Commodity Clips, July/August 2007
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2007 Federal Budget
Import Rules for Financial Institutions and Dealings Between Permanent Establishments
GST/HST Technical Information Bulletin B-095 – Import Rules for Financial Institutions and Dealings Between Permanent Establishments reflects proposed amendments to the Excise Tax Act (the ETA) contained in the draft legislation announced on January 26, 2007. At the time of publication, Parliament had not enacted these proposed amendments.
The bulletin explains the draft legislation that contains new import rules for Financial Institutions (FIs) in sections 217.1, 218.01, 218.1, 218.3 and 219 of Division IV of Part IX and clarifying amendments to section 220 of Division IV relating to dealings between permanent establishments.
Broadly, the import rules for FIs will require a qualifying taxpayer to self-assess tax on each amount of “qualifying consideration” in respect of an “outlay made, or an expense incurred, outside Canada” that is greater than zero for a taxation year of the taxpayer. The bulletin analyzes whether self-assessment is required and illustrates the calculation of the tax payable under the proposed legislation.
Input Tax Credit Entitlement for Tax on Imported Goods
GST/HST Policy Statement P-125R, originally issued on March 17, 1994, was superseded by an amended version issued by the Canada Revenue Agency (CRA) on June 1, 2007. The revised policy statement considers whether a person is entitled to an input tax credit (ITC) for the tax on imported goods in various circumstances. The CRA has determined that whether or not a person is entitled to an ITC for the tax on imported goods depends on the application of various provisions of the ETA and requires consideration of all relevant facts. The revised policy statement also explains the provisions that are relevant in making such a determination and then provides examples that illustrate their application in various circumstances (A table summarizing the examples may be found on page 9 of the policy statement).
Basic Groceries
Notice 220 – Notice of Change related to GST/HST Memoranda Series 4.3 – Basic Groceries was issued on May 30, 2007, to outline changes to the memorandum. Paragraph 105 has been changed to define the meaning of “salad.” GST/HST Memorandum 4.3 – Basic Groceries has been updated to reflect this change.
Cancellation of the Visitor Rebate Program and Foreign Convention and Tour Incentive Program — Updated
On September 25, 2006, the government of Canada announced amendments to the ETA that would eliminate the Visitor Rebate Program effective April 1, 2007. The legislative amendments required to make these changes received royal assent on June 22, 2007. Notice 221 — Q&As — Proposed Cancellation of the Visitor Rebate Program and Proposed Foreign Convention and Tour Incentive Program — Updated constitutes the first and second instalments of a comprehensive series of questions and answers that the CRA is issuing on this subject. Further questions and answers on foreign and domestic conventions are set to be added as soon as they become available.
Excise Tax
Notice to all Licensed Manufacturers and Wholesalers, and Importers of Automobiles — Imposition of Excise Tax on Fuel-inefficient Vehicles
On March 27, 2007, the federal Minister of Finance tabled a Notice of Ways and Means Motion to implement certain provisions of the budget tabled in parliament on March 19, 2007. The Motion includes changes to the non-GST/HST portions of the Excise Tax Act, including proposed changes to section 6 of Schedule I to the Act, which will be amended to impose a new excise tax on certain fuel-inefficient vehicles. This new tax replaces the existing heavy vehicle weight tax, which no longer applies after March 19, 2007. On June 13, 2007, the CRA issued a change to notice (ET/SL-064R) under the heading "effective date of the tax" to indicate that automobiles for which an agreement in writing between a dealer and a final consumer was entered into before March 20, 2007, will not be subject to the tax, provided the final consumer takes possession of the vehicle before October 2007. This change is incorporated in the current version of the notice.
PST
Auto Repair
The Ministry of Small Business and Revenue has issued Notice to Automotive Repair Industry — July 2007, that explains how the social service tax, also called the provincial sales tax (PST), applies when automotive repair facilities purchase or lease courtesy vehicles for the use of their customers. The notice also sets out the circumstances in which an automotive repairer needs to charge and pay the PST.
