EXTRA Vol. 144, No. 4

Canada Gazette

Part II

OTTAWA, WEDNESDAY, JUNE 30, 2010

Registration
SOR/2010-150 June 17, 2010

EXCISE TAX ACT

Electronic Filing and Provision of Information (GST/HST) Regulations

P.C. 2010-789 June 17, 2010

Her Excellency the Governor General in Council, on the recommendation of the Minister of Finance, pursuant to sections 277 (see footnote a) and 277.1 (see footnote b) of the Excise Tax Act (see footnote c), hereby makes the annexed Electronic Filing and Provision of Information (GST/HST) Regulations.

ELECTRONIC FILING AND PROVISION OF INFORMATION (GST/HST) REGULATIONS

INTERPRETATION

Definitions

1. The following definitions apply in these Regulations.

“Act”
« Loi »

“Act” means the Excise Tax Act.

“qualifying housing supply”
« fourniture d’habitation admissible »

“qualifying housing supply” means a supply of a residential complex

(a) in respect of which no tax is payable under subsection 165(2) of the Act as a consequence of subsection 51(1) or (2), 52(1) or (2) or 53(1) or (2) of the New Harmonized Value-added Tax System Regulations, No. 2; or

(b) in respect of which section 2 of the Nova Scotia HST Regulations, 2010 does not apply as a consequence of paragraph 19(3)(h) or (i) of those Regulations.

“specified housing supply”
« fourniture d’habitation déterminée »

“specified housing supply” means a qualifying housing supply in respect of which no rebate is payable under subsection 254(2) or 254.1(2) or section 256.2 of the Act.

“specified return”
« déclaration déterminée »

“specified return” means a return prescribed by section 4.

“transitional new housing rebate”
« remboursement transitoire pour habitation neuve »

“transitional new housing rebate” means a rebate under subsection 256.21(1) of the Act, the amount of which is determined under Division 4 of Part 9 of the New Harmonized Value-added Tax System Regulations, No. 2.

ELECTRONIC FILING

Prescribed person

2. For the purposes of subsection 278.1(2.1) of the Act, a person (other than a selected listed financial institution) that is a registrant is a prescribed person in respect of a reporting period of the person that is in a fiscal year of the person if

(a) the person is not a charity and the threshold amount of the person for the fiscal year, as determined under subsection 249(1) of the Act, exceeds $1,500,000;

(b) the person is a large business (as defined in subsection 236.01(1) of the Act) at any time in the reporting period or in a preceding reporting period of the person in the fiscal year;

(c) the person is a builder that

(i) makes a specified housing supply in respect of which tax under subsection 165(1) of the Act becomes payable at any time in the reporting period,

(ii) where the person is the recipient of a supply of a residential complex that is a qualifying housing supply, makes a supply of the residential complex in respect of which tax under subsection 165(2) of the Act becomes payable at any time in the reporting period, or

(iii) is deemed, for the purposes of the Act, to have collected, at any time in the reporting period, tax as a consequence of paragraph 51(1)(e), 52(1)(e) or 53(1)(e) of the New Harmonized Value-added Tax System Regulations, No. 2; or

(d) the person is a builder that claims, in accordance with subsection 228(6) of the Act, a transitional new housing rebate in a return under Division V of Part IX of the Act for the reporting period.

PENALTIES

Failure to file as required

3. For the purposes of section 280.11 of the Act, the amount of a penalty to which a person is liable for failing to file a return is

(a) for the first failure by the person, $100; and

(b) for each subsequent failure by the person, $250.

Prescribed return

4. For the purposes of section 284.01 of the Act, a prescribed return for a reporting period of a person is a return for the reporting period that is required to be filed by way of electronic filing in accordance with subsection 278.1(2.1) of the Act.

Recaptured input tax credits — addition

5. (1) For the purposes of this section, if, under subsection 236.01(2) of the Act, a person is required, in determining its net tax for a reporting period of the person, to add all or part of a specified provincial input tax credit (as defined in subsection 236.01(1) of the Act) of the person in respect of property or a service,

(a) the total of all such amounts that are reasonably attributable to property acquired in, or brought into, Ontario or that relate to a service acquired for consumption or use in Ontario is a specified amount in respect of a specified return for the reporting period; and

(b) the total of all such amounts that are reasonably attributable to property acquired in, or brought into, British Columbia or that relate to a service acquired for consumption or use in British Columbia is a specified amount in respect of a specified return for the reporting period.

