Chartered Professional Accountants

2016 Federal Budget Highlights – Changes to GST/HST

Here is a highlight of items proposed changes for Changes to GST/HST:

Health Measures
Zero-Rated Medical Devices
Budget 2016 proposes to add insulin pens, insulin pen needles, and intermittent urinary catheters to the list of zero-rated medical devices. This measure will, with certain exceptions, apply to supplies made after Budget Day

Purely Cosmetic Procedures
Budget 2016 proposes to clarify that the GST/HST generally applies to supplies of purely cosmetic procedures provided by all suppliers, including registered charities. This clarification will apply to supplies made after Budget Day.

Exported Call Centre Services
Zero-rated supplies do not attract GST/HST but related input tax credits can be claimed. Budget 2016 proposes to modify the zero-rating rules for certain exported supplies of call centre services. Specifically, rendering technical or customer support to individuals by means of telecommunications (e.g., by telephone, email or web chat) will be zero-rated for GST/HST purposes only if:

  •  the service is supplied to a non-resident person that is not registered for GST/HST purposes; and,
  •  it can reasonably be expected at the time the supply is made that the technical or customer support is to be rendered primarily to individuals who are outside Canada at the time the support is rendered to those individuals.

This measure will apply to supplies made after Budget Day, and in certain cases, prior to Budget Day.

GST/HST on Donations to Charities
Budget 2016 proposes a relieving change when a charity supplies property or services in exchange for a donation, and an income tax receipt is issued for a portion of the donation. Under the proposal, only the value of the property or services supplied will be subject to GST/HST, ensuring that the portion of the donation in excess of the value of the property or services is not subject to the GST/HST. The proposal will apply to supplies that are not already exempt from GST/HST, and will apply to supplies made after Budget Day.

Where a charity did not collect GST/HST on the full value of donations made in exchange for an inducement, for supplies made between December 21, 2002 (when the income tax split-receipting rules came into effect) and Budget Day, transitional relief will be provided.

Closely Related Test
Special relieving rules allow the members of a group of closely related corporations or partnerships to neither charge nor collect GST/HST on certain intercompany supplies. To qualify for these relieving rules, each member of this group must, among other requirements, be considered to be closely related to each other member of the group.

Budget 2016 proposes to require that, in addition to meeting the conditions of the current test, a corporation or partnership must also hold and control 90 per cent or more of the votes in respect of every corporate matter of the subsidiary corporation (with limited exceptions) in order to be considered closely related.

This measure will generally apply as of the day that is one year after Budget Day.

Collection Provisions
Budget 2016 proposes to give the Minister of National Revenue the authority to require security for payment of assessed amounts and penalties in excess of $10 million that are not otherwise collected under the Excise Act, 2001. This measure will apply to amounts assessed and penalties after the day of Royal Assent to the enacting legislation.

If you want to know how the changes may affect you or your corporation, please contact our office to speak with one of our professionals today.

The preceding information is for educational purposes only. As it is impossible to include all situations, circumstances and exceptions in a post such as this, a further review should be done by a qualified professional.

No individual or organization involved in either the preparation or distribution of this post accepts any contractual, tortious, or any other form of liability for its contents or for any consequences arising from its use.



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