Notice to Lawyers
The Ministry of Small Business and Revenue has issued a notice that explains how the PST applies to lawyers holding PST in trust as a result of the court decisions in British Columbia Attorney General v. Christie, 2007 SCC 21 (the Christie case). On May 25, 2007, the Supreme Court of Canada ruled in the Christie case that the imposition of the PST on legal services is constitutionally valid.
Notice to Sellers of Electricity, Natural Gas, Fuel Oil and Propane: Innovative Clean Energy (ICE) Fund Levy — June 2007
As part of the BC Energy Plan, the government recently announced the creation of a $25 million Innovative Clean Energy (ICE) Fund to help support clean energy initiatives. Funding will be from a levy on purchases of electricity, natural gas, grid propane and fuel oil (i.e., heating oil) by industrial, residential and commercial customers.
Sellers of electricity, natural gas, grid propane or fuel oil, will be required to charge customers a levy of 0.4% on the purchase price of these energy products delivered on or after September 1, 2007. This notice explains when to charge the levy, when not to charge the levy and provides examples.
Discount Transactions — June 2007
The Ministry of Small Business and Revenue has issued a notice that clarifies how the PST applies to discount transactions. Effective June 30, 2007, when a reduced or discounted purchase or lease price is offered to a customer, the amount of the reduction must first be deducted in full from the price before tax. PST is then calculated on the reduced price.
Catalysts and Direct Agents — June 2007
The Ministry of Small Business and Revenue has issued a notice that clarifies how the PST applies to catalysts and direct agents. The notice was issued as a result of the British Columbia Court of Appeal decision with respect to Domtar v. Her Majesty the Queen in Right of the Province of British Columbia, 2007 BCCA 49, released on January 19, 2007. As a result of that decision it has been determined that PST need not be paid on the purchase price of biocides and other catalysts and direct agents provided certain conditions are met.
Exemption for Material and Equipment Used to Conserve Energy
Bulletin SST 011 — Exemption for Material and Equipment Used to Conserve Energy, originally issued September 1981, was revised in June 2007 to clarify that, as of February 21, 2007, products that do not have the ENERGY STAR® designation are taxable. In addition, the webpage for Energy Conservation Exemptions has been updated and a new Notice — Energy Conserving Windows, Doors and Skylights: Transitional Refund Provisions has been posted. Further information is provided for contractors in Bulletin SST 072 – Real Property Contractors and for retailers in Bulletin SST 057 – Building and Home Improvement Stores (see below).
Motor Vehicle Dealers
Bulletin SST 042 — Motor Vehicle Dealers — May 2007, originally issued September 1986, was revised in May 2007 to include further details about how PST applies to sales of used passenger vehicles, other motor vehicles and trailers, by motor vehicle dealers and in private sales.
Manufacturers
Bulletin SST 054 — Manufacturers, originally issued June 1989, was revised in May 2007 to clarify the kinds of businesses that generally qualify as manufacturers for the purposes of the production machinery and equipment (PM&E) exemption for PST purposes.
Building and Home Improvement Stores
Bulletin SST 057 — Building and Home Improvement Stores — June 2007, originally issued June 2004, was revised June 2007 to clarify that, as of February 21, 2007, on the sale or lease of windows, doors and skylights, PST is:
- charged if the products lack the ENERGY STAR® designation; and
- not charged if they are ENERGY STAR® qualified.
Real Property Contractors
Bulletin SST 072 — Real Property Contractors — June 2007, originally issued September 1986, was revised in June 2007 to clarify that PST is not paid on certain specified energy conservation materials and equipment. Effective February 21, 2007, products that do not have the ENERGY STAR® designation are taxable. The revised bulletin also sets out procedures for claiming transitional refunds.
Multi-Jurisdictional Vehicles
Bulletin SST 073 — Multi-jurisdictional Vehicles — May 2007, originally issued November 1995, was revised in May 2007 to insert additional guidance regarding the application of PST to multi-jurisdictional vehicles for the benefit of out-of-province carriers not licensed under the International Registration Plan (IRP), Canadian Agreement for Vehicle Registration (CAVR) or the Uniform Prorate Agreement (UPA).
Home-Based Businesses
Bulletin SST 133 – Home Based Businesses – June 2007, originally issued November 2006, was revised in June 2007 to clarify the requirements to collect and remit PST for suppliers that do not need to register with the Ministry but that make sales of taxable goods. Further guidance regarding optional registration and collection was also inserted into the bulletin.
