VMSW HST Resource Library

Introduction to the Ontario Harmonized Sales Tax (HST)

The Province of Ontario is in the process of abandoning its current retail sales tax system (provincial sales tax – PST) and replacing it with a combined Federal / Provincial harmonized sales tax (HST), effective July 1, 2010.  Over the past several months, the Ontario Ministry of Finance and the Canada Revenue Agency have gradually released several notices which include information on the implementation, transition, administration and filing obligations under the new HST system.

As of the date of publication, the Ministry of Finance has not released the regulations to the Excise Tax Act, Canada (ETA) which relate to Ontario’s transition to the HST system.  As such, the actual rules concerning the transition to HST could change, in a material manner, from the information outlined below.

Highlights of the New HST System

On July 1, 2010, the Ontario Provincial Sales Tax (PST) will be combined with the Federal Goods and Services Tax (GST) to create a Harmonized Sales Tax (HST). 

• The HST will be applied on most supplies of goods and services made in Ontario at a rate of 13%, consisting of the 5% federal portion and an 8% provincial portion.  The existing GST rules which relate to the taxation of goods and services will apply for the most part under the HST system.

   

  • Goods and services which were considered to be taxable supplies, zero-rated supplies and exempt supplies under the GST system will generally be subject to the same rules under the HST system.  Exceptions to this rule have been made in the retail sector (point-of-sale rebates).

  • GST/HST registrants will be entitled to claim input tax credits for the HST paid as part of their commercial activities (subject to the restrictions currently imposed under the GST system).  There is an exception to this rule for large businesses whose taxable sales exceed $10 million during the first 8 years under the HST system.

   

• The HST system will be administered by the Canada Revenue Agency (CRA).  As such, businesses in Ontario that are registered for the GST would be required to collect / report / remit HST in the same manner in which they currently do under the GST system [i.e. using the same filing frequency and GST/HST returns currently used to report GST (GST34 or GST62)].

• Effective July 1, 2010, GST/HST registrants will be required to ELECTRONICALLY FILE their GST/HST returns if:

   

  • the registrant (and any associated entities) have total annual taxable supplies in excess of $1.5 million;

  • the registrant’s input tax credits are subject to the Ontario HST input tax credit restrictions for large businesses; OR

  • the registrant is in the business of residential construction.

Information on the Harmonized Sales Tax

The following documents provide an overview of how the new HST system will impact you businesses and your families:

Should you have any questions concerning the transition to the Harmonized Sales Tax system in Ontario please feel free to contact a member of the VMSW Tax Group:

The information contained in these materials are in summary form, believed to be current as of the date of publication, and is intended for general guidance only.  It should not be regarded as comprehensive or a substitute for professional advice.  Before taking any particular course of action, please contact a professional advisor to discuss these matters in the context of your particular circumstances.  We accept no responsibility for any loss or damage occasioned by your reliance on information contained in this resource library.

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