HST - FAQ

 

1. How will my business be affected by the proposed HST?
2. How should I begin preparing for the transition?
3. Will the only change I need to make involve shifting my invoicing system from 5% to the 12% or 13%?
4. What if my business is not currently registered for GST/PST?
5. What if I charge the wrong GST/HST rate?
6. Does the HST affect how I file my tax return?


1. How will my business be affected by the proposed HST?

The HST affects almost all aspects of your business operations, including:

  • Pricing of products or services
  • Cash flow
  • Invoicing systems
  • Contracts
  • Disclosure on sales invoices
  • Purchases, including purchases of Input Tax Credits (ITC) restricted items
  • Advertising
  • Taxable benefits for employees
  • Transactions from May 1, 2010 forward may be affected
  • Returns of sales straddling July 1, 2010

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2. How should I begin preparing for the transition?

Our HST Timeline provides an outline of the action items that need to be completed:

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3. Will the only change I need to make involve shifting my invoicing system from 5% to the 12% or 13%?

The process of effectively transitioning your invoicing systems is more complicated than simply replacing the old rates with the new HST rate. It is important that you review “place of supply” rules to determine which tax rate will apply, particularly if you have customers, employees, or locations in more than one province. In addition, if you provide a combination of goods, services and intangibles, it may be difficult to determine which rate of tax to apply.
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4. What if my business is not currently registered for GST/PST?

It is important to review whether your business is required to be registered for GST/HST. If your business is carrying on taxable activities it may be beneficial to consider voluntarily registering for GST/HST in order to claim back additional tax as input tax credits.
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5. What if I charge the wrong GST/HST rate?

If the HST rate you charge is too low, the Canada Revenue Agency (CRA) may assess the difference between the rate you charge and the actual rate and charge you interest, which is compounded daily. If the HST rate you charge is too high, you will create a cash-flow issue for your customers or if they don't get full Input Tax Credits (ITC), they will incur greater costs. In addition, your customers may have to claim a rebate for tax paid in error rather than claiming an ITC.
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6. Does the HST affect how I file my tax return?

Effective July 1, 2010 -- for reporting periods ending on or after July 1, 2010 -- many GST/HST Registrants will be required to file their return electronically.

Who is required to file electronically?

  • GST/HST Registrants who have more than $1.5 million of  annual taxable sales (except charities)
  • Builders who will be impacted by the Transitional Rules released in Ontario and British Columbia
  • Registrants who are required to recapture Input Tax Credits (ITCs) for the provincial portion of the HST on:
    • Meals & Entertainment
    • Telecommunications
    • Vehicles and Parts
    • Energy costs

What are my options for filing electronically?

  • GST/HST Netfile
  • GST/HST Telefile
  • GST/HST EDI filing and remitting
  • Internet File Transfer

How will the electronic return differ from the paper return?

The new electronic version of the GST/HST return will be exactly the same as the paper version of the return with the exception of two new schedules. The new schedules are applicable to:

  • Residential builders in the construction industry
  • Large businesses with sales greater than $10 million (applies to single businesses or associated groups)
  • Financial institutions

How do the new schedules differ?

Schedule A – for Residential Builders:
Schedule A is for builders that have sold residential property where the transitional rules are applicable or the property is subject to HST and the purchaser is entitled to any of the new HST rebates. If you are required to complete this schedule, you must show the amount of rebates and or transitional tax paid out.

Schedule B - Large Corporations and listed Financial Institutions:
You are required to complete Schedule B if you have one or more Recaptured Input Tax Credits (RITCs) and you meet the definition of a large business as per above. This includes certain listed financial institutions. Also, if you are required to complete this schedule, you will need to show the amount of RITCs from British Columbia on one line and the amount of RITCs from Ontario on another. You do not have to itemize what category of expense these RITCs are from.

Regardless of the electronic filing method you choose, it’s important you file by the due date. Payments can be made by: CRA’s My Payment, using your Financial Institution’s Internet or Telephone Banking Services.
Visit www.cra.gc.ca/payments for more information.
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The rules surrounding the HST transition are complex. To find out how MNP can help you successfully manage the transition, please contact your local MNP Tax advisor.