,886

Total Cost 118,589 70,460 39,000 5,883 233,932

Profit 13,000

Selling Price 246,93223Appraisal Institute of Canada - PEI



(Profit $ Constant)

Total


HST 34,570

GST/HST New Housing Rebate – 36% of federal part of HST (maximum $6,300)

-4,445


Percent Increase in Price 3.3%

Tax Paid by Purchaser – Net HST (no embedded PST)

$ 30,125




(Profit % Constant)


Cost before taxes 118,589 70,460 39,000 5,883 233,932

HST 16,602 5,460 824 22,886

135,191 70,460 44,460 6,707 256,818

PST 0 0 0

135,191 70,460 44,460 6,707 256,818


Total Cost 118,589 70,460 39,000 5,883 233,932

Profit (10%) 23,393

Selling price 257,325




(Profit % Constant)

Totals


HST 36,025

GST/HST New Housing Rebate – 36% of federal part of HST (maximum $6,300)

-4,632


Percent Increase in Price 3.0%

Tax Paid by Purchaser – Net HST $ 31,393


ProvincialNew Housing Rebate

Jurisdictional Comparison

Maximum Housing Value

Maximum ProvincialRebate Note

NL N/A N/ANo program

PE N/A N/ANo program

NS $160,000 $3,000Only available to first time home buyers

NB N/A N/ANo program

ON $400,000 $24,000Maximum $16,080 for owner-built home where no HST paid on land

BC $850,000 $42,500Maximum $28,475 for owner-built home where no HST paid on land


Non-Residential ConstructionNew Build

GST/PST Tax System

28



GST 17,138 5,625 848 23,611

359,898 202,500 118,125 17,817 698,340

PST 35,990 1,781 37,771

395,888 202,500 118,125 19,598 736,111


Total 378,750 202,500 112,500 18,750 712,500

Profit (5%) 37,500



Notes Totals

Selling price $ 750,000

GST 37,500

Total purchase price 787,500

ITC (Assuming purchaser is a Registrant)

- 37,500

Net paid by purchaser $ 750,000

Tax paid by purchaser (net) Embedded PST $ 37,771


GST/PST Tax System



HST(Profit % Constant)

30



HST 47,986 15,750 2,376 66,112

390,746 202,500 128,250 19,345 740,841

PST 0 0 0

390,746 202,500 128,250 19,345 740,841

Input Tax Credits -47,986 -15,750 -2,376 -66,112

Total 342,760 202,500 112,500 16,969 674,729

Profit (5%) 35,512



Notes Totals

Selling price $ 742,202

HST 103,908

Total purchase price 846,110

ITC (Assuming purchaser is a Registrant)

- 103,908

Net price to purchaser $ 742,202

Percent decrease in price - 1.0%

Tax paid by purchaser (net) $ 103,908 HST – $103,908 ITC $ 0

Non-ResidentialConstructionNew Build

HST(Profit % Constant)


Department of Finance, Energy and Municipal Affairs• [email protected] - Email• www.gov.pe.ca/hst - Website

Canada Revenue Agency (CRA)• www.cra-arc.gc.ca/gsthst

HSTAdditional Information


http://[email protected]/�

http://www.gov.pe.ca/hst�

http://www.cra-arc.gc.ca/gsthst�

Documents

HST Information - Prince Edward Island · 2013. 2. 26. · Effective April 1 st, 2013 HST rate - 14% • Federal component - 5% • Provincial component – 9% Point of sale rebates