Recaptured input tax credits — deduction

(2) For the purposes of this section, if, under subsection 236.01(3) of the Act, a person is permitted, in determining its net tax for a reporting period of the person, to deduct all or part of a specified provincial input tax credit (as defined in subsection 236.01(1) of the Act) of the person in respect of property or a service,

(a) the total of all such amounts that are reasonably attributable to property acquired in, or brought into, Ontario or that relate to a service acquired for consumption or use in Ontario is a specified amount in respect of a specified return for the reporting period; and

(b) the total of all such amounts that are reasonably attributable to property acquired in, or brought into, British Columbia or that relate to a service acquired for consumption or use in British Columbia is a specified amount in respect of a specified return for the reporting period.

Prescribed amounts

(3) For the purposes of section 284.01 of the Act, the following amounts are prescribed amounts in respect of a specified return for a reporting period of a person:

(a) the positive or negative amount determined by the formula

A - B

where

A is the specified amount referred to in paragraph 5(1)(a) in respect of the specified return for the reporting period, and

B is the specified amount referred to in paragraph 5(2)(a) in respect of the specified return for the reporting period; and

(b) the positive or negative amount determined by the formula

A - B

where

A is the specified amount referred to in paragraph 5(1)(b) in respect of the specified return for the reporting period, and

B is the specified amount referred to in paragraph 5(2)(b) in respect of the specified return for the reporting period.

Transitional tax adjustment

6. If a builder is deemed, for the purposes of the Act, to have collected, as a consequence of paragraph 51(1)(e), 52(1)(e) or 53(1)(e) of the New Harmonized Value-added Tax System Regulations, No. 2, amounts of tax in a reporting period of the builder, for the purposes of section 284.01 of the Act, the total of those amounts of tax in respect of Ontario and the total of those amounts of tax in respect of British Columbia are prescribed amounts in respect of a specified return for the reporting period.

Penalty amount — sections 5 and 6

7. The penalty under section 284.01 of the Act in respect of a particular amount that is in respect of a specified return for a particular reporting period of a person and that is prescribed, for the purposes of that section, by subsection 5(3) or section 6 is equal to the sum of

(a) an amount (in this section referred to as the “base penalty”) equal to 5% of the amount determined by the formula

A - B

where

A is the particular amount, and

B is

(i) if the person failed to report the particular amount as and when required, zero, or

(ii) if the person misstated the particular amount, the amount reported by the person in the specified return; and

(b) the amount obtained when one-fifth of the base penalty is multiplied by the number of complete months, not exceeding five, that are included in the period that begins on the day on or before which the specified return was required to be filed and that ends on the earlier of

(i) the day on which the person reports the particular amount and identifies the particular reporting period to the Minister in writing or in any other manner satisfactory to the Minister, and

(ii) the day on which the Minister sends a notice of assessment that includes an assessment of the net tax for the particular reporting period taking into account that the person failed to report, or misstated, the particular amount.

Sales of specified housing — consideration

8. If a builder makes specified housing supplies in respect of which tax under subsection 165(1) of the Act becomes payable at any time in a reporting period of the builder, for the purposes of section 284.01 of the Act, the total of all consideration for those specified housing supplies made in Ontario, the total of all consideration for those specified housing supplies made in Nova Scotia and the total of all consideration for those specified housing supplies made in British Columbia are prescribed amounts in respect of a specified return for the reporting period.

Sales of formerly qualifying housing — Ontario and British Columbia

9. If a builder is the recipient of supplies of residential complexes that are qualifying housing supplies made in Ontario or British Columbia and the builder makes other subsequent supplies of the residential complexes in Ontario or British Columbia in respect of which tax under subsection 165(2) of the Act becomes payable at any time in a reporting period of the builder, for the purposes of section 284.01 of the Act, the total of all consideration for those qualifying housing supplies made in Ontario and the total of all consideration for those qualifying housing supplies made in British Columbia are prescribed amounts in respect of a specified return for the reporting period.

