Yes, it’s that time of year again. Tax season is finished and while there is nothing particularly earthshaking in store for Canadian taxpayers this year, a few changes are worthy of note.
Sales Tax Harmonization
Two provinces — Quebec and Prince Edward Island — will join the national trend and harmonize their provincial sales tax systems with the federal Goods and Services Tax (GST). British Columbia has chosen to buck the trend.
Quebec. Unlike other provinces that have harmonized their sales tax, Quebec is keeping its own provincial tax act. Quebec’s new Quebec Sales Tax (QST) has increased to 9.975 percent (up from 9.5 percent), which results in a harmonized rate of 14.975 percent.
If your company charges sales tax in Quebec, the GST and the QST must be shown separately on invoices. Also, your company must now register for a federal business number and a provincial QST business number.
If you are in the financial services industry, note that providing financial services in Quebec has changed from being zero rated to being exempt. This means that financial services providers doing business in Quebec can no longer claim an input tax refund of the QST paid on inputs to those services.
PEI. Prince Edward Island harmonized its sales tax on April 1. The provincial component was lowered to 9 percent (down from 10 percent) and the harmonized rate has been lowered to 14 percent (down from 15 percent). However, the harmonized tax allows for fewer exemptions. If your company is already GST-registered, no new Harmonized Sales Tax (HST) registration is required.
British Columbia. In an interesting twist, as of April 1, British Columbia has reverted from HST to separate Provincial Sales Tax (PST) and GST. The new PST for British Columbia is 7 percent on taxable goods brought into the province, with the typical exceptions.
Note that if you were registered in British Columbia for a federal business number, you can still use your old business number for the GST, but will need to re-register for a PST business number.
Corporations have already gone paperless in terms of their tax return filing. This year, individual taxpayers must also take the paperless route if their taxes are prepared by a firm that prepares more than 10 T1s per year.
Sickness and AD&D Plans
In a change affecting both employers and employees beginning in 2013, employer-paid premiums for critical illness insurance and accidental death and dismemberment (AD&D) insurance plans are now a taxable benefit. This change impacts traditional insurance plans as well as flexible benefit plans that allow employees to pay for benefits with funds provided by employers.
Canadian taxpayers are already seeing higher payroll deductions that went into effect at the beginning of the year. For example, the increase in the Canada Pension Plan deduction ($49.50) and Employment Insurance ($51.50) is reducing paychecks by $100 per year for those earning more than $51,500 per year. Provincial tax changes are also taking a bite out of take-home pay.
Staying abreast of CRA changes requires careful attention. Be sure to ask your tax advisors if you have questions about these or other tax matters.
Be sure to ask your DJB tax advisor if you have questions about these or other tax matters.