Ontario HST Transitional Rules
The 2009 Ontario Budget proposed a Harmonized Sales tax for Ontario (HST) which will come into effect on July 1, 2010. It is proposed that,
Transitional rules are required to determine which tax- the existing RST or the Ontario component of the HST- will apply to transactions that straddle the July 1, 2010 implementation date for the HST.
There are three key dates that will be critical to the implementation of the HST transitional rules. It is important to note that the transitional rules operate on the basis of the earlier of when consideration for a supply becomes due or is paid without having become due. Under the Excise Tax Act (ETA), consideration for a supply becomes due on the earliest of the day the supplier first issues an invoice with respect to a supply; the date of the invoice; the day the supplier would have, but for undue delay, issued an invoice with respect to the supply; and the day the recipient of the supply is required to pay the consideration pursuant to a written agreement. The transitional rules are summarized as follows:
Implementation Date- July 1, 2010
The date in which most supplies of goods and services made in Ontario will become subject to HST.
Pre-Implementation Date- May 1, 2010
Consideration for a supply made in Ontario that becomes due, or is paid without becoming due, on or after this date will be subject to HST where the actual supply of goods and services is made on or after the implementation date (July 1).
For example: In June 2010, a business pays for equipment for which delivery occurs and ownership will not be transferred until August 2010. The HST will apply to the sale.
Announcement Date- October 14, 2009
Any consideration that becomes due or is paid without having become due after October 14, 2009 and before May 1, 2010 where the actual supply of goods and services is made on or after the implementation date will not be subject to the HST. However, a non-consumer such as a business or a non-profit organization must self- assess HST on a prepayment of consideration due or paid after October 14, 2009 and before May 1 , 2010 if the non-consumer does not acquire the goods for consumption, use, or supply exclusively in its commercial activities; if it uses “simplified” remittance methods under the ETA; or if it qualifies as a selected listed financial institution as defined in the ETA. A non-consumer must also self-assess on prepayments in this period for its purchases of goods (such as electricity) that are subject to an input tax credit restriction. A consumer is defined as individuals or households that use goods and services. Therefore consumers are not required to self-assess.
For example: In February 2010, a non-consumer (ie. Financial institution, public service bodies) is invoiced for equipment for which delivery occurs and ownership is transferred in August 2010. The non-consumer must self-assess the Ontario Component of the HST on the consideration for the equipment in its GST/HST return in which the self-assessed tax is required to be reported.
October 14, 2009 and prior
Release date of HST transitional rules. The HST will not apply to consideration that becomes due, on or before October 14, 2009.
October 31, 2010
The date on which any outstanding RST will become payable under the transitional rules to facilitate the efficient wind-down of the RST.
For transitional rules on specific goods and services please see Ontario Ministry of Revenue Information Notice No. 3 (click function to the PDF)
