October 2014 – A publication of Sales and Special Taxes Division

General Preferential Tariff Withdrawal Order

Economic Action Plan 2013 announced changes to Canada’s General Preferential Tariff (GPT) regime. This order comes into force on January 1, 2015.

  • (i) withdraw entitlement to GPT benefits from 72 higher-income and trade-competitive countries (out of current 175 beneficiaries), effective January 1, 2015;
  • (ii) ensure that changes to GPT country eligibility do not reduce the benefits of the Least Developed Country Tariff and the Outward Processing Remission Order;
  • (iii) introduce a number of revenue-neutral technical amendments to make the GPT and Least Developed Country Tariff rules of origin regulations simpler and clearer for traders; and
    (iv) make a consequential amendment to Most-Favoured-Nation tariffs on imported raw cane sugar, effective January 1, 2015.

Based on current trade patterns, the net impact of these changes, on a static basis, is expected to result in $333 million in additional annual tariff revenues, beginning January 1, 2015.

The General Preferential Tariff Withdrawal Order (2013 GPT Review) withdraws entitlement to GPT benefits, effective January 1, 2015, from the following 72 higher-income and trade competitive countries (out of current 175 beneficiaries), as identified in the December 22, 2012, Canada Gazette, Part I notice:

  • Algeria
  • American Samoa
  • Antigua and Barbuda
  • Antilles, Netherlands
  • Argentina
  • Azerbaijan
  • Bahamas
  • Bahrain
  • Barbados
  • Bermuda
  • Bosnia and Herzegovina
  • Botswana
  • Brazil
  • Brunei
  • Cayman Islands
  • Chile
  • China
  • Colombia
  • Costa Rica
  • Croatia
  • Cuba
  • Dominica
  • Dominican Republic
  • Ecuador
  • Equatorial Guinea
  • French Polynesia
  • Gabon
  • Gibraltar
  • Grenada
  • Guam
  • Hong Kong
  • India
  • Indonesia
  • Iran
  • Israel
  • Jamaica
  • Jordan
  • Kazakhstan
  • Kuwait
  • Lebanon
  • Macao
  • Macedonia
  • Malaysia
  • Maldives
  • Mariana Islands
  • Mauritius
  • Mexico
  • Namibia
  • New Caledonia and Dependencies
  • Oman
  • Palau
  • Panama
  • Peru
  • Qatar
  • Russia
  • Saint Kitts and Nevis
  • Saint Lucia
  • Saint Vincent and the Grenadines
  • Seychelles
  • Singapore
  • South Africa
  • South Korea
  • Suriname
  • Thailand
  • Trinidad and Tobago
  • Tunisia
  • Turkey
  • Turks and Caicos Islands
  • United Arab Emirates
  • Uruguay
  • Venezuela
  • Virgin Islands, U.S.A.

The Least Developed Country Tariff Withdrawal Order (2013 GPT Review) removes LDCT benefits, effective January 1, 2015, from Equatorial Guinea and the Maldives, which are respectively classified as high and upper-middle income countries by the World Bank and are thus among the 72 countries from which GPT benefits are also being withdrawn.

The General Preferential Tariff and Least Developed Country Tariff Rules of Origin Regulations amend the current regulations so that products imported from least developed countries can continue to qualify for duty-free treatment under the LDCT, even when using inputs from the current 175 GPT beneficiaries (i.e. “grandfathering”). In addition, a number of revenue-neutral technical amendments have been made, i.e.

  • removing rules of origin applicable to goods that are duty-free on a MFN basis;
  • updating the schedule to reflect revisions to the Customs Tariff;
  • adding the word “territory” to the definitions of “beneficiary country” and “least developed country”; and
  • clarifying that the rule of origin for apparel applies only to the fabric that makes up the major portion of the imported garment.

Under the outward processing program, Canadian importers can benefit from reduced rates of duty when importing apparel produced in a GPT country when that apparel is made from Canadian textiles. The Order Amending the Outward Processing Remission Order (Textiles and Apparel) grandfathers the current 175 GPT beneficiaries so that importers can continue using the program, even when producing apparel in a country for which GPT eligibility is being withdrawn.

The Order Amending the Schedule to the Customs Tariff (Raw Cane Sugar) eliminates, as of January 1, 2015, MFN tariffs on imported raw cane sugar.

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December 2013 – A publication of the Sales and Special Taxes Division

Sales and Commodity Taxes

Third-party fundraising

Generally, fundraising by its very nature is considered a profit activity. Organizations that are established and operated for the sole purpose of raising funds are not considered non-profit organizations for

GST/HST purposes, even if all the profit from a fundraising activity is donated to a registered charity. These organizations do not meet the “operated solely for a purpose other than profit” requirement in the definition of non-profit organization. For more information on the definition of “non-profit organization” for GST/HST purposes, see GST/HST Policy Statement P-215, Determination of whether an entity is a “non-profit organization” for purpose of the Excise Tax Act (ETA).

