As committed, the PST is being re-implemented with all permanent exemptions. The government also introduced common-sense improvements that will make administration of the sales tax easier for businesses.

Consumers will pay PST only on those goods and services that were subject to the tax before July 1, 2010. Consumers will again not pay PST on purchases like food, restaurant meals, bicycles, gym memberships, movie tickets, and others, nor for personal services like haircuts.

For businesses, the new legislation has been streamlined to help  simplify business compliance and reduce costs is clearer and easier to administer.   New measures to improve the PST include: 

• New online access for businesses, including the ability to register, update their account, and make payments.
• The due date for tax remittance and returns will be moved to the last day of the month to match GST remittance, simplifying administration for business.
• The Hotel Room Tax (eight per cent, as it was before July 2010) will now be incorporated into the PST—no more separate registration, remittance or returns, reducing paperwork.
• Businesses can register with their federal business number, making registration easier.
• Retailers will be allowed to refund tax to customers in a broader range of circumstances.
• Businesses that collect and remit tax will again receive commission of up to $198 per reporting period (typically monthly).

Over the coming months, further work on regulations to fully establish the exemptions will continue and will consider the input received from business to ensure clarity. Additional consequential and transitional amendments will also be required before April 1, 2013. The Province intends to publically release a final proposed version of the legislation as early as this fall to support business outreach and awareness.

By October 2012, government will begin outreach seminars to train businesses on how the PST applies, and business registration using the new online system will begin in January 2013.

As previously announced, the return to PST will also see:

• B.C. HST Credit eliminated.
• B.C. Sales Tax Credit re-implemented.
• Basic Personal Amount Tax Credit enhancement reversed.
• Tobacco Tax Rates adjusted to keep price levels consistent.
• Continuation at 12 per cent of the tax on private sales of vehicles, boats and aircraft.
• The PST rate of 10 per cent on liquor will be reinstated with the re-implementation of the PST. Liquor mark-ups will be reduced to generally keep shelf prices constant.
• The tax on propane will be re-implemented. The tax rate will be 2.7 cents per litre, the same rate as prior to the implementation of the HST.

 For more details, please see the “Return to PST” website.

1. Home Buyers’ Plan
Qualifying home buyers can withdraw up to $25,000 (couples can withdraw up to $50,000) from their RRSPs for a down payment. Home buyers who have repaid their RRSP may be eligible to use the program a second time.
Canada Revenue Agency www.cra.gc.ca Enter ‘Home Buyers’ Plan’ in the search box. 1.800.959.8287

2. GST Rebate on New Homes
New home buyers can apply for a rebate of the federal portion of the HST (the 5% GST) if the purchase price is less than $350,000. The rebate is up to 36% of the GST to a maximum rebate of $6,300. There is a proportional GST rebate for new homes costing between $350,000 and $450,000. Canada Revenue Agency www.cra.gc.ca Enter ‘RC4028’ in the search box. 1.800.959.8287

3. BC New Housing Rebate (HST)
Buyers of new or substantially renovated homes priced up to $525,000 are eligible for a rebate of 71.43% of the provincial portion (7%) of the 12% HST paid to a maximum rebate of $26,250. Homes priced at $525,000+ are eligible for a flat rebate of $26,250. www.hstinbc.ca/making_your_choice/faqs/new_housing_rebate
1.800.959.8287

Download the entire list here.

2012 Corporate & Individual Tax Rates

For more information about any of these rates, please contact us.

On April 1, 2013, British Columbia will eliminate the 12% harmonized sales tax (HST) and re-implement the 5% goods and services tax (GST) and 7% BC provincial sales tax (PST).  Builders need to keep in mind the following issues with respect to the transition:

1. Sales of new homes prior to April 1, 2013

a)       The 12% HST will continue to apply sales of new homes prior to April 1, 2013.

b)       BC First Time New Home Buyer’s Bonus - Eligible first-time new home buyers that meet certain conditions will be able to receive a refundable income tax credit worth up to $10,000 for purchases of new homes from February 21, 2102 to March 31, 2013.

c)       Increased Threshold for BC New Housing Rebate – The maximum rebate for the BC portion of the HST paid on the purchase of new homes will increase to $42,500 for qualifying homes purchased between April 1, 2012 and March 31, 2013.  The rebate is 71.43% of the BC portion of the HST up to a maximum of $42,500.  There is also an enhanced BC New Rental Housing Rebate and a new second and Recreational Home rebate available in certain circumstances with similar thresholds.

