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Changes in BC and Quebec


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Canadian Indirect Tax News, December 12, 2011 (11-5)

QST rate change

On January 1, 2012, the Quebec Sales Tax (QST) rate will increase from 8.5% to 9.5%. If you have transactions straddling this date, whether you purchase or sell goods/services in Quebec, you may wish to speak with your tax service advisor or refer to one of the Revenue Quebec publications to determine how any transitional rules apply.

Return to PST considerations

In August 2011, British Columbians voted to extinguish the Harmonized Sales Tax (HST) and return to the Goods & Services Tax (GST) and Provincial Sales Tax (PST) regime. The return to the PST is burdensome for most businesses that have already spent money and time implementing the HST, and now must incur additional costs to re-implement the PST.

While the provincial government is yet to confirm a PST re-implementation date, it is not too soon to begin considering the implications of the return and begin planning to minimize the tax cost of transactions. Issues to consider may include:

Budgets and forecasts

  • Budgets and forecasts will need to be amended to include any increased PST costs

Transitional rules

  • Consider the impact of large expenditures around the re-implementation date. Goods and services purchased before but delivered or used after the re-implementation date may be subject to the rules under the PST regime.
  • Exchanges and returns of goods around the re-implementation date will be subject to special transitional rules
  • The potential impact of PST to real estate developers if the provincial government requires PST to be self-assessed on materials purchased before but used after the re-implementation

Contracts

  • Current contracts may need to be examined to determine the PST impact, and consider whether clauses exist to recover additional PST costs. It is advisable to begin negotiations with contracting parties to account for the PST under both the current and future tax regime.
  • Consider the potential implications of pre-payments, progress billings, software licenses or maintenance contracts

Acquisition of assets

  • Leased assets held by a leasing company should be considered to determine if a buy-out would be more cost effective before the re-implementation of PST
  • Capital projects should be examined to consider timing. For many companies in commercial activities, it may be more beneficial to incur large expenditures prior to the re-implementation of the PST

Systems and processes changes — accounting for the PST regime

  • Purchase orders, contracts, and agreements templates may need to be updated
  • Accounting, reporting, and point-of-sale systems may need to be reconfigured
  • Process and systems changes may be required to deal with self-assessment requirements under PST
  • Tax status of various products and services should be considered, and the tax coding may need to be adjusted in the sales systems
  • Plan for training sessions to ensure staff are up-to-date on transitional rules and PST implications

As the provincial government prepares to re-introduce the PST, we expect more information to be released in the coming months. This is a good time to start considering the implications to your business and speaking with your tax service provider for planning opportunities.

 

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This publication is produced by Deloitte & Touche LLP as an information service to clients and friends of the firm, and is not intended to substitute for competent professional advice. No action should be initiated without consulting your professional advisors. Your use of this document is at your own risk.