A third-party fundraiser may make supplies of property or services in the course of a fundraising activity or event. Most supplies of property and services made in Canada are subject to the GST/HST, unless specifically exempt or zero-rated (taxed at the rate of 0%). Supplies made by a third-party fundraiser will generally be taxable, even when the profits from the fundraising event will be donated to a registered charity.

Supplies of paid parking made by certain public sector bodies 

Amendments in Bill C-4 clarify that supplies of paid parking made by a public sector body would be taxable even if the body provides a significant amount of parking at no charge.

Currently, the legislation exempts supplies of property or services (excluding supplies of blood and blood derivatives) made by a public sector body if all or substantially all (90% or more) of the body’s supplies of the property or service are made for no consideration. For purposes of this exemption, a public sector body means a municipality, university, public college, school authority, hospital authority, non-profit organization or government.

Bill C-4, if enacted, would also exclude from this exemption the supply of a parking space if the supply is made for consideration by way of lease, licence or similar arrangement in the course of a business carried on by a public sector body. If enacted, this amendment will be deemed to have come into force on December 17, 1990.  

Canada Custom Duties

Additional Eligibility Requirements for the Courier Low Value Shipment (LVS) Program

1. Participation in the Courier LVS Program is restricted to couriers that are approved Partners In Protection (PIP) members as couriers/carriers; in addition, Courier LVS Program shipments must be imported and transported by approved PIP carriers.

2. Participation in the Courier LVS Program is restricted to couriers that will allow the CBSA the use of their proprietary systems for the report/release functions and for risk assessment capability.

3. According to paragraphs 2 and 3, the courier will be required notably to demonstrate the following:

(a) Control requirements:

It must maintain a high-degree of control over their expedited shipments through the use of internal security, logistics and tracking technology; it must maintain a closely integrated administrative control over the shipments with operations that are sufficiently integrated at both ends of the service, i.e. from the time they are picked-up for export from the foreign exporter to the time they are physically delivered to the Canadian importer, so that it is exercising a high-degree of control over the shipments, particularly in regard to the reliability of the information that is supplied for CBSA purposes;

(b) Service requirements:

It must offer a service to the public under advertised, reliable, timely delivery on a door-to-door basis;

(c) Tracking requirements:

It must be able to track and control the expedited shipments at every point during their conveyance, and it must maintain the capacity to locate the shipments at any point in their conveyance and to obtain current information on the estimated delivery time of those shipments.

4. Participation in the Courier LVS Program is restricted to couriers that will be able to transmit the shipments’ pre-arrival cargo data to the CBSA as they do today for high value shipments (note: this criteria will be brought into force at a later time).

5. In addition, a low risk sub-process has been created within the Courier LVS Program; it is dedicated solely for the importation of casual U.S. mail-order/direct marketing goods. Participants in this low risk sub-process are only authorized to import personal internet shopping goods. The program’s exclusion of prohibited, restricted or controlled goods is also valid for this sub-process.

eManifest implementation update

The Canada Border Services Agency (CBSA) announced today that eManifest requirements for highway and rail carriers will not be mandatory in fall 2013, due to timelines associated with regulatory processes.

The CBSA remains committed to providing clients at least 45 days advance notice of the eManifest mandatory compliance date to ensure a smooth transition to modernized, more efficient commercial processing at Canada’s borders. Updates regarding the status of the regulatory process will be made public when available.

The CBSA continues to strongly advise highway and rail carriers who have not yet adopted eManifest to take advantage of the additional time and the CBSA’s various client support resources to become compliant as soon as possible.

eManifest is a major transformational initiative that impacts all areas of commercial cross-border processes.

When fully implemented, eManifest will require carriers, freight forwarders and importers in all modes of transportation (air, marine, highway and rail) to electronically transmit advance commercial information to the CBSA within prescribed mode-specific time frames.

The CBSA applauds carriers who have adopted eManifest requirements and is pleased with the continual increase in eManifest transmissions.

U.S. Custom Duties

The United States and the Kingdom of Morocco Sign Customs Mutual Assistance Agreement

U.S. Customs and Border Protection announced today that a Customs Mutual Assistance Agreement was signed between the United States and the Kingdom of Morocco. The bilateral agreement is a valuable tool for CBP and Immigration and Customs Enforcement in cooperation with the Moroccan Administration of Customs and Indirect Taxes of the Ministry of Economy and Finance to prevent, repress, and, investigate customs offenses. The agreement, signed on November 21, marks a significant milestone in collaboration between the two countries.