Motor Fuel Tax
Fuel Used by the Logging and Mining Industries
Bulletin MFT 010 — Fuel Used by the Logging and Mining Industries, originally issued October 2006, was revised in May 2007 to reduce the number of years within which a refund for the difference between the clear and coloured fuel tax rates may be claimed from six years to four, effective from May 1, 2007. A new Notice to Fuel Sellers was also issued in July 2007. This new notice explains that all heating fuel will soon have to be coloured, outlines coming changes to the generic fuel tax return and explains when a tax return and payment under the Motor Fuel Tax Act must be received by the Ministry in order to be considered filed on time.
Hotel Room Tax
Accommodation — Registered Operators of Hotels, Motels or Other Lodgings
Bulletin HRT 006 — Accommodation — Registered Operators of Hotels, Motels or Other Lodgings — June 2007, originally issued June 1983, was revised in June 2007 to clarify the responsibilities of registered operators of hotels, motels and other lodgings and to expand upon the instances in which such providers are not required to charge Hotel Room Tax (HRT). Specifically, HRT need not be charged if the accommodation is provided without amenities, such as bedding, heat, electricity and indoor plumbing.
PST
Filing Frequency for PST Returns
Information Bulletin PST-5 — Provincial Sales Tax Act, originally issued June 1984, was revised in July 2007 by the Saskatchewan Finance Revenue Division to amend the filing frequency for tax returns and additional penalties applied to audit assessments.
PST
Summary of Taxable and Exempt Goods and Services
Information Bulletin 030 — Summary of Taxable and Exempt Goods and Services — June 2007, originally issued April 2000, was revised in June 2007 to specify that the exemption from the imposition of PST for manure slurry tanks or liners for manure lagoons used directly in the farm production of livestock expires June 30, 2009. In addition, the revised bulletin clarifies that despite the exemption in certain situations of PST for sales of home-based businesses, the home-based business must pay PST when purchasing goods or services that are otherwise taxable.
Sales by Vendors Located on a Reserve
Information Notice – Sales by Vendors Located on a Reserve — May 2007, originally issued June 2006, was revised in May 2007. This notice outlines the application of PST by persons who operate a business located on a reserve. It explains when vendors are required to collect PST and the documentation required on sales to status Indians and Indian bands entitled to exemption under the federal Indian Act. The amendment clarifies that collection of PST is not required for goods sold on a reserve to status Indians or Indian bands and is not required when the seller delivers goods directly or by common carrier to status Indians or Indian bands on a reserve.
Exemption for Status Indians and Indian Bands
Information Notice – Clarification of Manitoba Sales Tax Exemption for Status Indians and Indian Bands – May 2007, originally issued June 2006, was revised in May 2007. This notice provides details regarding the exemption available to status Indians and Indian bands residing on a reserve when the seller of the goods delivers the goods directly or by common carrier to a reserve address. The amendment includes an additional requirement regarding the information that must be shown on the invoice for the goods being purchased, namely the status Indian's resident reserve address or band reserve address, if the sale involves leased goods or cellular telephone services.
Gasoline Tax
Revised Bulletin
Information Bulletin No. GT 1-2003 Gasoline Tax in Ontario, originally issued September 2003, was revised in June 2007. The bulletin provides an overview of the administration of the Gasoline Tax Act (Act) and the collection of tax in Ontario on gasoline, aviation fuel, and propane. Several minor changes have been made to the bulletin in the latest revision, including, among other things, the amount of security required by a person who brings or causes to be brought into Ontario gasoline, aviation fuel or propane.
QST
Supplies of Orthodontic Appliances, Artificial Teeth and Health Care Services
TVQ 176-4/R2 — Supplies of Orthodontic Appliances, Artificial Teeth and Health Care Services, originally issued December 28, 2006, as Supply of Orthodontic Appliances and Services, was revised on June 29, 2007. This bulletin clarifies the application of the Québec Sales Tax (QST) with respect to supplies of orthodontic appliances, artificial teeth and health care services. The latest revision inserts certain particulars relating to input tax refund (ITR) claims by dentists and orthodontists. These particulars were not specifically addressed in the previous bulletin.
