Vol. 142, No. 16 — August 6, 2008

Registration

SOR/2008-238 July 28, 2008

EXCISE TAX ACT

Regulations Amending the Selected Listed Financial Institutions Attribution Method (GST/HST) Regulations

P.C. 2008-1350 July 28, 2008

Her Excellency the Governor General in Council, on the recommendation of the Minister of Finance, pursuant to subsection 225.2(2) (see footnote a) and section 277 (see footnote b) of the Excise Tax Act, hereby makes the annexed Regulations Amending the Selected Listed Financial Institutions Attribution Method (GST/HST) Regulations.

REGULATIONS AMENDING THE SELECTED LISTED FINANCIAL INSTITUTIONS ATTRIBUTION METHOD (GST/HST) REGULATIONS

AMENDMENTS

1. (1) The formula in subparagraph (v) of the description of G₁ in paragraph 15(a) of the Selected Listed Financial Institutions Attribution Method (GST/HST) Regulations (see footnote 1) is replaced by the following:

[A/(106 + A)] × B

(2) The formula in subparagraph (v) of the description of G₁ in paragraph 15(a) of the Regulations as enacted by subsection (1) is replaced by the following:

[A/(100 + A + B)] × C

(3) The description of B in subparagraph (v) of the description of G₁ in paragraph 15(a) of the Regulations is replaced by the following:

B is the rate set out in subsection 165(1) of the Act, and

C is the amount of the rebate,

(4) The formula in subparagraph (v) of the description of G₂ in paragraph 15(a) of the Regulations is replaced by the following:

[6/(106 + A)] × B

(5) The formula in subparagraph (v) of the description of G₂ in paragraph 15(a) of the Regulations as enacted by subsection (4) is replaced by the following:

[A/(100 + A + B)] × C

(6) The descriptions of A and B in subparagraph (v) of the description of G₂ in paragraph 15(a) of the Regulations are replaced by the following:

A is the rate set out in subsection 165(1) of the Act,

B is

(A) if tax under subsection 165(2) of the Act was payable in respect of the supply to the financial institution of the property or service in respect of which the rebate is paid, the tax rate for the participating province in which the supply was made, and

(B) in any other case, zero, and

C is the amount of the rebate,

(7) The description of G₆ in paragraph 15(a) of the Regulations is replaced by the following:

G₆ is 6 percent; and

(8) The description of G₆ in paragraph 15(a) of the Regulations as enacted by subsection (7) is replaced by the following:

G₆ is the rate set out in subsection 165(1) of the Act; and

(9) The description of G₁₁ in paragraph 15(b) of the Regulations is replaced by the following:

G₁₁ is 6 percent, and

(10) The description of G₁₁ in paragraph 15(b) of the Regulations as enacted by subsection (9) is replaced by the following:

G₁₁ is the rate set out in subsection 165(1) of the Act, and

COMING INTO FORCE

2. Subsections 1(1), (4), (7) and (9) apply for the purpose of determining prescribed amounts in respect of a particular reporting period of a selected listed financial institution that ends on or after July 1, 2006.

3. Subsections 1(2), (3), (5), (6), (8) and (10) apply for the purpose of determining prescribed amounts in respect of a particular reporting period of a selected listed financial institution that ends on or after January 1, 2008.

REGULATORY IMPACT
ANALYSIS STATEMENT

(This statement is not part of the Regulations.)

Issue and objectives

On May 2, 2006 as part of Budget 2006, a one-percentage point reduction in the goods and services tax/harmonized sales tax (GST/HST) was announced. A second one-percentage point reduction in the GST/HST was announced on October 30, 2007 as part of the 2007 Economic Statement. These rate changes took effect on July 1, 2006 and January 1, 2008 respectively. As a result of these changes, amendments are required to update references made to the former GST/HST rates in the Selected Listed Financial Institutions Attribution Method (GST/HST) Regulations (the “Regulations”).

Description and rationale

The Regulations set out, among other things, special rules for determining amounts that a Selected Listed Financial Institution (an “SLFI”) must include in a special attribution method that serves as a proxy for the appropriate amount of the provincial component of the HST (i.e., the 8% component) that should be borne by the SLFI on property and services it consumes in its exempt activities.

SLFIs include, for example, banks, insurance companies and trust and loan companies that operate both within the participating provinces (Nova Scotia, New Brunswick and Newfoundland and Labrador) and within non-participating provinces. Under the special attribution method, SLFIs adjust their net tax otherwise determined under the general rules of the Excise Tax Act. The adjustments take into account the provincial component of the HST in respect of the SLFI’s purchases for use in activities carried out within and outside the participating provinces. The objective of these rules is to avoid the HST creating a bias in terms of where an SLFI sources its inputs.

In the absence of the special attribution method, an SLFI would be required to track the actual extent to which goods and services purchased by it outside the participating provinces were for use within those provinces and would have to self assess the 8% provincial component of the HST on the proportionate amount of its expenses on those items. Similarly, in the absence of the special net tax adjustments, an SLFI would have to track the actual extent to which goods and services purchased by it within the HST provinces were for use outside those provinces so as to claim reimbursement for a proportionate amount of the 8% component of the HST paid on those items.

The amendments to the Regulations are consequential to the two one-percentage point reductions in the GST and the federal component of the HST and update references made to the former rate of 7% in the Regulations to 6% for the purpose of determining prescribed amounts in respect of a reporting period of an SLFI ending on or after July 1, 2006 and to 5% for the purpose of determining prescribed amounts in respect of a reporting period of an SLFI ending on or after January 1, 2008.

Consultation

Interested parties have not raised any concerns since the announcements of the two rate reductions in respect of the proposed amendments to the Regulations.

Contact s

Robert Ives
Sales Tax Division
Department of Finance
L’Esplanade Laurier, 16th Floor
140 O’Connor Street
Ottawa, Ontario
K1A 0G5
Telephone: 613-943-0619

Financial Institutions Unit
Excise and GST/HST Rulings Directorate
Canada Revenue Agency
Place de Ville, 14th Floor
320 Queen Street
Ottawa, Ontario
K1A 0L5
Telephone: 613-952-9210

Footnote a
S.C. 2006, c. 4, s. 21(1)

Footnote b
S.C. 1993, c. 27, s. 125(1)

Footnote 1
SOR/2001-171

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