CMAAs provide for mutual assistance to ensure the accurate assessment of customs duties and taxes, and in efforts to combat illicit cross-border activities to include contraband smuggling, financial crimes such as customs fraud and money laundering, and international terrorism.

CBP and ICE have used bilateral CMAAs as a valuable part of law enforcement efforts. These agreements provide a legal framework for information sharing and cooperation between customs administrations as they combat transnational crime and endeavor to protect their respective national frontiers.

Scientific Research and Experimental Development (SR&ED) Tax Incentive Program

SR&ED T661 Claim Form – 2013 Revision – Claim preparer information

The March 2013 Federal Budget proposed changes to the Scientific Research and Experimental Development (SR&ED) Program. We have revised the form to include additional prescribed information in respect of SR&ED claim preparers. Therefore, the 2013 version of the Form T661, Scientific Research and Experimental Development (SR&ED) Expenditures Claim, contains new Part 9 – Claim preparer information.

If a claim preparer was engaged in the preparation of the SR&ED claim, the prescribed information in respect of SR&ED claim preparers required to be reported in the new Part 9 includes:

  • The name of each claim preparer that has accepted consideration to prepare or assist in the preparation of the SR&ED claim;
  • The business number of the claim preparer. For individuals, the Goods and services tax (GST) or Harmonized sales tax (HST) number of the claim preparer must be provided;
  • The billing arrangement code for the claim preparer as described in Form T661 Part 9 in the list of Billing arrangement codes;
  • The billing rate;
  • Any other billing arrangement (if other than those identified under Billing arrangement codes in the T661 Part 9); and
  • The total fee is paid, payable or expected to pay.
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June 2013 – A publication of the Sales and Special Taxes Division

 CANADA CUSTOM DUTIES

Implementation of the Canada-Panama Free Trade Agreement (CPAFTA)

1. This customs notice is to inform you that the Canada-Panama  Free Trade Agreement (CPAFTA) will be implemented on April 1, 2013. With the  exception of a few agricultural goods, the CPAFTA will essentially eliminate  the customs duties on all imports from Panama, either immediately upon  implementation of the agreement, or through a tariff phase-out.

2. Information regarding the CPAFTA and the text of the  agreement can be found on the Foreign Affairs and International Trade Canada  website at: www.international.gc.ca.

3. The CPAFTA implementing legislation, Bill C-24, received Royal Assent on December  14, 2012, and is scheduled to come into force on April 1, 2013. Bill  C-24 can be found on the Parliament of Canada website at: www.parl.gc.ca.

4. Proposed regulatory amendments and a new regulation under  the Customs Act related to the CPAFTA  will be announced in a separate customs notice at a later date.

Tariff treatment of MP3 players

Ottawa, Ontario, April 5, 2013 — Recently, there has been significant media attention on the tariff treatment of  MP3 players, such as iPods. The Canada Border Services Agency (CBSA) would like  to clarify.

Importers of MP3 players continue to be eligible to apply for  tariff relief under Tariff Item 9948.00.00.

Customs duty will be relieved on those imported goods that meet  the requirements of tariff item 9948.00.00.

UNITED STATES CUSTOM DUTIES  

United States Harmonizes its Threshold Value for Low Value Commercial Shipments with Canada

Washington— The United States Government announced that it is delivering on a key  commitment under the U.S.-Canada Beyond the Border Action Plan through the  publication of a final rule in the Federal Register titled “Informal Entry  Limit and Removal of a Formal Entry Requirement.” The rule increases and  harmonizes the value thresholds for expedited customs clearance to $2,500. This  change would harmonize the value threshold for both countries, from the current  levels of $2,000 in the United States and $1,600 in Canada.

United States and Republic of Nigeria Sign Customs Mutual
Assistance Agreement

Washington— On behalf of the United States and  the Federal Republic of Nigeria, U.S. Customs and Border Protection (CBP)  Acting Commissioner Winkowski and Nigeria Customs Service Comptroller General  Abdullahi Dikko Inde signed a Customs Mutual Assistance Agreement (CMAA) today,  which marks a significant milestone in collaboration between the two countries.

The bilateral agreement is a valuable  tool for CBP and U.S. Immigration and Customs Enforcement (ICE) in cooperation  with the Nigeria Customs Service to prevent, repress, and, investigate customs  offenses. CMAAs provide for mutual assistance to ensure the accurate assessment  of customs duties and taxes, and in efforts to combat illicit cross-border  activities to include contraband smuggling, financial crimes such as customs  fraud and money laundering, and international terrorism.

SCIENTIFIC RESEARCH AND EXPERIMENTAL DEVELOPMENT (SR&ED) TAX INCENTIVE PROGRAM


To access SR&ED tax incentives, Form T661,
Scientific Research and Experimental Development (SR&ED) Expenditures Claim
,  must be completed and submitted to the CRA by the reporting deadline. Taxpayers  are currently requested to only provide limited information to the CRA about  the external consultants that prepared certain parts of their SR&ED tax  incentive program claim.

