Tax Insights: Indirect tax hot topics ─ Do they impact your business?

April 08, 2021

Issue 2021-08

In brief

Businesses and other organizations should ensure that they are aware of, and comply with, recent and upcoming changes to indirect tax regimes in Canada. Of particular interest are a new sales tax rebate in British Columbia (BC) and new BC and Manitoba provincial sales tax (PST) and Goods and Services Tax /Harmonized Sales Tax (GST/HST) registration requirements for certain non-resident vendors.

This Tax Insights highlights the following significant indirect tax developments that may impact your organization or business:

BC PST Rebate on Select Machinery and Equipment
BC PST registration requirements for out-of-province businesses, effective April 1, 2021
Manitoba PST requirements for e-commerce businesses, effective December 1, 2021
phase-out of Québec sales tax (QST) input tax refund (ITR) restrictions for large businesses
Québec’s intention to work with the federal government regarding the harmonization of GST/HST and QST requirements on Québec sales by out‑of‑province e‑commerce businesses
GST/HST rules for foreign-based digital businesses, effective July 1, 2021

In detail

British Columbia developments

BC PST Rebate on Select Machinery and Equipment

On March 15, 2021, British Columbia released regulations for the PST Rebate on Select Machinery and Equipment. The regulations outline eligibility for this rebate of PST paid after September 16, 2020 and before October 1, 2021, on the purchase or lease of an eligible investment. The regulations also outline how the rebate is to be claimed, when it may be required to be paid back and transitional rules.

Eligibility

Most incorporated entities are eligible to claim the rebate, except for:

crown and local government corporations
charities and non-profit corporations
schools and universities
hospitals and regional health boards
agents of the government and other agencies listed above, to the extent that the PST was paid in their capacity as an agent
small sellers who have paid PST on goods and software acquired for resale
independent sales contractors who have paid PST on the purchase of exclusive products from direct sellers or another independent sales contractor

Eligible investment

PST paid after September 16, 2020 and before October 1, 2021, on:

the purchase or lease of tangible personal property in or imported into BC, and
software purchased for use on or with an electronic device ordinarily situated in BC,

qualifies for the rebate if the purchase meets the definition of an eligible investment and is delivered generally before October 1, 2021 (transitional rules apply). An eligible investment must:

for income tax purposes, be included in capital cost allowance class 8, 10, 12, 16, 38, 43, 43.1, 43.2, 46, 50, 53, 54 or 55
be purchased on account of capital (not inventory)
be obtained substantially for the purpose of gaining or producing income
not be a vehicle (other than a zero-emission vehicle), and
not be tangible personal property to be installed as an improvement to real property (other than tangible personal property designed to supply electricity or hydrogen to a zero-emission vehicle)

The rebate cannot be claimed if the applicant is eligible for a refund of the PST paid under another provision of the Provincial Sales Tax Act (British Columbia). The rebate must also be repaid in certain circumstances.

Application process

An eligible corporation can make a maximum of two applications for the rebate, during two application periods:

the first after March 31, 2021, and before October 1, 2021
the second after September 30, 2021, and before April 1, 2022

Two applications can be submitted during the second application period if one was not submitted during the first. Applications should be made online through eTaxBC.

PwC observes

Eligible corporations should:

review all their fixed asset purchases and new leases entered into since September 2020 to determine if the PST paid qualifies for this rebate
determine whether one or two rebate applications should be filed, depending on the magnitude of expected PST to be paid to September 30, 2021
consider accelerating anticipated fixed asset additions so that the related PST paid can qualify for this rebate
ensure they have all the appropriate support for the PST charged by the suppliers/lessors and evidence of the PST payment, because this supporting documentation will likely be examined by BC Ministry of Finance auditors

British Columbia PST registration requirements for businesses located outside the province

As previously mentioned in our Tax Insights “Indirect tax hot topics: Do they impact your business” (November 2, 2020); effective April 1, 2021, non-residents of British Columbia located:

in Canada that sell taxable goods
in or outside Canada that sell software and telecommunication services

to customers for consumption or use in British Columbia will generally be required to register for BC PST if their annual revenue from sales in the province exceeds $10,000 (either actual sales in the past 12 months or estimated sales in the next 12 months). Once registered, these businesses will be required to collect BC PST from their customers in British Columbia.

