Self-Assessment of the HST on Supplies Brought Into a Participating Province

GST/HST Technical Information Bulletin B-079
February 28, 1997

This bulletin does not replace the law found in the Excise Tax Act and its Regulations. It is provided for your reference. As it may not completely address your particular operation, you may wish to refer to the Act or appropriate Regulation, or contact any Revenue Canada tax services office for additional information. If you are located in the province of Quebec, please contact the ministere du Revenu du Quebec (MRQ) for additional information.

This bulletin reflects amendments proposed to the Excise Tax Act contained in Bill C-70, which received third reading and was passed by the House of Commons on February 11, 1997. At the time of publication, Parliament has not enacted these proposed amendments. Any commentary in this bulletin should not be taken as a statement by the Department that such amendments will in fact be enacted into law in their current form.

Table of Contents

Introduction

This bulletin outlines how the Harmonized Sales Tax (HST) is applied to supplies made outside the participating provinces (Nova Scotia, New Brunswick and Newfoundland), and subsequently brought into a participating province. It explains the types of supplies that are subject to the provincial component of the HST. In this bulletin, the term “provincial component of the HST” means the provincial component of the HST that is imposed at the rate of 8%. The HST takes effect April 1, 1997.

Important terms used in this bulletin are as follows, and are found under subsection 123(1), new subsection 212.1(1) and new section 220.01 of the Excise Tax Act (the Act):

  • Tangible personal property also includes a mobile home that is not affixed to land and a floating home.
  • Commercial goods are goods that are for sale or for any other commercial, industrial, occupational, institutional or other like use.
  • Specified motor vehicles are defined in subsection 123(1) as vehicles that are, or that would be, if they were imported, classified under any of several tariff headings in Schedule I to the Customs Tariff. In general, these include almost all motor vehicles, other than racing cars classified under heading 87.03, and any prescribed motor vehicle.

For the purpose of applying the self-assessment rules, where a person brings property into a participating province on behalf of another person, new section 220.02 deems the person on whose behalf the property is brought into the participating province to be the person who brought the property into the province.

In addition, where a person brings tangible personal property from outside a participating province into a participating province en route to a destination outside a participating province, and the property is not stored in a participating province except for storage incidental to its transportation, new section 220.03 deems the person not to have brought the property into the province. In such cases, self-assessment of the provincial component of the HST is not required.

The self-assessment rules apply to supplies relating to the Nova Scotia and Newfoundland offshore areas only to the extent that they are for consumption, use or supply in the course of an offshore activity.

Self-Assessment rules for the HST

Supplies of tangible personal property, intangible personal property and services that are made outside a participating province and that are brought, or are caused to be brought, into a participating province from a non-participating province may be subject to self-assessment of the provincial component of the HST. Generally, the self-assessment rules apply to persons engaged in non-commercial activities and consumers who have not been charged the provincial component of the HST by the supplier.

As well, where the provincial component of the HST has not been charged, registrants have to self-assess the provincial component on property or services (except for specified motor vehicles) where such property or services are not for consumption, use or supply exclusively (i.e., 90% or more) in the course of their commercial activities. In addition, registrants using a streamlined accounting method are required to self-assess the provincial component of the HST when acquiring property or services outside a participating province and subsequently bringing them into a participating province even if the property or services are for use exclusively in their commercial activities. However, a selected listed financial institution that is required to use the special attribution method set out in section 225.2 to determine its net tax adjustment is not required to self-assess the provincial component of the HST. Detailed information on financial services under the HST will be available in Technical Information Bulletin B-083, Financial Services under the HST .

Exceptions to the self-assessment rules are explained in the following sections of this bulletin. For example, supplies that are included in Schedule X, Non-Taxable Property and Services for Purposes of Division IV.I of Part IX , do not require self-assessment.

Tangible personal property

Persons bringing goods into a participating province
(new s 220.05 and 220.09)

Unless a specific exception applies, tangible personal property purchased in a non-participating province that is brought, or caused to be brought, into a participating province by a person must be self-assessed by that person at the 8% rate of the provincial component of the HST.

