Vol. 150, No. 15 — July 27, 2016

Registration

SOR/2016-212 July 8, 2016

EXCISE TAX ACT

Regulations Amending Various GST/HST Regulations, No. 9 (Prince Edward Island)

P.C. 2016-683 July 8, 2016

His Excellency the Governor General in Council, on the recommendation of the Minister of Finance, pursuant to sections 277 (see footnote a) and 277.1 (see footnote b) of the Excise Tax Act (see footnote c), makes the annexed Regulations Amending Various GST/HST Regulations, No. 9 (Prince Edward Island).

Regulations Amending Various GST/HST Regulations, No. 9 (Prince Edward Island)

PART 1

New Harmonized Value-added Tax System Regulations

1 Subsection 33.3(3) of the New Harmonized Value-added Tax System Regulations (see footnote 1) is replaced by the following:

Prince Edward Island — tax rate

(3) For the purposes of paragraph (a) of the definition tax rate in subsection 123(1) of the Act, the prescribed rate for Prince Edward Island is 10%.

2 The Regulations are amended by adding the following after section 58.57:

PART 3.5

Prince Edward Island Transitional Rules — 2016 Rate Change

Additional disclosure — real property

58.58 (1) If a builder makes a taxable supply of a residential complex in Prince Edward Island under an agreement of purchase and sale entered into after June 16, 2016 but before October 1, 2016, the builder must indicate in the agreement of purchase and sale

Failure to disclose

(2) If a builder fails to comply with subsection (1) in respect of a supply and is required under section 221 of the Act to collect tax at a particular time in respect of the supply and if tax under subsection 165(2) of the Act applies in respect of the supply at a rate of 10%, the following rules apply:

Adaptation — paragraph 172.1(5)(c) of Act

58.59 (1) If a person is a participating employer of a pension plan that acquires property or a service for the purpose of making a supply of all or part of the property or service to a pension entity of the pension plan but not for the purpose of making a supply of any part of the property or service to a pension entity of the pension plan after September 2016, for the purposes of determining the value for B in paragraph 172.1(5)(c) of the Act, the amount for Prince Edward Island in respect of a taxable supply of all or part of the property or service deemed to have been made under paragraph 172.1(5)(a) of the Act is determined by adapting the description of F in paragraph 172.1(5)(c) of the Act to read as follows:

F is the provincial factor in respect of the pension plan and the participating province for the particular fiscal year, determined as if the tax rate for Prince Edward Island on the last day of the particular fiscal year were 9%; and

Adaptation — paragraphs 172.1(6)(c) and (7)(c) of Act

(2) In respect of a fiscal year of a person that includes October 1, 2016, for the purposes of determining the value for B in paragraph 172.1(6)(c) of the Act and the value for B in paragraph 172.1(7)(c) of the Act, the amount for Prince Edward Island is determined by adapting the description of F in paragraph 172.1(6)(c) of the Act and the description of F in paragraph 172.1(7)(c) of the Act to read as follows:

F is the provincial factor in respect of the pension plan and the participating province for the particular fiscal year, determined as if the tax rate for Prince Edward Island on the last day of the particular fiscal year were the rate determined by the formula

9% + (1% × G/H)

Adaptation — employee and shareholder benefits

58.60 In respect of the 2016 taxation year, if

the portion of subclause (I) of the description of A in clause 173(1)(d)(vi)(B) of the Act after sub-subclause 2 is adapted as follows except in respect of section 37 of the New Harmonized Value-added Tax System Regulations, No. 2:

Transitional specified year — subsection 218.1(1.2) of Act

58.61 For the purpose of determining the tax payable by a person under subsection 218.1(1.2) of the Act for a specified year (as defined in section 217 of the Act) of the person that includes October 1, 2016 and for Prince Edward Island, the tax rate for Prince Edward Island is deemed to be equal to the rate determined by the formula

9% + (1% × A/B)

Adaptation — rebate for pension entities

58.62 For the purposes of determining the provincial pension rebate amount for a claim period (as those terms are defined in subsection 261.01(1) of the Act) of a pension entity that includes October 1, 2016, the description of C in paragraph (a) of the definition provincial pension rebate amount in that subsection is adapted as follows if the participating province referred to in that paragraph is Prince Edward Island:

