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Return To Provincial Sales Tax (PST): Moving Forward

MOVING FORWARD



New Housing Transitional Rules Announcement

Feb. 17, 2012

Ministry of FinanceTransition measures support new-home buyers, builders

VICTORIA – New housing transition measures give certainty to an important economic sector and help to keep taxes equitable throughout the transition as the province returns to the PST, Finance Minister Kevin Falcon announced today.

B.C. will return to the PST on April 1, 2013, meeting the Province’s commitment to return to the PST as quickly and responsibly as possible, while ensuring businesses can plan their training and systems switch-over effectively to apply the sales tax correctly.

Government is announcing new relief measures that will benefit purchasers and builders of new homes. The B.C. new housing rebate threshold will be increased to $850,000, meaning more than 90 per cent of newly built homes will now be eligible for a provincial HST rebate of up to $42,500. It is important to note that the HST does not apply to resale housing.

In addition, to help support workers and communities in B.C. that depend on residential recreational development, purchasers of new secondary vacation or recreational homes outside the Greater Vancouver and Capital regional districts priced up to $850,000 will now be eligible to claim a provincial grant of up to $42,500 effective April 1, 2012.

The housing transition rules help ensure when people buy a newly constructed home under the PST, whether built entirely under the HST, entirely under the PST, or partly under HST and partly under the PST, they will all pay a consistent and equitable amount of tax.

Specifically:

  • B.C.’s portion of the HST will continue to apply before April 1, 2013. Purchasers will be eligible for the new higher B.C. HST new housing rebate, of up to $42,500, and builders will continue to claim input tax credits.
  • B.C.’s portion of the HST will no longer apply to newly built homes where construction begins on or after April 1, 2013. Builders will once again pay seven per cent PST on their building materials. On average, about two per cent of the home’s final price will again be embedded PST.
  • For newly built homes where construction begins before April 1, 2013, but ownership and possession occur after, purchasers will not pay the seven per cent provincial portion of the HST. Instead, purchasers will pay a temporary, transitional provincial tax of two per cent on the full house price. This ensures equitable treatment among purchasers and will help mitigate distortive market behaviour. Builders will receive temporary housing transition rebates to offset PST on materials to help prevent double-taxation on homebuyers.

The transition rules outlined today provide certainty for new-home construction and sales, particularly during the transition period.

For goods and services that will be subject to PST, PST will generally apply where tax becomes payable on or after April 1, 2013. Detailed general transitional rules for goods and services will be available with the full PST legislation introduced in the legislature this spring.

The provincial changes are subject to the approval of the legislature.

Quotes:

Finance Minister Kevin Falcon –

“These measures ensure that there is fairness and equity throughout the transition period, and provide a roadmap for the housing industry to make the transition back to PST as smooth as possible.”

“The relief measures announced today are a boost to home buyers purchasing either a new primary residence or a secondary home. At the same time, they help an important job-creator in all parts of the province.”

Quick Facts:

  • Raising the B.C. HST rebate threshold to $850,000 is expected to save purchasers about $60 million in 2012-13. The maximum value rises to $42,500 from $26,250, a 60 per cent increase.
  • More than 90 per cent of newly built homes sold in B.C. are below the new higher rebate threshold.
  • Average amount of embedded sales tax in newly built homes under PST: two per cent.
  • Tax paid by purchasers on an $850,000-newly built home after HST rebate: two per cent.
  • Tax rate on a newly built home during transition: two per cent.
  • The temporary housing transition measures will be in place for two years, until March 31, 2015. The tax only applies to homes where construction begins before the transition date and ownership and possession occur after.
  • The temporary housing transition tax and the temporary housing transition rebates will be administered by the Canada Revenue Agency on behalf of B.C. The Province is administering the grant for new secondary vacation and recreational homes.