In the case of specified motor vehicles, the provincial component of the HST is applied to the prescribed value (generally, the value determined by the provincial licensing authority) of the vehicle at the time the vehicle is registered in the participating province.

In the case of other tangible personal property that was sold to the person at arm's length, the provincial component of the HST is applied on the lesser of the amount paid or the fair market value. Where the property was not acquired at arm's length, the provincial component of the HST is to be calculated on the basis of its fair market value.

Prescribed property will be defined by regulations and the rules for valuation will be set out in these regulations.

Payment of the provincial component of the HST
(new ss 220.05(2))

The provincial component of the HST is payable on a specified motor vehicle when the vehicle is registered, or on the day the vehicle is required to be registered, whichever is earlier. In this case, the applicable tax is not required to be reported on a GST return, but rather is collected by the provincial licensing authority on behalf of the Receiver General when the vehicle is registered.

The provincial component of the HST on any other tangible personal property is payable on the day the property is brought into the province.

Registrants who are required to self-assess the provincial component of the HST should account for that tax on their regular GST return for the reporting period in which that tax became payable.

Non-registrants must pay the provincial component of the HST to the Receiver General and file form GST 489, Tax Return for Self-Assessment of Provincial Portion of the Harmonized Sales Tax , no later than the last day of the calendar month following the month in which that tax became payable.

Example: If a non-registrant purchased clothing in Ontario and brought it back to her home in Nova Scotia on May 3, 1997, the non-registrant would have to self-assess the provincial component of the HST and pay that tax no later than June 30, 1997.

Non-taxable property
(new ss 220.05(3))

The provincial component of the HST is not required to be self-assessed in respect of tangible personal property where:

  • the recipient of the property has paid the provincial component of the HST under section 220.06 (i.e., the provincial component of the HST was self-assessed on property that was supplied by an unregistered non-resident of Canada);
  • the provincial component of the HST was paid under section 220.07 in respect of the property (i.e., the provincial component of the HST was self-assessed on imported commercial goods or an imported specified motor vehicle); or
  • the property is included in Part I of Schedule X to the Act. This part of Schedule X lists property that is relieved of the provincial component of the HST, and generally includes those goods for which the purchaser has already paid the provincial component of the HST and goods that would be imported free from the GST when entering Canada by virtue of Schedule VII of the Act. The Appendix to this bulletin contains the text of Part I of Schedule X.

Unregistered non-resident suppliers
(new s 220.06 and 220.09)

A recipient of a supply of tangible personal property that is delivered, made available, or sent by mail or courier to a resident at an address in a participating province by an unregistered, non-resident supplier is required to self-assess the provincial component of the HST in respect of the supply.

The provincial component of the HST that applies to prescribed property that is supplied in prescribed circumstances must be self-assessed by the resident based on the prescribed value. Prescribed property will be defined by regulations and the rules for valuation will be set out in these regulations.

In the case of any other type of property, where the recipient of the supply has acquired it by way of sale at arm's length from the supplier, the provincial component of the HST is assessed on the value of the consideration or the fair market value, whichever is less. Where the property was not acquired at arm's length, the provincial component of the HST is assessed on the fair market value of the property at the time it was brought into the province.

Payment of the provincial component of the HST
(ss 220.06(2))

The tax is payable on the day the property is delivered or made available to the recipient in the participating province.

Registrants who are required to self-assess the provincial component of the HST should account for that tax in their regular GST return for the reporting period in which that tax became payable.

Non-registrants must pay the provincial component of the HST to the Receiver General and file form GST 489, Tax Return for Self-Assessment of Provincial Portion of the Harmonized Sales Tax , no later than the last day of the calendar month following the month in which that tax became payable.

Non-taxable property
(ss 220.06(3))

The provincial component of the HST does not have to be self-assessed under this provision where:

  • the non-resident supplier has paid the provincial component of the HST when the property entered the province under section 220.05;
  • the recipient has self-assessed and paid the provincial component of the HST under section 220.07 (importation of commercial goods);
  • the property is a specified motor vehicle required to be licensed in a participating province; or
  • the property is included in Part I of Schedule X (refer to the Appendix).

