Tax Harmonization: Frequently Asked Questions

What is a Harmonized Sales Tax?

Ontario plans a major tax reform that will combine both the provincial and federal sales tax on products and services. The combined tax of five per cent GST and eight per cent Ontario sales tax won't change the price on most items. But many items that used to be exempt from sales tax will no longer be so.

What is no longer PST exempt?

Consumers are most likely to notice an increase in the price of gasoline and heating fuels. Electricity will no longer be exempt from provincial sales tax, nor will tobacco, personal services like haircuts, membership fees for clubs and gyms, newspapers and magazines, taxi fares and the professional services of lawyers, architects and accountants. Real estate commissions will also be taxed.

Will anything remain exempt?

Not a lot. Children's clothing and footwear, children's car seats and car booster seats, books, diapers and feminine hygiene products will remain exempt from the provincial portion of the single sales tax.
Basic groceries, rent, condo fees, prescription drugs, and medical devices remain exempt from both PST and GST.
Purchase of resale homes will remain exempt from PST, although real estate transaction fees will be taxed.

Why is Ontario doing this?

The province says implementation of the single sales tax would bring Ontario into line with "what is viewed as the most efficient form of sales taxation around the world." The finance ministry says the single sales tax would reduce the cost of goods that Ontario exports, making the province more competitive and boosting a sector of the economy that has been particularly hard hit by the economic downturn.
At the moment, businesses may not deduct the PST from the cost of materials and other products they buy; instead, they pass the cost along to consumers. But under harmonization, businesses may claim tax credits for those purchases, which some estimates suggest could save them $3-billion a year.
The Ontario Chamber of Commerce believes a fully blended system would cost consumers approximately $905 million in additional sales taxes per year, while the GST and PST bill for companies would fall by $1.6 billion annually.
The Canadian Federation of Independent Businesses says harmonization will save business $100 million a year in reduced red tape.
Businesses will save a further $500-million a year on the costs of administering a single tax instead of two, according to the budget documents.

Are all businesses on side?

Contractors, developers and homebuilders oppose the blending. Ontario's Building Industry and Land Development Association estimates that a blended tax would add more than $46,000 to the price of a $580,000 new home in Toronto.

Will household expenses rise?

Yes, although the province says it will offer $10.6 billion worth of tax relief over the next three years:

• Cash payments of up to $1,000 for in 2010 and 2011 for families earning less than $160,000 a year.
• A new permanent $260 refundable sales tax credit for low to middle-income adults and children.
• An enhanced refundable property tax credit for low and middle-income homeowners and tenants.
• New homes under $400,000 would be exempt from the new blended tax.
• $1.1 billion in personal income tax cuts

So what's the problem?

The provincial NDP says the single sales tax would leave families "feeling the pinch" from having to spend more on a range of goods at a time that many are already struggling to deal with job losses.
The Conservatives, while ideologically in favour of harmonizing, say this is no time to be raising taxes.
The Ontario Real Estate Association says merging the taxes will add more than $2,000 to the cost of a real estate transaction, hurting the resale home market and prolonging the housing industry's recovery from the economic doldrums.

Is Ontario alone in this?

All the Atlantic provinces except Prince Edward Island have a harmonized sales tax.

When does the new tax begin?

July 1, 2010.


Read more: http://www.cbc.ca/money/story/2009/03/27/f-tax-faq.html#ixzz0mzrQOPxJ

How condo owners can claim the Home Renovation Tax Credit

If the term "Home Renovation Tax Credit" brings to mind images of detached houses in the suburbs and not units in sky-high buildings, you're not alone. Many condo owners are paying little attention to the credit when they could be reaping the benefits.

In fact, there are many opportunities for condo owners to claim the credit, including some outside of their own units.

Condo owners can claim a portion of improvements made to their building between Jan. 27, 2009 and Feb. 1, 2010, as long as they were at least partially responsible for paying for the upgrades.


Here's how it works:
Assuming each condo owner pays a monthly fee to a condo corporation, repairs or renovations completed and paid for with that money should count toward the HRTC. The condo corporation is simply paying for these goods and services on behalf of all of the unit owners.
Condo corporations are unable to claim the credit because it is available only to individuals, so it's up to each person to claim his or her portion.

Therefore, on their 2009 taxes, condo owners can claim the credit for renovations to their own unit – similar to what would be done in a detached home, for example – as well as their share of any renovations to common areas paid for by the condo corporation.
This could include anything from new windows installed in your building to a redesigned lobby area or improved landscaping.

Add these shared costs with renovations you may have done to your individual unit (bathroom or kitchen upgrades, new fixtures, painting) and you could significantly increase your credit.
Canada Revenue Agency guidelines for condo owners indicate that improvements made to common areas will qualify if:

– You own your unit. Renters are out of luck, even if they pay similar monthly fees.
– "The expenses would be eligible expenses if the common areas were treated as an eligible dwelling" – if new furniture wouldn't count in a detached home, it won't count in a condo either.
– Your condo corporation has notified you of your share of the expenses.
As a reminder, the tax credit applies to renovation costs over $1,000 and under $10,000, so if you spent a few hundred dollars on your own unit and the condo corporation spent a few hundred more on your behalf, that may be the difference between getting a return or not.

