Canada: Prepare for HST changes in provinces, scheduled for 2016

Canada: Prepare for HST changes in provinces, 2016

Businesses across Canada need to consider how to implement the upcoming harmonized sales tax (HST) changes and to complete appropriate adjustments to their systems and processes. The upcoming HST changes will affect businesses located in the provinces of New Brunswick, Newfoundland and Labrador, Ontario and Prince Edward Island, as well as businesses that have activities in those provinces.

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Overview of HST changes

The following HST regimes in Canada will see significant changes in the coming months:  

  • New Brunswick plans to increase its HST to 15% (from 13%) effective 1 July 2016.
  • The province of Newfoundland and Labrador plans to increase its HST to 15% (from 13%) effective 1 July 2016, and reinstate a 15% retail sales tax on some insurance premiums.
  • Ontario will continue to phase out the recaptured input tax credit rules that apply to large businesses by reducing the recapture rate to 50% (from 75%) effective 1 July 2016.
  • Prince Edward Island plans to increase its HST to 15% (from 14%) effective 1 October 2016.

Businesses—including non-resident businesses—that are registered for GST purposes are also registered for HST purposes. As such, any of these businesses that make supplies in an HST province may be required to collect HST that applies for that province. Also, many large businesses across Canada incur expenses that are subject to the recapture input tax credit requirements. 

KPMG observation

It is important to prepare for these changes as soon as possible because GST/HST applies to most transactions, and errors in systems and processes can multiply quickly and become very expensive.

 

Read a May 2016 report [PDF 73 KB] prepared by the KPMG member firm in Canada: Upcoming HST Changes — Get Systems and Processes Ready

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