2. Sales of new homes on or after April 1, 2013

a)       The 5% GST will apply to the sale of new homes on or after April 1, 2013. The 7% PST generally does no apply to the sale of new homes.

b)       BC Transition Tax  – BC will impose a 2% transition tax on purchasers of new homes where:

i)       HST does not apply to the sale;

ii)      Construction of the home  is at least 10% complete at April 1, 2013; and

iii)     Ownership or possession of the new home transfers before April 1, 2015.  The transition tax will be collected by builders and is intended to mirror the embedded PST that would apply on the construction of a new home after PST is fully implemented.

c)       BC Transition Tax Rebate – A BC Transition Tax Rebate is available to builders of between 0.2% and 1.5% of the selling price of the new home. The purpose of the rebate is to compensate builders for the PST costs incurred after April 1, 2013 which may not have been factored into the price of new homes.

The above rules also generally apply to substantially renovated housing. 

For more information, please contact Merrill Leung, CA, Senior Manager, Tax at mleung@dmcl.ca 

Read more about the “Return To PST” at  http://www.pstinbc.ca/

• A reduction of departmental spending (savings expected of $5.2 billion by 2016-17).
• A number of new tax and tariff measures ($3.5 billion of new revenue in the next 5 years).
• Expected economic growth.

The Vancouver Board of Trade has given the federal budget an “A” grade because of spending control, debt management and its long term economic vision. Please take a look at our link in the website to review the Vancouver Board of Trade’s commentary.

There are some key highlights which will impact Canadians and their planning for the future, including:

For Indivdual

• Old Age Security – The government will adjust the age of eligibility the Old Age Security Program from 65 to 67 years of age for those currently 54 years of age of younger (those born in 1958 or later) starting in 2023. In addition starting on July 1, 2013 the Government will allow for the voluntary deferral of the OAS pension for up to 5 years;
• The Traveler – An increase in the travelers’ tax exemptions from $50 to $200 for travelers who are out of the country for 24 hours or more and from $400 to $800 for travelers who are out of the country for 48 hours or more; and
• The Wage Earner Protection Program – Has been committed $1.4 million annually.

For Corporations:

• R&D – The Government is supporting innovation in Canada through a $1.1 billion investment over five years to directly support research and development and $500 million for venture capital. This is a shift from the Scientific Research and Experimental Development (SR&ED) tax incentive program to a more direct funding approach through government, research and university programs and venture capital funding;
• Mineral Exploration Tax Credit – The temporary 15% Mineral Exploration Tax Credit for investors in Flow-through shares has been extended for an additional year to March 31, 2013; and
• Dividends – the budget has proposed simplifications in the manner in which a corporation resident in Canada pays and designates eligible dividends.

For Businesses in general:

• A reduction in the tax compliance burden for small business related is underway. This would include doubling the thresholds for eligibility to use the GST/HST streamlined accounting methods, simplifying the administration for partnerships and improving the rules for paying eligible dividends;
• The hiring credit for Small business has been extended for 1 year which will provide a credit of up to $1,000 against a small employer’s increase in its 2012 EI premiums over those paid in 2011; and
• No more pennies distributed after 2012.

For more details please refer to DMCL Insight, our latest newsletter. We are here to help! Contact our knowlegeable tax department to help you with your tax planning.

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A corporation will be considered to be carrying on a PSB where a specified shareholder (generally, a person who owns 10% or more of any class of the corporation’s shares) of the corporation performs services on behalf of the corporation, and that shareholder would reasonably be considered an employee of the customer to whom the services are rendered if the corporation did not exist (i.e. an incorporated employee). If the services are performed by a person related to a specified shareholder, the corporation will also be considered to be carrying on a PSB. For the purpose of the specified shareholder test, a person is deemed to own any shares of the company that are owned by related parties. An exception applies where the corporation employees more than five full-time employees in the business.

The issue of whether someone is an incorporated employee is a question of fact, and must be reviewed on a case by case basis. You may be considered an incorporated employee of the client in the following situation:

• You have one or very few clients.
• Your client has a high degree of control over your activities (when, where, how)
• You carry on the duties at that client’s place of business on a continuous basis.
• Your client provides an office and the tools of the trade.
• Your business card is in the name of the client.
• The client pays you on a regular basis.You have little or no risk of loss or opportunity for profit.
• You perform on-going services for the client and are an integral part of their business

If you think you might be an incorporated employee, you should discuss your situation with the DMCL Tax Team to gain an understanding of the implications of your corporation carrying on a personal services business and the options available to you.

Your DMCL Tax Team contacts – Ken Chong, Partner and Stewart Bullard, Sr. Manager.

• 60 to 65 years of age;
• 65 to 70 years of age, unless the employee has filed an election with you to stop paying CPP contributions; or
• 65 to 70 years of age, if the employee revoked his or her election to stop paying CPP contributions in 2013 or later.

If an employee is at least 65 years old and is receiving CPP or QPP and does not want to contribute in 2012, then he or she can elect to stop contributing by providing a copy of a signed and completed form CPT30 – this can be done as early as possible in December.

You may also want to remind all employees to file new TD1 if their personal situation as changed.