C is the rate determined by the formula

9% + (1% × C1/C2)

PART 2

Games of Chance (GST/HST) Regulations

3 Subclauses (i)(A)(I) to (IV) of the description of E3 in subsection 7(7) of the Games of Chance (GST/HST) Regulations (see footnote 2) are replaced by the following:

PART 3

Streamlined Accounting (GST/HST) Regulations

4 (1) Clauses 15(5)(a)(i)(B) to (D) of the Streamlined Accounting (GST/HST) Regulations (see footnote 3) are replaced by the following:

(2) The portion of subparagraph 15(5)(a)(ii) of the Regulations before clause (A) is replaced by the following:

(3) Clauses 15(5)(a)(ii)(B) to (D) of the Regulations are replaced by the following:

(4) Subparagraphs 15(5)(a)(iii.1) and (iv) of the Regulations are replaced by the following:

(5) Clauses 15(5)(b)(i)(B) to (D) of the Regulations are replaced by the following:

(6) The portion of subparagraph 15(5)(b)(ii) of the Regulations before clause (A) is replaced by the following:

(7) Clauses 15(5)(b)(ii)(B) to (D) of the Regulations are replaced by the following:

(8) Subparagraphs 15(5)(b)(iii.1) and (iv) of the Regulations are replaced by the following:

5 The description of C in subsection 17(1) of the Regulations is amended by adding “or” at the end of paragraph (c) and by replacing paragraphs (d) and (f) with the following:

6 (1) Clauses 19(3)(a)(i)(B) to (D) of the Regulations are replaced by the following:

(2) Clauses 19(3)(a)(ii)(B) to (D) of the Regulations are replaced by the following:

(3) Subparagraphs 19(3)(a)(iv.1) and (v) of the Regulations are replaced by the following:

(4) Clauses 19(3)(b)(i)(B) to (D) of the Regulations are replaced by the following:

(5) Clauses 19(3)(b)(ii)(B) to (D) of the Regulations are replaced by the following:

(6) The portion of subparagraph 19(3)(b)(iii) of the Regulations before clause (A) is replaced by the following:

(7) Clauses 19(3)(b)(iii)(B) to (D) of the Regulations are replaced by the following:

(8) Subparagraphs 19(3)(b)(iv.1) and (v) of the Regulations are replaced by the following:

(9) Subclauses 19(3)(c)(i)(A)(II) to (IV) of the Regulations are replaced by the following:

(10) Subclauses 19(3)(c)(i)(B)(II) to (IV) of the Regulations are replaced by the following:

(11) The portion of clause 19(3)(c)(i)(C) of the Regulations before subclause (I) is replaced by the following:

(12) Subclauses 19(3)(c)(i)(C)(II) to (IV) of the Regulations are replaced by the following:

(13) Clauses 19(3)(c)(i)(D.1) and (E) of the Regulations are replaced by the following:

(14) Subclauses 19(3)(c)(ii)(A)(II) to (IV) of the Regulations are replaced by the following:

(15) Subclauses 19(3)(c)(ii)(B)(II) to (IV) of the Regulations are replaced by the following:

(16) The portion of clause 19(3)(c)(ii)(C) of the Regulations before subclause (I) is replaced by the following:

(17) Subclauses 19(3)(c)(ii)(C)(II) to (IV) of the Regulations are replaced by the following:

(18) Clauses 19(3)(c)(ii)(D.1) and (E) of the Regulations are replaced by the following:

(19) Clauses 19(3)(d)(i)(B) to (D) of the Regulations are replaced by the following:

(20) Clauses 19(3)(d)(ii)(B) to (D) of the Regulations are replaced by the following:

(21) The portion of subparagraph 19(3)(d)(iii) of the Regulations before clause (A) is replaced by the following:

(22) Clauses 19(3)(d)(iii)(B) to (D) of the Regulations are replaced by the following:

(23) Subparagraphs 19(3)(d)(iv.1) and (v) of the Regulations are replaced by the following:

(24) Clauses 19(3)(e)(i)(B) to (D) of the Regulations are replaced by the following:

(25) Clauses 19(3)(e)(ii)(B) to (D) of the Regulations are replaced by the following:

(26) Clauses 19(3)(e)(iii.1)(A) to (D) of the Regulations are replaced by the following:

(27) Clauses 19(3)(e)(iv)(B) and (C) of the Regulations are replaced by the following:

(28) Paragraph 19(3)(e) of the Regulations is amended by adding “and” at the end of subparagraph (iii.1) and by repealing subparagraph (iv), as amended by subsection (27).