Imported commercial goods
(new s 220.07 and 220.09)

Persons who import a specified motor vehicle or commercial goods into a participating province and who are liable for payment of duties under the Customs Act, or would be liable if they were subject to duty, may be required to self-assess the provincial component of the HST.

Exception
(ss 220.07(2))

Persons are not required to self-assess the provincial component of the HST for:

  • goods (other than a specified motor vehicle) that are to be consumed, used or supplied exclusively in a registrant's commercial activities. However, registrants who use the Quick Method, the Special Quick Method of Accounting for Public Service Bodies, or charities that use the simplified net tax calculation have to self-assess the provincial component of the HST even if the goods are for use exclusively in their commercial activities;
  • mobile or a floating homes that have been used or occupied in Canada as a place of residence for individuals; or
  • goods that are included in Schedule VII, Non-Taxable Importations (i.e., goods that are not subject to the GST on importation because they are included in that Schedule). Examples include zero-rated goods, goods that are imported by a charity, which have been donated to that charity, and settlers' effects.

Value of goods
(ss 220.07(3))

The motor vehicle licensing authorities in participating provinces will collect the provincial component of the HST on specified motor vehicles based on their prescribed value at the time the vehicle is registered in the province. Prescribed property that is imported into a participating province under prescribed circumstances will require self-assessment of the provincial component based on its prescribed value. For any other goods, the provincial component of the HST is to be based on the excise and duty-paid value of the goods in accordance with section 215. Any GST payable in respect of the importation of the property is assessed and collected by Customs officials at the time of importation.

Payment of the provincial component of the HST
(ss 220.07(4))

The provincial component of the HST on a specified motor vehicle is payable by the person who brought the vehicle into the province on the earlier of the day the person registers the vehicle or it is required to registered. The provincial component of the HST is not required to be reported in the GST return as it will be collected at the time the vehicle is registered.

For all other goods brought into a participating province under this provision, the provincial component of the HST is due on the day the goods are brought into the province.

Registrants who are required to self-assess the provincial component of the HST should account for that tax in their regular GST return for the reporting period in which that tax became payable.

Non-registrants must pay the provincial component of the HST to the Receiver General and file form GST 489, Tax Return for Self-Assessment of Provincial Portion of the Harmonized Sales Tax , no later than the last day of the calendar month following the month in which that tax became payable.

Intangible personal property and services

Persons acquiring intangible personal property and services for use in a participating province
(new s 220.08 and 220.09)

A resident of a participating province who is a recipient of a taxable supply of intangible personal property or a service made outside the participating provinces, which is acquired primarily (meaning more than 50%) for consumption, use or supply in the participating provinces must self-assess the provincial component of the HST. The provincial component of the HST is to be assessed on the percentage of the total consideration paid for the service or property that is attributable to consumption, use or supply by the recipient in participating provinces.

Registrants who use the Quick Method, the Special Quick Method of Accounting for Public Service Bodies, or charities that use the simplified net tax calculation have to self-assess the provincial component of the HST even if the goods are for use exclusively in their commercial activities.

Payment of the provincial component of the HST
(ss 220.08(2))

The provincial component of the HST is payable each time an amount of consideration for the supply becomes due, or is paid without becoming due.

Registrants who are required to self-assess the provincial component of the HST should account for that tax in their regular GST return for the reporting period in which that tax became payable.

Non-registrants must pay the provincial component of the HST to the Receiver General and file form GST 489, Tax Return for Self-Assessment of Provincial Portion of the Harmonized Sales Tax , no later than the last day of the calendar month following the month in which that tax became payable.