Sales of formerly qualifying housing — Nova Scotia

10. If a builder is the recipient of supplies of residential complexes that are qualifying housing supplies made in Nova Scotia and either the builder makes other subsequent supplies (other than qualifying housing supplies) of the residential complexes in Nova Scotia in respect of which tax under subsection 165(2) of the Act becomes payable at any time in a reporting period of the builder or the builder is, at any time in the reporting period, deemed under subsection 191(1) of the Act to have made taxable supplies (other than qualifying housing supplies) by way of sale of the residential complexes and to have collected tax payable under subsection 165(2) of the Act in respect of those taxable supplies, for the purposes of section 284.01 of the Act, the total of all consideration for those qualifying housing supplies is a prescribed amount in respect of a specified return for the reporting period.

Penalty amount — sections 8 to 10

11. The penalty under section 284.01 of the Act in respect of a particular amount that is in respect of a specified return for a particular reporting period of a person and that is prescribed, for the purposes of that section, by any of sections 8 to 10 is equal to the sum of

(a) an amount (in this section referred to as the “base penalty”) equal to 5% of the absolute value of the positive or negative amount determined by the formula

A - B

where

A is the particular amount, and

B is

(i) if the person failed to report the particular amount as and when required, zero, or

(ii) if the person misstated the particular amount, the amount reported by the person in the specified return; and

(b) the amount obtained when one-fifth of the base penalty is multiplied by the number of complete months, not exceeding five, that are included in the period that begins on the day on or before which the specified return was required to be filed and that ends on the earlier of

(i) the day on which the person reports the particular amount and identifies the particular reporting period to the Minister in writing or in any other manner satisfactory to the Minister, and

(ii) the day on which the Minister sends a notice of assessment that includes an assessment of the net tax for the particular reporting period taking into account that the person failed to report, or misstated, the particular amount.

Number of housing units

12. If a person is required to report an amount determined under any of sections 8 to 10 in respect of residential complexes in a specified return for a reporting period of the person, for the purposes of section 284.01 of the Act, the number (in these Regulations referred to as the “specified number”) of residential complexes that are supplied by the person in the reporting period in each of Ontario, Nova Scotia and British Columbia and in respect of which the amount is determined under any of those sections is prescribed information.

Penalty amount — section 12

13. The penalty under section 284.01 of the Act in respect of a specified number that is prescribed, for the purposes of that section, by section 12 is equal to $250 multiplied by the difference between the specified number and

(a) if the person failed to provide the specified number as and when required, zero; or

(b) if the person misstated the specified number, the number reported by the person in the specified return.

New housing rebates

14. For the purposes of section 284.01 of the Act, the particular amount that is the total of all amounts each of which is an amount on account of rebates in respect of residential complexes that a person deducts, in accordance with subsection 234(1) of the Act, in determining the net tax of the person for a reporting period of the person whether or not the requirement to transmit documentation that applies in respect of that deduction has been met is a prescribed amount in respect of a specified return for the reporting period.

Penalty amount — section 14

15. The penalty under section 284.01 of the Act in respect of the particular amount that is in respect of a specified return for a particular reporting period of a person and that is prescribed, for the purposes of that section, by section 14 is, if the person failed to report the particular amount as and when required, equal to

(a) if the person does not transmit, in accordance with subsection 254(5), 254.1(5) or 256.21(4) of the Act, as the case requires, any of the applications referred to in subsection 234(1) of the Act in respect of the rebates to the Minister, the total of

(i) an amount (in this section referred to as the “base penalty”) equal to 5% of the particular amount, and

(ii) the amount obtained when one-fifth of the base penalty is multiplied by the number of complete months, not exceeding five, that are included in the period that begins on the day on or before which the specified return was required to be filed and that ends on the earlier of

(A) the day on which an application for any of the rebates is transmitted to the Minister in accordance with the applicable subsection of the Act, or

(B) the day on which the Minister sends a notice of assessment that includes an assessment of the net tax for the reporting period taking into account that the person failed to report the particular amount; and

(b) in any other case, $250.

Transitional new housing rebates

16. For the purposes of section 284.01 of the Act, if a person claims, in accordance with subsection 228(6) of the Act, an amount in respect of a transitional new housing rebate that is assigned to the person or to which the person is entitled in a specified return for a reporting period of the person, that amount is a prescribed amount and, if the person reports that amount as a deduction in determining the net tax of the person for the reporting period and as a consequence of that reporting fails to report that amount as required, the penalty under section 284.01 of the Act in respect of that prescribed amount is $250.