(29) Clauses 19(3)(e)(v)(B) to (D) of the Regulations are replaced by the following:

PART 4

Automobile Operating Expense Benefit (GST/HST) Regulations

7 (1) Subparagraphs 2(b)(i) and (ii) of the Automobile Operating Expense Benefit (GST/HST) Regulations (see footnote 4) are replaced by the following:

(2) Paragraph 2(c.1) of the Regulations is repealed.

PART 5

Selected Listed Financial Institutions Attribution Method (GST/HST) Regulations

8 (1) The description of G21 in paragraph 46(d) of the Selected Listed Financial Institutions Attribution Method (GST/HST) Regulations (see footnote 5) is replaced by the following:

(2) Section 46 of the Regulations is amended by striking out “and” at the end of paragraph (h), by adding “and” at the end of paragraph (i) and by adding the following after paragraph (i):

–1 × (G50 – G51) × G52 × (1%/G53) × (G54/G55)

where

G50 is the total of the following amounts, each of which is determined for the particular reporting period and the participating province:

G51 is the total of the following amounts, each of which is determined for the particular reporting period and the participating province:

G52 is the specified percentage of the financial institution for the participating province and for the particular reporting period,

G53 is the rate set out in subsection 165(1) of the Act,

G54 is

where

A is an amount of tax that became payable by the financial institution during the particular reporting period, or that was paid by the financial institution during the particular reporting period without having become payable

B is

where

G55 is

PART 6

Electronic Filing and Provision of Information (GST/HST) Regulations

9 The definition qualifying housing supply in section 1 of the Electronic Filing and Provision of Information (GST/HST) Regulations (see footnote 6) is amended by striking out “or” at the end of paragraph (c), by adding “or” at the end of paragraph (d) and by adding the following after paragraph (d):

10 Section 8 of the Regulations is replaced by the following:

Sales of specified housing — consideration

8 (1) If a builder makes specified housing supplies (other than specified housing supplies referred to in subsection (2)) in respect of which tax under subsection 165(1) of the Act becomes payable at any time in a reporting period of the builder, for the purposes of section 284.01 of the Act, the total of all consideration for those specified housing supplies made in each of Ontario, Nova Scotia, New Brunswick, British Columbia and Newfoundland and Labrador is each a prescribed amount in respect of a specified return for the reporting period.

Sales of specified housing — Prince Edward Island

(2) If a builder makes specified housing supplies in Prince Edward Island in respect of which tax under subsection 165(1) of the Act becomes payable at any time in a reporting period of the builder, for the purposes of section 284.01 of the Act, the following amounts are prescribed amounts in respect of a specified return for the particular reporting period:

11 Paragraph 8.1(1)(d) of the Regulations is replaced by the following:

12 Section 10 of the Regulations is replaced by the following:

Sales of formerly qualifying housing

10 If a builder is the recipient of supplies of residential complexes that are qualifying housing supplies made in Nova Scotia, New Brunswick, Prince Edward Island or Newfoundland and Labrador and either the builder makes subsequent supplies (other than qualifying housing supplies) of the residential complexes in Nova Scotia, New Brunswick, Prince Edward Island or Newfoundland and Labrador in respect of which tax under subsection 165(2) of the Act becomes payable at any time in a reporting period of the builder or the builder is, at any time in the reporting period, deemed under subsection 191(1) of the Act to have made taxable supplies (other than qualifying housing supplies) by way of sale of the residential complexes and to have collected tax payable under subsection 165(2) of the Act in respect of those taxable supplies, for the purposes of section 284.01 of the Act, the total of all consideration for those qualifying housing supplies made in each of Nova Scotia, New Brunswick, Prince Edward Island and Newfoundland and Labrador is each a prescribed amount in respect of a specified return for the reporting period.