Tax Information Notice:
Enhanced New Housing Rebates and Transitional Rules for the Re-implementation of the British Columbia Provincial Sales Tax

More Information

If you have questions regarding eligibility requirements for the enhanced new housing rebates or new rental housing rebates or about the application of the B.C. transition tax or B.C. transition rebate, please call the Canada Revenue Agency at 1‐800‐959‐8287 (English) and 1‐800‐959‐8296 (French) or go to:

http://www.fin.gc.ca/n12/12-017-eng.asp (English)
http://www.fin.gc.ca/n12/12-017-fra.asp (French)

Quarterly Update

November 28, 2011: Second Quarterly PST Transition Update

Additional Information

Aug. 26, 2011
Action plan in place to return B.C. to 12% PST/GST

VICTORIA - The Province will reinstate the combined 12 per cent PST and GST tax system following the referendum decision by British Columbians to extinguish the HST in B.C., Finance Minister Kevin Falcon announced today.

An action plan has been established to guide the transition process and help ensure an effective and orderly transition from the HST to the PST plus GST system in B.C.

The PST will be reinstated at seven per cent with all permanent PST exemptions. The Province may make some common sense administrative improvements to streamline the PST.

The transition period is expected to take a minimum of 18 months, consistent with the report of the independent panel on the HST. During this period, the provincial portion of the HST will remain in place at seven per cent. Eligible lower-income British Columbians will continue to receive the B.C. HST Credit until the PST is re-implemented. The B.C. HST credit will then be replaced by the re-implemented PST credit.

During the transition period, the Province will provide quarterly updates on the progress of returning to the PST.

Quote: Minister of Finance Kevin Falcon-

"British Columbians have made their choice and we will honour that decision. Now more than ever, government must provide British Columbians economic stability and focus our attention toward growing our economy to create jobs and balancing our budget in a time of global economic uncertainty.

"We will work as quickly as we responsibly can to return to the PST. We have always been clear that, as the independent panel found, dismantling the B.C. HST and returning to the PST will take time to do properly.

"I can assure British Columbians PST will not be applied to such items as restaurant meals, haircuts, bikes and gym memberships - just as it was before the HST was introduced in B.C."

Learn More: For more information about the return to the PST, visit: http://www.fin.gov.bc.ca/pst-return.htm

Backgrounder

Action Plan to Re-implement PST

An action plan has been established to ensure an effective and orderly transition to the PST. Key phases in the transition process are described here.

Federal Transitional Rules and Systems:
  • A letter from the provincial finance minister to the federal finance minister is conveying the referendum results and advising the federal government that B.C. will re-implement the PST.
  • The Province will work with the federal government to develop HST transition rules and to make any necessary changes to systems and processes.
  • The provincial government will begin discussions with the federal government about exiting the Comprehensive Integrated Tax Coordination Agreement (CITCA) including the return of the funding received for adopting the HST.

Provincial Legislation and Transitional Rules:
  • The provincial government will develop legislation and regulations necessary to re-implement the PST in B.C. and may make some administrative changes to streamline and improve the PST.
  • Provincial PST transition rules to mirror federal HST transition rules will be developed.
  • The provincial government will develop other legislation and administrative programs necessary to support the full reimplementation of the PST (e.g. hotel room tax, etc).

Provincial Systems Development:
  • The Province will develop and establish appropriate reporting, data gathering, billing, remittance/collection, audit, assessment and appeal processes, and supporting computer systems to properly administer the PST and other related taxes (e.g. hotel room tax, etc.) in B.C.

Provincial Administration:
  • The Province will re-establish its capacity to administer the tax in the areas of registration and close of business, field and desk audit, appeals, rulings, provincial tax information phone lines, billings and remittances, collections and refunds. This will include staffing, facilities and equipment, and staff training to administer the PST and related taxes. This also includes developing appropriate administrative reporting forms and other information and communications material required to support the transition.

Provincial Business Registration and Outreach:
  • The provincial government will register approximately 100,000 businesses as tax collectors before the PST is re-implemented and provide information and training on the tax application, collection, compliance and reporting rules related to the PST. By the time the PST is re-implemented, there will be an estimated 30,000 new businesses in B.C. with no PST experience. These businesses will need to be registered and provided with detailed information and training to enable them to comply with the tax law.

Business Transition:
  • Businesses will need to change their own electronic and manual systems and processes to assess, collect, report and remit the PST and other related taxes to the provincial government.

Other Key Stakeholders:

  • The provincial government will consult with key administration stakeholders once provincial transition rules are completed. The Province relies on partner agencies to help ensure efficient tax collection, reporting and compliance. These agencies will need to make a number of systems and process changes, as well as receive information and training to help complete the PST transition.