Non-taxable supplies

Pursuant to subsection 220.08(3), self-assessment of the provincial component of the HST by a resident of a participating province is not required for intangible personal property or services that are included in Part II of Schedule X to the Act, which are:

  • property or services supplied to a registrant that are for consumption, use or supply exclusively in the commercial activities of the registrant (except for registrants who use the Quick Method, the Special Quick Method of Accounting for Public Service Bodies, or charities that use the simplified net tax calculation have to self-assess the provincial component of the HST even if the goods are for use exclusively in their commercial activities ) ;
  • zero-rated supplies;
  • services (other than a custodial or nominee service in respect of securities or precious metals of the person) relating to tangible personal property that is removed from the participating provinces as soon after the service is performed as is reasonable in the circumstances and that is not consumed, used or supplied in the participating provinces after the service is performed and before it is removed;
  • services relating to criminal, civil or administrative litigation outside the participating provinces other than a service rendered before commencement of the litigation;
  • transportation services;
  • telecommunication services; and
  • a prescribed supply of property or a service where the property or services is acquired by the recipient of the supply in prescribed circumstances, subject to such terms and conditions as may be prescribed.

APPENDIX

Schedule X to the Excise Tax Act lists the property relieved of the provincial component of the HST under the conditions described.

SCHEDULE X

NON-TAXABLE PROPERTY AND SERVICES FOR PURPOSES OF DIVISION IV.1 OF PART IX

Part I 
A Non-Taxable property for purposes of subdivision A

(Subsections 220.05(3) and 220.06(3))

1. Property that is at any time brought into a participating province and that is described in heading No. 98.01 (certain foreign-based conveyances involved in international commercial transportation) 98.10 (certain arms, military stores, munitions and similar goods) or 98.12 (UN or NATO publications and books received from free lending libraries located abroad and subject to return under Customs supervision) of Schedule I to the Customs Tariff to the extent that the property would not be subject to customs duties under that Act.

2. Conveyances temporarily brought into a participating province by a person who is resident in that province, to be employed in the international non-commercial transportation of that person and accompanying persons using the same conveyance.

3. Conveyances and baggage temporarily brought into a participating province by a non-resident person for use by that person in that province.

4. Arms, military stores and munitions of war brought into a participating province by the Government of Canada in replacement of or in anticipation or actual exchange for similar goods loaned to or exchanged or to be exchanged with the governments of a foreign country designated by the Governor in Council under heading No. 98.10 (certain arms, military stores, munitions and similar goods) of Schedule I to the Customs Tariff , under such regulations as the Minister may make for purposes of heading No. 98.11 (certain arms, military stores and munitions) of that Act.

5. Property that is clothing or books brought into a participating province for charitable purposes, and photographs, not exceeding three, where they are brought into a participating province other than for the purpose of sale.

6. Property, (other than advertising matter, tobacco or an alcoholic beverage) that is a casual donation sent by a person in a non-participating province to a person in a participating province, or brought into a particular participating province by a person who is not resident in the participating provinces as a gift to a person in that participating province, where the fair market value of the property does not exceed $60, under such regulations as the Minister may make for purposes of heading No. 98.16 (certain casual donations and gifts to residents of Canada) of Schedule I to the Customs Tariff .

7. Property that is brought into a participating province for a period not exceeding six months for the purpose of display at a convention (within the meaning assigned by the Display Goods Temporary Importation Regulations made under the Customs Tariff ) or a public exhibition at which the goods of various manufacturers or producers are displayed.

8. Property that is brought into a participating province on a temporary basis after having been removed from Mexico or the United States, where the property is

(a) intended for display or demonstration;

(b) commercial samples;

(c) advertising films; or

(d) conveyances or containers based in the United States or Mexico engaged in the international traffic of goods.