PART 7

New Harmonized Value-added Tax System Regulations, No. 2

13 Subparagraphs 42(d.1)(i) to (v) of the New Harmonized Value-added Tax System Regulations, No. 2 (see footnote 7) are replaced by the following:

14 Subparagraphs 44(d.1)(i) to (v) of the Regulations are replaced by the following:

PART 8

Regulations Amending Various GST/HST Regulations (Prince Edward Island)

15 Section 45 of the Regulations Amending Various GST/HST Regulations (Prince Edward Island) (see footnote 8) is replaced by the following:

45 Section 8 applies to amounts that are required to be included in computing an individual’s income for the purposes of the Income Tax Act for the 2013 to 2015 taxation years, except that

PART 9

Regulations Amending Various GST/HST Regulations, No. 8

16 Section 3 of the Regulations Amending Various GST/HST Regulations, No. 8 (see footnote 9) is deemed never to have produced its effects and is repealed.

17 Subsection 6(32) of the Regulations is deemed never to have produced its effects and is repealed.

18 Paragraph 17(k) of the Regulations is replaced by the following:

PART 10

Application

19 Section 1 applies

20 Sections 2 and 8 are deemed to have come into force on June 16, 2016.

21 Section 3 applies in respect of any reporting period of a provincial gaming authority that ends on or after February 28, 2017, except that in respect of the reporting period of the provincial gaming authority that includes February 28, 2017, subclauses (i)(A)(I) and (II) of the description of E3 in subsection 7(7) of the Games of Chance (GST/HST) Regulations, as enacted by section 3, are to be read as follows:

22 Section 4 applies for the purpose of determining the net tax of a registrant for reporting periods ending after September 2016, except that the quick-method rate of the registrant for the reporting period of the registrant that includes October 1, 2016 and that applies in respect of a supply is, in respect of consideration for the supply that is paid or becomes due before October 1, 2016, the quick-method rate of the registrant for that reporting period that would apply if that section had not come into force.

23 Section 5 applies for the purpose of determining the net tax of a registrant for reporting periods ending after September 2016, other than in respect of the portion of the registrant’s net specified supplies (as described in subsection 15(5.1) of the Streamlined Accounting (GST/HST) Regulations) for the reporting period of the registrant that includes October 1, 2016 that is attributable to supplies that are made before October 1, 2016 through a permanent establishment of the registrant in Prince Edward Island.

24 Subsections 6(1) to (27) and (29) apply for the purpose of determining the net tax of a registrant for reporting periods ending after September 2016, except that the special quick-method rate of the registrant for the reporting period of the registrant that includes October 1, 2016 and that applies in respect of a supply is, in respect of consideration for the supply that is paid or becomes due before October 1, 2016, the special quick-method rate of the registrant for that reporting period that would apply if those subsections had not come into force.

25 Subsection 6(28) applies for the purpose of determining the net tax of a registrant for reporting periods ending after December 31, 2016, except that the special quick-method rate of the registrant for the reporting period of the registrant that includes January 1, 2017 and that applies in respect of a supply is, in respect of consideration for the supply that is paid or becomes due before January 1, 2017, the special quick-method rate of the registrant for that reporting period that would apply if that subsection had not come into force.

26 Section 7 applies to amounts that are required to be included in computing an individual’s income for the purposes of the Income Tax Act for the 2016 and subsequent taxation years except that,

27 Sections 9 to 12 apply in respect of any reporting period of a person that ends on or after October 1, 2016.

28 Section 13 applies for the purposes of determining a rebate in respect of a supply to a particular individual referred to in subsection 254.1(2) of the Excise Tax Act of a building, or part of it, in which a residential unit forming part of a residential complex is situated if the supply of the complex referred to in paragraph 254.1(2)(d) of that Act is deemed under section 191 of that Act to have been made on or after October 1, 2016, unless possession or use of the complex is transferred to the recipient of the supply under a written agreement of purchase and sale entered into on or before June 16, 2016.

29 Section 14 applies for the purposes of determining a rebate in respect of a supply, by a cooperative housing corporation to a particular individual, of a share of the capital stock of the corporation acquired by the particular individual for the purpose of using a residential unit in a residential complex as the primary place of residence of the particular individual or a relation (as defined in subsection 255(1) of the Excise Tax Act) of the particular individual if the corporation paid tax under subsection 165(2) of the Excise Tax Act at a rate of 10% in respect of a taxable supply of the residential complex to the corporation.

