GST/HST filers must electronically file July 1, 2010

The announcement by the CRA that businesses that fall over a threshold must electronically file their HST returns is a long time coming.  From the government’s perspective I can’t understand why they didn’t do this earlier in order to get their information and payments earlier similar to personal taxpayers e-filing their income tax returns.  The government told us they wanted individuals to e-file because it made things more productive and easier at CRA, so this seems like a natural progression.  I’m surprised though they didn’t make it mandatory for all businesses because it would actually probably reduce their collections for late filers of GST/HST.

For GST & HST registrants with $1.5 million total supplies purchased for a fiscal year you will be required to electronically file their GST/HST returns.  The exception to this rule would be charitable organizations.

Currently there are 5 methods of filing a GST / HST return:

1. Electronically (netfile)
2. Telephone (telefile)
3. Paper
4. Electronica data interchange (EDI)
5. Internet file transfer

Another major exception will be for builders in Ontario and BC which currently provide a GST rebate or credit paid by home purchasers will have to Telefile or Netfile.

If you want to amend a prior GST / HST return you must do so in writing to CRA.

Penalties from CRA will apply if you’re supposed to electronically file your return.  The exact amount of penalties has yet to be determined.

If you currently aren’t filing electronically your return you can do so July 1, 2010 if you choose.

For Ontario and BC registrants you must Netfile your returns if the following apply:

• Registrants that are required to recapture the input tax credit (ITC) from the provincial portion of the HST.
• Builders who must report transitional housing information (transitional tax adjustment or transitional new housing rebate)
• Builders who have a “grandfathered clause” where they made new home sales and the home buyer cannot claim the GST / HST rebate

What Registrants have to Recapture ITC’s?

For the first five years after the implementation of the HST, organizations in BC and Ontario who have greater than $10 million taxable sales and /or financial institutions will not be able to claim ITC’s on the provincial portion ie. BC 7% for certain supplies such as:

1. Telecommunication services, except toll free numbers and internet access
2. Energy ie. (Natural gas, electricity) except if you’re a farm or the energy is used to manufacture goods for resale.
3. Road vehicles weighing less than 3,000 kg
4. Food, beverages, and entertainment.

After the 5 year period, full ITC’s will be able to be claimed over a 3 year phase in period.

Businesses will have to report Recaptured ITC’s as a Result on the HST form

More policies is a result of these exceptions and phase in periods which businesses small and large need to pay attention to when July 1st comes along.

Links:

CRA News Release: http://www.cra-arc.gc.ca/nwsrm/rlss/2010/m01/nr100104b-eng.html

Simply Accounting: http://www.simplyaccounting.com/community/forums/t/7306.aspx

Quickbooks 2010: http://quickbooks.intuit.ca/accounting-software/2010-quickbooks-features.jsp

CRA: GST/HST Administration Checklist: http://www.cra-arc.gc.ca/E/pub/tg/rc4346/rc4346-09e.pdf

Deloitte: New Housing Rebates & Transition rules: http://www.deloitte.com/assets/Dcom-Canada/Local%20Assets/Documents/Tax/EN/ca_en_tax_BCHST_NewHousingRebate_TransitionalRules120909.pdf

Written by Richard Wong, CMA                            Email: rwong@firstchoicecapital.ca