9. Property that is at any time brought into a participating province by an individual who

(a) was formerly resident in the participating province and is, at that time, returning to resume residence in the participating province after being resident in another province for a period of not less than one year,

(b) is a resident of the participating province who is, at that time, returning after being absent from the participating province for a period of not less than one year, or

(c) is, at that time, entering the province with the intention of establishing a residence for a period of not less than twelve months, (other than a person who enters Canada in order to reside in Canada for the purpose of employment for a temporary period not exceeding 36 months or for the purpose of studying at an institute of learning)

where the property is for the individual's personal or household use and was owned and in the individual's possession before that time, provided that, where the property was owned and in the individual's possession for less than 31 days prior to the time when it is brought into the participating province

(d) the individual has paid any retail sales tax applicable to the property in the province from which the property has been brought, and

(e) the individual is not entitled to claim a rebate or a refund of that retail sales tax.

10. Property that is brought into a participating province, where the property is

(a) personal and household effects of an individual who died outside the participating provinces and was, at the time of death, resident in a participating province, or

(b) personal and household effects received, by an individual who is resident in a participating province, as a result or in anticipation of the death of an individual who was not resident in a participating province,

where the property is given as a gift or bequest to an individual who is resident in a participating province.

11. Medals, trophies and other prizes, not including usual merchantable goods, that are won outside the participating provinces in competitions, that are bestowed, received or accepted outside the participating provinces or that are donated by persons outside the participating provinces, for heroic deeds, valour or distinction.

12. Printed matter that is to be made available to the general public, without charge, for the promotion of tourism, where the printed matter is brought into a participating province

(a) by or on the order of a foreign government or a government outside the participating province or by an agency or representative of such a government; or

(b) by a board of trade, chamber of commerce, municipal or automobile association or similar organization to which it was supplied for no consideration, other than shipping and handling charges.

13. Property that is brought into a participating province by a charity or a public institution and that has been donated to the charity or the institution.

14. Property that is brought into a participating province by a person where it is supplied to the person for no consideration, other than shipping and handling charges, as a replacement part under a warranty in respect of tangible personal property.

15. Property that is brought into a participating province, the supply of which is included in any of Parts I to IV and VIII of Schedule VI.

16. Containers that are brought into a participating province where, because of regulations made under Note 11(c) to Chapter 98 of Schedule I to the Customs Tariff , they would, if they were imported, be imported free of customs duties under that Act.

17. Money or certificates or other documents evidencing a right that is a financial instrument.

18. Property that is brought into a participating province by a person after having been supplied to the person by another person in circumstances in which tax was payable in respect of the property by the person under subsection 165(2) or section 218.1 of the Act.

19. Property that a person brings at any time into a participating province and that at that time is being supplied in a non-participating province to the person by way of lease, licence or similar arrangement under which continuous possession or use of the property is provided for a period of more than three months and in circumstances in which tax under subsection 165(1) is payable by the person in respect of that supply.

20. Property that is brought into a participating province by a person after having been imported by the person in circumstances in which

(a) tax was not payable under section 212 of the Act in respect of the property because of section 213 of the Act; or

(b) tax was payable under section 212.1 of the Act and the person was not entitled to a rebate of that tax under section 261.2 of the Act.

21. Property that is brought into a participating province by a person after having been used in, and removed from, a participating province by the person and in respect of which the person was not entitled to claim a rebate under section 261.1.

22. Property, other than a returnable container (within the meaning assigned by subsection 226(1)) or a specified motor vehicle, that is brought into a participating province by a registrant (other than a registrant whose net tax is determined under section 225.1 of the Act or under Part IV or V of the Streamlined Accounting (GST) Regulations ) for consumption, use or supply exclusively in the course of commercial activities of the registrant.

23. Prescribed property brought into a participating province in prescribed circumstances, subject to such terms and conditions as may be prescribed.

24. A specified motor vehicle that is brought into a participating province by a person after having been supplied to the person by way of sale in a non-participating province, in circumstances in which tax was not payable under subsection 165(1) of the Act in respect of the supply.

25. A mobile home or a floating home that has been used or occupied in Canada as a place of residence for individuals.

26. Property referred to in subsection 178.3(1) or 178.4(1) of the Act where it is brought into a participating province by an independent sales contractor (within the meaning of section 178.1 of the Act) who is not a distributor in respect of whom an approval granted under subsection 178.2(4) on application made jointly with a direct seller is in effect.

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