REGULATORY IMPACT ANALYSIS STATEMENT

(This statement is not part of the Regulations.)

Issues

On April 19, 2016, the Government of Prince Edward Island announced its intention to increase the rate of the Prince Edward Island component of the Harmonized Sales Tax (HST) from 9% to 10%, effective October 1, 2016. Therefore, when combined with the 5% federal component, the HST rate for Prince Edward Island will increase to a rate of 15% from the current rate of 14%.

Also, in order to facilitate the implementation of the increase to the HST rate in Prince Edward Island, transitional rules were announced in the form of a detailed notice by the Government of Prince Edward Island on June 16, 2016. These rules specify the tax rate applicable to transactions that straddle the implementation date of October 1, 2016. With the passage of the Provincial Choice Tax Framework Act on December 15, 2009, Parliament approved that regulations would serve as the mechanism to facilitate a change in the provincial component of the HST. Amendments to existing Goods and Services Tax/Harmonized Sales Tax (GST/HST) regulations are therefore required in order to implement the decision of Prince Edward Island to increase the rate of its provincial component of the HST.

Background

The HST is imposed in participating provinces under federal legislation and administration. The Comprehensive Integrated Tax Coordination Agreements (CITCAs) between the Government of Canada and each of the participating provinces detail the parameters that govern the imposition of the HST. Under the CITCAs, each participating province may exercise some flexibility in certain areas covered by the agreement, such as establishing the rate of its provincial component of the HST.

Objectives

The Regulations Amending Various GST/HST Regulations, No. 9 (Prince Edward Island) [the Regulations] amend existing GST/HST regulations made under the Excise Tax Act (the Act) to formalize and give legal effect to the decision of Prince Edward Island to increase the rate of its provincial component of the HST.

Description

The Regulations contain rules relating to the harmonized value-added tax system. Specifically, the Regulations include amendments to the following regulations:

New Harmonized Value-added Tax System Regulations

These Regulations contain various rules that relate to the harmonized value-added tax system under the Act. These Regulations are amended to prescribe the rate of the provincial component of the HST for Prince Edward Island at 10%. The Regulations set out the complete details of the transitional rules for transactions that straddle the October 1, 2016, implementation date of the rate increase.

The transitional rules that apply to the amendments to these Regulations vary depending on the type of property or service being supplied. Generally, under these transitional rules, businesses are required to charge and collect the provincial component of the HST at the rate of 10% on any consideration that becomes due without having been paid, or is paid without having become due, on or after October 1, 2016, for supplies of services or property (other than real property). Additionally, the transitional rules stipulate what rate of HST is applicable to property and services that are brought into, or imported in, Prince Edward Island from another province or from outside Canada.

With respect to supplies of real property, the new HST rate of 15% generally applies to a supply of real property by way of sale (including sales of newly constructed or substantially renovated housing) if both ownership and possession of the property are transferred to the purchaser on or after October 1, 2016. Conversely, the HST rate of 14% generally applies to a supply of real property by way of sale if either ownership or possession of the property is transferred to the purchaser before October 1, 2016. However, this general rule may not apply in respect of certain sales of new housing under agreements entered into on or before June 16, 2016, which are subject to certain relieving grandparenting rules.

The transitional rules provide grandparenting of certain agreements for the purchase and sale of new housing. Subject to certain conditions and exceptions, a builder’s sale of a new or substantially renovated single-unit home, duplex, mobile home, floating home or residential condominium unit, in respect of which both ownership and possession are transferred on or after October 1, 2016, under a written agreement of purchase and sale, are grandparented (i.e. subject to HST at a rate of 14%) if the agreement was entered into on or before June 16, 2016.

Additionally, these amendments provide special transitional rules that apply to participating employers and pension entities of pension plans for periods that begin before October 1, 2016, and end on or after that date. Generally, for these periods, tax liabilities in respect of the Prince Edward Island component of the HST would apply at a rate of 10% based upon the number of days in the period that are on or after October 1, 2016, and at a rate of 9% based upon the number of days in the period that are before that date.

Games of Chance (GST/HST) Regulations

These Regulations set out special rules under which provincial gaming authorities (e.g. provincial lottery and casino corporations) calculate their GST/HST remittances. These calculations are based upon the 5% federal component and the various respective provincial components of the HST.