What you'll need to make the claim:
Since you're not dealing directly with stores or contractors and won't receive original receipts or invoices, in order to claim your portion of building renovations you need documentation from your condo corporation. This can be in the form of a letter and must be signed.
Most condo corporations have a set of guidelines that help them determine the allocation of expenses for common areas. It is this documentation that will guide them in establishing each condo owner's contributions to renovations and therefore how much people can claim.
According to Canada Revenue Agency, the documentation "must clearly identify the type and quantity of goods purchased or services provided" and also include the following:
– The cost of the renovations
– Your portion of the expenses (exactly how much you are considered to have contributed)
– Contact information for the vendor or contractor (including GST/HST number, if applicable)
– A description of the work in question
– The date or dates the work was completed.
If you do not receive documentation for improvements to your building, it is worth asking about. It could mean a few more dollars in your pocket!

Having a green home provides savings and peace-of-mind

When it comes to character, you just can’t beat the charm of an older home. Newly constructed homes however, come with their own unique assets, one of the most noteworthy of which is energy efficiency.

From the roof to the foundation, a number of innovative building practices often go into constructing today’s greenest homes.

Roof shingles for example, are now available in recycled materials. Environmentally friendly spray foam insulation, which can help prevent dampness, keep out pollutants and contribute to structural strength, is even partially made with recycled materials.

Roofs, walls and floors can be insulated as well with special structural panels that consist of two layers of board with insulating foam in between them. The forms that are used to mould a home’s poured concrete foundation can now also be found with insulating ability, and barriers that prevent dampness from rising into the foundation can be used at this stage of construction as well. Even exterior cladding is now insulated to offer greater energy efficiency.

If you prefer an older home though, there are many simple ways to make it more energy efficient and environmentally friendly.

Start with an Energy Star programmable thermostat that will save on heating and cooling costs when you’re not home. You can take this approach a step further by investing in a new high efficiency furnace or air conditioner. Adding insulation to the attic of your home will offer reduced energy costs for years to come as well.

A tank-less water heater will also save on energy costs by providing only the amount of heated water that you need rather than maintaining it in a cylinder.

Even making minor changes can have an impact, like choosing energy efficient light bulbs - Compact Fluorescent Lamps (CFLs) are good and Light Emitting Diodes (LEDs) are even better.

If you’re planning to make cosmetic changes to your home you can do your part for the environment by choosing wood flooring, and even carpet, made with recycled content. Look for low VOC paints and stains as well, which reduce the number of unstable, carbon-containing compounds that enter the air and react with other elements.

In the bathroom, you can keep more money in your pocket by installing low-flow faucets, showerheads and toilets.

Replacing old windows with low-E argon-filled units that have the Energy Star symbol can make a dramatic difference to your home’s energy efficiency as well.

Changing your old appliances with new Energy Star machines is also a great way to reduce energy consumption while enhancing the overall appeal of your home.

Beyond enjoying the aesthetics, cost savings and fulfillment associated with helping the environment, you can also consider getting an energy audit to take full advantage of a number of government rebates for energy-saving home improvements..

Regardless of the approach you choose, remember that nothing can substitute for good-old fashioned conservation. Remember that the energy you save today may well be the energy that is needed tomorrow.

HST Transition Rules

The provincial government has provided rules/guidance on how it will transition to the implementation of the proposed Harmonized Sales Tax.

• The HST is NOT YET IN EFFECT. The HST will come into effect beginning on July 1, 2010; however, note transition rules below.
• HST will not apply on the purchase price of re-sale homes.
• HST would apply to services such as moving cost, legal fees, home inspection fees, and REALTOR® commissions.
• HST will apply to the purchase price of newly constructed homes. However, the Province is proposing a rebate so that new homes across all price ranges would receive a 75 per cent rebate of the provincial portion of the single sales tax on the first $400,000. For new homes under $400,000, this would mean, on average, no additional tax amount compared to the current system. 

Transitional Rules for New Housing

• Generally, sales of new homes under written agreements of purchase and sale entered into on or before June 18, 2009 would not be subject to the provincial portion of the single sales tax, even if both ownership and possession are transferred on or after July 1, 2010.
• The tax would also not apply to sales of new homes under written agreements of purchase and sale entered into after June 18, 2009 where ownership or possession is transferred before July 1, 2010.

Additional Transitional Rules

• Where services straddle the HST implementation date of July 1, 2010, the tax charged for the service may have to be split between the pre-July 2010 and post-June 2010 periods. However, the HST will generally not apply to a service if all or substantially all (90% or more) of the service is performed before July 2010.
• Four key timelines are important (see below). All are based on the earlier of the time the consideration is either due (In general, an amount is due on the date of the invoice or the day required to be paid pursuant to a written agreement), or is paid without having become due. If consideration is due or paid,

• Before October 15, 2009, HST will generally not apply (however, see above transition rules for new housing).
• From October 15, 2009 to April 30, 2010, certain business that are not entitled to recover all of their GST/HST paid as input tax credit may be required to self-assess the provincial component of the HST with respect to goods or services supplied after June 30, 2010.
• From May 1, 2010 to June 30, 2010, HST will generally apply for services supplied after June 30, 2010.
• After June 30, 2010, HST will generally apply. An exception to this rule would be where ownership of the property is transferred before July 2010 or the invoice relates to services provided before July 2010. 

• With regard to the lease or license of goods, including non-residential real property, HST will generally apply to lease intervals or payment periods on or after July 1, 2010 and the general rules noted above will apply. However, where a lease interval begins before July 2010 and ends before July 31, 2010, it is not subject to HST.
• With regard to the sale of non-residential property, HST is due where both possession and ownership of non-residential property occurs on or after July 1, 2010.

More Detail

Additional detail on the transition rules is available at the provincial government web site here or by calling the provincial government enquiry line at 1-800-337-7222.