Phasing Out of Input Tax Credits Recapture in Ontario as of July 1, 2017
Since the HST came into effect in Ontario in 2010, large businesses have been subject to the temporary recapture requirement—i.e., reversal—of the 8% provincial component of the HST of the eligible input tax credits (ITCs), with respect to certain goods and services such as motor vehicles, fuel used in those motor vehicles, electricity, gas, steam, some telecommunications services and meals and entertainment.
A person is generally considered to be a “large business” during a particular recapture period if the person is a GST/HST registrant with taxable sales (including those of associated persons) in excess of $10 million, a specified financial institution or a person related to a specified financial institution.
The recapture has been phased out gradually since July 1, 2015, and has been at 25% since July 1, 2017. In other words, large businesses can be refunded for a net 75% of the provincial component of the HST with regard to the goods and services listed above.
Phasing Out of Recaptured Input Tax Credits in Ontario as of July 1, 2018
As of July 1, 2018, large businesses will no longer be subject to the recapture of the 8% provincial component of the HST of ITCs. They will be able to claim a full refund of ITCs with regard to the goods and services currently covered by the restriction.
More information is available in the Canada Revenue Agency Guide at: https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/gi-171-phasing-recaptured-input-tax-credits-ontario.html
Phasing Out of Input Tax Refund (“ITR”) Restrictions for Large Businesses in Quebec
In Quebec, the goods and services covered by the Ontario restriction described above do not entitle large businesses to refunds.
The Quebec government confirmed in its most recent budget that, as of January 1, 2018, large businesses will be able to claim ITCs on the QST paid for such goods and services at the rate of 25%. The recapture rate will go up to 50% in 2019 and 75% in 2020. As of January 1, 2021, large businesses will no longer be subject to the restrictions.
See pages A.80 and A.81 of the Additional Information 2015-2016 document at: http://www.budget.finances.gouv.qc.ca/budget/2015-2016/en/documents/AdditionalInfo.pdf
Attestation for builders
The Revenu Québec Attestation is a document produced by Revenu Québec confirming that a business meets the following conditions: it has filed the returns and reports required under Quebec tax laws, and it does not have any overdue account with the Minister of Revenue of Québec.
The Attestation is required for certain construction contracts, certain placement and temporary help and certain public contracts.
Revenu Québec now offers online renewal of its Attestations through a service called “Sign up for Attestation de Revenu Québec Renewal” in clicSÉQUR – Entreprise. Revenu Québec will automatically deposit a new Attestation in the company’s file a few days before the end of the validity period entered on its previous valid Attestation. Companies need to have at least one valid existing Attestation to sign up for the service.
You can consult the Revenu Québec website for more details at: http://www.revenuquebec.ca/en/amr/comment.aspx
Economic nexus – United States
Non-resident businesses in the United States may be obliged to register for U.S. sales taxes in some states and under some circumstances.
The U.S. Supreme Court has determined that a business must have more than a minimal physical presence (“de minimis”) in a state before that state can require the business to register and collect state sales tax (such minimal presence is known as a “nexus”).
Several states, including Alabama, Minnesota, Vermont, South Dakota, Tennessee (Hi P.K. !) and Wyoming have tried to enlarge the notion of nexus for sales tax purposes by arguing that an “economic nexus” would create a sales tax nexus; this would bypass the requirement for a physical presence.
That has generated some new criteria for determining whether a business has a sales tax nexus in certain states. The criteria are based on total annual sales to consumers or the number of sales to consumers.
If your company is making sales in any of those states you should consult your U.S. sales tax consultant to see whether you have obligations under laws or regulations in those states.
Reminder - Elections under s. 156 of the Excise Tax Act (ETA) and s. 334 of the Act respecting the Québec sales tax (AQST)
Subsection 156(2) of the ETA and section 334 of the AQST allow closely related entities to make a joint election to eliminate the obligation of collecting and remitting GST/HST/QST on certain taxable supplies between them. Since such supplies are deemed to have been made for no consideration, no taxes are owing.
Since January 1, 2015, entities that make the election under ETA s. 156 and AQST s. 334 have to file Form FP-4616 to Revenu Québec (RQ) or Form RC-4616 to Canada Revenue Agency (CRA).
If the election is made after the deadline prescribed by law, CRA and RQ will not recognize the election. However, upon a written request, CRA or RQ might study the possibility of a late election or revocation filed pursuant to ETA subparagraph 156(4)(b)(ii) or AQST subparagraph 335.1 (2) (b).
More information is available in the Canada Revenue Agency Guide at: https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/p-255-late-filed-section-156-elections-revocations.html