These Regulations are amended so that the GST/HST remittances of provincial gaming authorities take into account the change in the automobile operating expense benefit rates consequential to the increase in the HST rate in Prince Edward Island [see the description of the amendments to the Automobile Operating Expense Benefit (GST/HST) Regulations below]. Also, consequential to that rate increase of the provincial component of the HST, effective October 1, 2016, the Regulations provide a transitional rule for 2016, relating to the increased HST rate, in respect of other employment benefits (e.g. parking paid by the employer).

Streamlined Accounting (GST/HST) Regulations

These Regulations provide small businesses and eligible public service bodies with optional simplified methods (i.e. Quick Method and Special Quick Method) of calculating their GST/HST remittances. These methods allow the business or public service body to remit an amount of tax that is a percentage (the remittance rate) of its eligible GST/HST-included sales. This allows the entity to avoid having to separately keep track of the GST/HST paid on purchases and collected on sales. Certain transactions are excluded from these rules (e.g. the sale or purchase of real property). In such cases, the tax must be accounted for separately under the normal GST/HST rules.

These Regulations are amended to provide for new remittance rates under the streamlined accounting methods, consequential to the increase in the HST rate in Prince Edward Island.

Automobile Operating Expense Benefit (GST/HST) Regulations

These Regulations prescribe the rates of GST/HST applicable to the value of an automobile operating expense benefit, which is the personal portion of automobile operating expenses paid by employers or corporations and reported as income for income tax purposes by an employee or shareholder. The GST/HST is applicable to the benefit and the employer or corporation must account for and remit the GST/HST at a prescribed rate. Special prescribed rates apply to the automobile operating expense benefit of an employee or shareholder in Prince Edward Island where the employer or corporation, as a large business, is required to temporarily recapture input tax credits in respect of certain automobile operating expenses, such as fuel.

The prescribed rate and the special prescribed rates for Prince Edward Island are amended to account for the new 15% HST rate applicable in Prince Edward Island. The prescribed rate applicable to automobile operating expense benefits is lower than the new 15% HST rate in Prince Edward Island to reflect the fact that a portion of the total automobile operating expense benefit reported for income tax purposes relates to GST/HST-exempt expenses, such as insurance.

Selected Listed Financial Institutions Attribution Method (GST/HST) Regulations

These Regulations, along with certain sections of the Act, set out special rules by which certain financial institutions are required to calculate the amount of the provincial component of the HST remittable by them, or refundable to them, for each of their reporting periods. The financial institutions to which these rules apply are referred to as “selected listed financial institutions” or “SLFIs” (generally speaking, these are financial institutions operating in an HST-participating province and at least one other province). Under these rules, SLFIs make adjustments to take into account the provincial component of the HST in respect of the SLFI’s purchases of goods and services for use in activities carried out within both the HST-participating provinces and the non-participating provinces.

These Regulations are amended to provide transitional rules applicable to SLFIs for the increase to the HST rate in Prince Edward Island. Generally, these transitional rules provide that if a reporting period of an SLFI straddles October 1, 2016, the SLFI’s liability for the increase of the provincial component of the HST for Prince Edward Island is determined on an apportionment basis based on the number of days in the reporting period before October 1, 2016, and the numbers of days in that period that are on or after October 1, 2016, or, in the case of a distributed investment plan, based on the amount of GST and federal component of the HST that becomes payable, or is paid without having become payable, before October 1, 2016, and on or after October 1, 2016.

Electronic Filing and Provision of Information (GST/HST) Regulations

These Regulations provide for mandatory filing of GST/HST returns under the Act electronically for certain registrants and penalties for failing to file electronically or failing to report certain amounts specified by way of these Regulations. The specified amounts include information related to certain provincial transitional housing measures. These Regulations also provide rules and enforcement mechanisms to ensure that sufficient and accurate information is provided by GST/HST registrants to enable the federal government to administer the GST/HST and to allocate revenues between the federal government and the participating provinces under the HST.