For more information, see British Columbia, Provincial Sales Tax (PST) Bulletin PST 001 (revised February 18, 2021) “Registering to Collect PST.”

Manitoba developments

Manitoba PST registration requirements for businesses located outside the province

As announced in its 2021 budget, Manitoba proposes to apply PST, effective December 1, 2021, on:

audio and video streaming services
sale of taxable goods sold by third parties through online marketplaces
booking of taxable accommodations through online platforms

Businesses providing these services and facilitating these marketplaces and platforms for sales to Manitoba consumers will be required to collect and remit PST, regardless of whether they have a physical presence in Manitoba. The Manitoba government will provide further details at a later date.

Québec developments

Elimination of QST ITR restrictions

Effective January 1, 2021, Québec has fully phased-out its ITR restrictions that applied to certain goods and services purchased by large businesses. As a result, starting January 1, 2021, large businesses can claim 100% of the QST that becomes payable on those goods and services that were previously subject to ITR restrictions. Large businesses are those with annual taxable revenue, including that of associated persons, exceeding $10 million in the preceding fiscal period.

2021 Québec budget

Since 2019, foreign and Canadian suppliers outside of Québec that sell services and intangible personal property to Québec consumers have generally been required to register under a simplified QST regime, to collect QST on their supplies of intangible personal property and services to Québec consumers. In addition, Canadian suppliers outside Québec and foreign suppliers registered for GST/HST are generally required to collect QST on supplies of goods made in Québec to consumers.

Following the federal government’s GST/HST proposals in its November 30, 2020 Fall Economic Statement (see new GST/HST rules below), the Québec government announced in its 2021 provincial budget that it will work with the federal government to implement harmonized rules for collecting QST on the supplies targeted under the federal proposals. The Québec government aims to specifically ensure that QST is collected on the sale of foreign goods made through fulfilment warehouses and on supplies of short-term accommodation made through accommodation platforms. For more information, see our Tax Insights “2021-2022 Québec Budget – Tax Highlights”.

New GST/HST rules for foreign-based digital businesses effective July 1, 2021

Under the existing GST/HST rules, non-resident vendors were generally not required to register for GST/HST unless they were “carrying on business in Canada,” which generally required some kind of physical presence in Canada. Effective July 1, 2021:

foreign-based digital businesses (that are not required to register under the current GST/HST rules) that supply intangible personal property and services to consumers in Canada will generally be required to register for and collect GST/HST under a new simplified GST/HST regime
GST/HST will apply to all supplies of short‑term accommodation by private residential property owners that are facilitated through digital platforms, which could impact non‑resident accommodation platforms
new GST/HST rules will apply to transactions involving goods for sale that are located at fulfilment warehouses in Canada and sold to purchasers in Canada by: (i) non‑resident vendors that sell directly to consumers in Canada on their own account, and (ii) online marketplace platforms that facilitate the sale of these goods by non‑registered vendors to consumers in Canada

For more information, see our Tax Insights “New GST/HST regime for non‑resident vendors of digital products will be effective July 1, 2021”.

PwC observes

As the July 1, 2021 implementation date approaches, we strongly encourage businesses to consider whether they are required to register for GST/HST and to ensure that their systems can accommodate the new GST/HST rules and PST regimes in British Columbia (see above), Manitoba (see above) and Saskatchewan, as well as the QST regime in Québec (see above). In response to submissions made by stakeholders, amendments and/or clarifications to the proposed GST/HST rules and draft legislation may be announced in the upcoming April 19, 2021 federal budget. To receive PwC’s federal budget analysis on April 19 and to learn more about this year’s federal budget, visit www.pwc.com/ca/budget.