Supplies of Corporeal Moveable Property to be Shipped Outside Québec
TVQ 179-2/R1 — Supplies of Corporeal Moveable Property to be Shipped Outside Québec, originally issued December 28, 1995, was revised in May 2007. The bulletin was revised to reflect the legislative amendments since it was last published. Those changes relate largely to what constitutes satisfactory evidence of the shipment of corporeal movable property outside Québec. The bulletin explains the rules applicable to shipping certificates and shipping distribution centre certificates, and deals with the issue of input tax refunds and QST rebates that may be claimed in the context of the supply of corporeal movable property shipping outside Québec. The revised bulletin now includes an appendix setting out a non-exhaustive list of the documents which may constitute satisfactory evidence that the corporeal moveable property was shipped outside Québec.
Fuel Tax
Coloured Fuel Oil
Revenu Québec issued a news release on June 11, 2007, regarding the liability for Fuel Tax in the context of contract work performed by a contractor for a farmer. The notice clarifies that coloured fuel oil, which is exempt from Fuel Tax, may be acquired or used only in specific situations. For example, it may be acquired or used to supply the propulsion engine of farm machinery, but only while the machinery is used for farming work by a person whose principal occupation is farming. If a contractor uses farm machinery to perform contract work for a farmer (for example, combining and tillage), coloured fuel oil may not be used to supply the propulsion engine of the farm machinery concerned, because the contractor is performing a service contract and not farming work within the meaning of the Fuel Tax Act.
Gas and Diesel Oil Tax
New Bulletins
The Tax Commission of Nova Scotia issued a series of Guides in May 2007 that provide direction on the application of Gasoline and Diesel Oil Tax as it applies to purchases of gasoline and diesel oil by a range of users. Specifically, the following Guides set out the circumstances in which an exemption from or refund of Gasoline or Diesel Oil Tax on purchases of gasoline and diesel oil may be obtained:
- RTG:2001R5 — Purchase of Gasoline & Diesel Oil by Commercial Fishers — May 2007
- RTG:2002R3 — Purchase of Gasoline & Diesel Oil by Commercial Farmers — May 2007
- RTG:2003R4 — Purchase of Gasoline & Diesel Oil by Commercial Loggers — May 2007
- RTG:2004R3 — Purchase of Gasoline & Diesel Oil by Commercial Manufacturers — May 2007
- RTG:2005R1 — Purchase of Gasoline & Diesel Oil by Aquaculturists — May 2007
Canada
Customs Notice 07-017 — Reporting the export of goods controlled by a Canadian Nuclear Safety Commission Export Licence
Certain goods for export are controlled because of their potential for use in the nuclear industry. This notice clarifies the requirements and the procedures for reporting the export of goods controlled by a Canadian Nuclear Safety Commission (CNSC) export licence. Exporters wishing to export these goods must first obtain an export licence from the CNSC which must be presented in addition to any export permits issued by Foreign Affairs and International Trade Canada.
Customs Notice N-431 — Where to file dispute notices to contest Customs decisions on tariff classification, value for duty, origin, marking and advance rulings
Updated May 25, 2007, this notice clarifies where you may file dispute notices (sometimes referred to as K14Ds) under section 60 of the Customs Act. The Canada Border Services Agency (CBSA) recommends that all dispute notices be filed with the Customs Appeals office that will review the dispute, to prevent delays. This information also applies when filing applications for extensions of time under section 60.1 of the Act.
Customs Notice N-512 — Treatment of discount in determining the transaction value and the value for duty code
Updated May 25, 2007, the purpose of this notice is to clarify the use of codes 13, 14, 23 and 24 when completing the customs accounting document and how to treat discounts in the transaction value method. The transaction value method is the primary basis for determining the value for duty.
European Union
The EU suspends WTO panel on India wines and spirits after India cuts discriminatory tariffs
The EU has suspended its World Trade Organization (WTO) panel against India, following India's repeal on July 3, 2007, of discriminatory duties on EU wines and spirits. The removal of the discriminatory duties is good news for European spirit and wine makers, who have been disadvantaged by the Indian measures.