These Regulations are amended consequential to the transitional rules with respect to the increase in the HST rate in Prince Edward Island. These Regulations set out which registrants are required to file GST/HST returns electronically and are amended to include builders that are affected by the transitional measures related to grandparented housing that were announced by Prince Edward Island on June 16, 2016 (see the description of the amendments to the New Harmonized Value-added Tax System Regulations above). These Regulations are also amended to provide the penalties for failing to accurately report certain amounts related to these transitional housing measures in Prince Edward Island.

New Harmonized Value-added Tax System Regulations, No. 2

These Regulations contain various rules with respect to the harmonized value-added tax system under the Act. These Regulations include, in particular, rules that modify certain amounts and rates contained in the Act in respect of some new housing rebates related to property situated in participating provinces to take into account the provincial component of the HST. These modified amounts and rates are based on the level of embedded tax in the value of property to which these rebates apply. For example, these Regulations currently provide that the maximum home value to qualify for a federal GST New Housing Rebate for the purchase of a new home situated on leased land in Prince Edward Island is an amount determined by taking into account that HST applies at a rate of 14% in Prince Edward Island. These amounts are different in provinces with a different provincial component of the HST to reflect embedded tax at a different rate. These Regulations are amended to adjust the applicable amounts and rates to reflect the new HST rate of 15% for Prince Edward Island.

Regulations Amending Various GST/HST Regulations (Prince Edward Island)

These Regulations were made in 2013 and contain the necessary amendments to various GST/HST regulations made under the Act to formalize and give legal effect to the decision of Prince Edward Island to adopt the HST. In particular, these Regulations contain the special prescribed rates mentioned in the description to the amendments relating to the Automobile Operating Expense Benefit (GST/HST) Regulations.

The Regulations provide new special prescribed rates that account for the new 15% HST rate applicable in Prince Edward Island for the 2016 and following taxation years of employees and shareholders.

Regulations Amending Various GST/HST Regulations, No. 8

These Regulations were made in 2016 and contain the necessary amendments to various GST/HST regulations made under the Act to formalize and give legal effect to the decisions of New Brunswick and Newfoundland and Labrador to increase the rate of the provincial component of the HST in their respective province, effective July 1, 2016. In particular, these Regulations contain amendments relating to the special quick method of accounting and to automobile operating expense benefits.

Provisions of these Regulations are superseded by, or incorporated into, amendments contained in the Regulations consequential to the increase in the HST rate in Prince Edward Island to ensure the proper operation of the amendments respecting these rules that are required to implement the HST rate increases in New Brunswick, Newfoundland and Labrador and Prince Edward Island.

“One-for-One” Rule

Overall, the HST framework minimizes the compliance and administrative burden imposed on businesses by eliminating ongoing substantial duplicative provincial requirements.

The Regulations implement the decision of Prince Edward Island under the HST framework to increase the rate of its provincial component of the HST. Accordingly, the Regulations do not increase or decrease the level of administrative burden imposed on business and, therefore, the “One-for-One” Rule does not apply.

Small business lens

As per the Treasury Board of Canada Secretariat’s Canadian Cost-Benefit Analysis Guide: Regulatory Proposals, taxes, fees, levies and other charges, because they constitute transfers from one group to another, are not considered to be compliance or administrative costs, whether they are intended as incentives to foster compliance and change behaviour or whether their purpose is to recover the costs of providing a service.

Accordingly, the small business lens does not apply, because the Regulations do not result in new incremental compliance or administrative costs for small businesses.

Consultation

The Regulations are designed to reflect the decision to increase the rate of the provincial component of the HST announced by Prince Edward Island on April 19, 2016. The Regulations also reflect the transitional rules announced by the Government of Prince Edward Island on June 16, 2016, which were developed in consultation with the Government of Prince Edward Island.

Rationale

The Regulations are required as a result of the decision of the Government of Prince Edward Island to increase the rate of its provincial component of the HST effective October 1, 2016. The Regulations formalize and give legal effect to previously announced amendments.

Contacts

François Beaulieu
Sales Tax Division
Department of Finance
90 Elgin Street
Ottawa, Ontario
K1A 0G5
Telephone: 613-369-3789

Patrick McKinnon
Excise and GST/HST Rulings Directorate
Canada Revenue Agency
Place de Ville, Tower A, 15th Floor
320 Queen Street
Ottawa, Ontario
K1A 0L5
Telephone: 613-954-7959