APPLICATION

17. Sections 1 to 16 apply in respect of any reporting period of a person that ends on or after July 1, 2010, except that no person is liable to a penalty the amount of which is determined under these Regulations in respect of a specified return for that reporting period that is filed before the day that is the later of July 1, 2010 and the day on which these Regulations are first published in the Canada Gazette.

REGULATORY IMPACT
ANALYSIS STATEMENT

(This statement is not part of the Regulations.)

Issue and objectives

On January 4, 2010, the Government of Canada announced, by way of a Canada Revenue Agency (CRA) news release, new electronic filing and reporting requirements for certain Goods and Services Tax / Harmonized Sales Tax (GST/HST) registrants under the Excise Tax Act (ETA). Details regarding the implementation of the mandatory electronic filing and reporting requirements for these GST/HST registrants were also released at that time.

The new electronic filing and reporting requirements, which are to become effective on July 1, 2010, aim to capture the GST/HST information required for the proper allocation of HST revenues among the participating provinces and the federal government as well as to facilitate CRA’s administration of the new harmonized value-added tax system under the ETA. The new rules are also aimed to accommodate province-specific policy flexibilities permitted under the new harmonized value-added tax system, such as elements relating to the recapture of the provincial portion of certain input tax credits of large businesses and of financial institutions.

The Electronic Filing and Provision of Information (GST/HST) Regulations (the Regulations) formalize and give legal force to the previously announced electronic filing and reporting requirements as well as the penalties resulting from non-compliance with these requirements.

Description and rationale

With the passage of the Provincial Choice Tax Framework Act on December 15, 2009, Parliament has approved the application on July 1, 2010 of mandatory filing of GST/HST returns under the ETA by electronic transmission for certain registrants and penalties for failing to file by electronic transmission or failing to report certain amounts specified by way of regulation. The specified amounts include amounts relating to recaptured input tax credits on the provincial component of the HST and information related to transitional housing measures in Ontario and British Columbia.

There are two components to the Regulations:

1. There are rules setting out which persons are required to file a GST/HST return by electronic transmission in a manner specified by the Minister of National Revenue. In general, these persons include

• GST/HST registrants (other than charities) with greater than $1.5 million in annual taxable supplies;
• all GST/HST registrants that are required to recapture input tax credits for the provincial portion of the HST on certain inputs in Ontario and British Columbia; and
• builders that are affected by the transitional housing measures announced by Ontario or British Columbia and certain builders in Nova Scotia relating to agreements for sales of housing closed on or after July 1, 2010 that are subject to the pre-July 1, 2010 rate of the provincial component of the HST in Nova Scotia.

2. Additional rules indicate the penalty amounts for the persons subject to the mandatory electronic filing and reporting requirements who fail to file a return in the appropriate manner outlined in the Regulations or who fail to provide, or who misstate, information that is required to be provided in accordance with the Regulations. The penalties are structured similarly to existing penalties under the ETA and the Income Tax Act.

The Regulations also provide rules and enforcement mechanisms to ensure that sufficient and accurate information is provided by the GST/HST registrants to enable the government to administer the GST/HST and to allocate revenues between the federal government and the participating provinces under the HST. At the time of making the Regulations, these participating provinces are Ontario, Nova Scotia, New Brunswick, British Columbia as well as Newfoundland and Labrador. The participating provinces under the HST could, in the future, include any other province that chooses to join the new value-added tax system under the ETA by signing a sales tax harmonization agreement with the Government of Canada. The Regulations provide further details regarding which registrants are required to file electronically and regarding the penalties that will apply for non-compliance.

Consultation

The CRA was consulted in the development of the Regulations. Mandatory electronic filing and the authority to impose penalties was first legislated, on December 15, 2009, as part of the Provincial Choice Tax Framework Act and was also announced in a CRA news release on mandatory electronic filing on January 4, 2010.

Contacts

Mark Walsh
Sales Tax Division
Department of Finance
L’Esplanade Laurier
140 O’Connor Street
Ottawa, Ontario
K1A 0G5
Telephone: 613-992-6397

Costa Dimitrakopoulos
Excise and GST/HST Rulings Directorate
Canada Revenue Agency
Place de Ville, Tower A, 15th Floor
Ottawa, Ontario
K1A 0L5
Telephone: 613-952-9205

Footnote a
S.C. 1993, c. 27, ss. 125(1)

Footnote b
S.C. 2009, c. 32, ss. 37(1)

Footnote c
R.S., c. E-15

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