For claims filed on or after the later of January 1,  2014, and the date of Royal Assent, the budget announces that the CRA will  require additional prescribed information in respect of tax preparers  (including external consultants) who have assisted with the preparation of an  SR&ED tax incentive program claim. The budget also proposes to introduce a  penalty in respect of each SR&ED tax incentive program claim if prescribed  information is missing, incomplete or inaccurate.

Q1. What information is currently requested on Form T661 in respect of the preparers that assisted in the preparation of an SR&ED tax incentive program claim?

A1. Currently, the taxpayer is only required to provide  the name (or the firm’s name) of the external consultant that prepared the  response for section B or section C of Part 2 of Form T661 and the name of the  person or firm who completed Form T661.

Q2. What additional prescribed information will be requested on Form T661 in respect of the preparers that assisted in the preparation of an SR&ED tax incentive program claim?

A2. Form T661 will be revised to require the business  number of each preparer and details about the billing arrangements, including  whether contingency fees were used and the amount of the fees payable. In  instances where no preparer was involved, the taxpayer will be required to  certify that no preparer assisted in any aspect of the preparation of the
SR&ED tax incentive program claim.

Q3. What is the amount of the new penalty that will be applied if prescribed information is missing, incomplete or inaccurate?

A3. The budget proposes to introduce a penalty of $1,000  in respect of each SR&ED tax incentive program claim made by a taxpayer for  which prescribed information in respect of the preparation is missing,  incomplete or inaccurate.

Q4. Who will be liable for the new penalty?

A4. Where a preparer participates in the preparation of  an SR&ED tax incentive program claim, the taxpayer and the preparer will be  jointly and severally, or solidarily, liable for the penalty.

Q5. Where can I get more information about the changes to the SR&ED tax incentive program?

A5. The CRA is committed to providing taxpayers with  up-to-date information. The CRA encourages taxpayers to check its Web site  often. All new forms, policies, and guidelines will be posted as they become  available.

COMMODITY TAXES

Home care services

Supplies of basic health care services and certain health-related assistive services are generally exempt from the GST/HST. Budget 2013 proposes amendments to expand the exemption for homemaker services to reflect current provincial and territorial practices for health-related assistive services delivered to persons in their homes.

Currently, publicly subsidized or funded homemaker services, such as cleaning, laundering, meal preparation and child care rendered to an individual who, due to age, infirmity or disability, requires assistance in his or her home, are exempt from the GST/HST. This exemption does not cover personal care services such as bathing, feeding, and assistance with activities of daily living.

Effective for supplies made after March 21, 2013, the budget proposes to expand the exemption for homemaker services to include publicly subsidized or funded personal care services, rendered to an individual who, due to age, infirmity or disability requires such assistance at home. Accordingly, it is proposed that the definition of “homemaker service” be repealed and the new definition of “home care service” be added. The new definition will include personal care services such as bathing, feeding and assistance with dressing and taking medication as well as household services, such as cleaning, laundering, meal preparation and child care.

Where a service provider charges GST/HST on an exempt supply of a home care service made after March 21, 2013, the supplier may refund or credit the GST/HST to the purchaser. Alternatively, purchasers who have paid an amount as GST/HST on exempt supplies may claim a rebate of tax paid in error using Form GST189, General Application for Rebate of GST/HST. The Canada Revenue Agency (CRA) will not pay rebates in respect of claims for GST/HST paid on supplies of exempt home care services made after March 21, 2013 until after the proposed amendments receive Royal Assent.

Regulations Amending Various GST/HST Regulations, No. 4

The Regulations Amending Various GST/HST Regulations, No. 4 were adopted on April 18, 2013 and were published in the Canada Gazette on May 8, 2013. These regulations include amendments to the Selected Listed Financial Institutions Attribution Method (GST/HST) Regulations and to other regulations relating to financial institutions, to implement the new rules for financial institutions outstanding from the introduction of the HST in Ontario and British Columbia. These regulations also implement rules for financial institutions related to the winding down of the HST in British Columbia.

Reminder – changes to harmonized sales tax in Prince Edward Island and British Columbia

Effective April 1, 2013, Prince Edward Island (P.E.I.) has an HST. The HST rate in P.E.I. is 14% of which 5% represents the federal part and 9% the provincial part.

Effective April 1, 2013, the 12% HST, consisting of a 5% federal part and a 7% provincial part, no longer applies in British Columbia (B.C.). Instead, the GST at 5% and a provincial sales tax apply.

Please go to the CRA “Changes to the Harmonized Sales Tax (HST)” Web page for a complete list of technical publications on these changes for both B.C. and P.E.I.

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Issue: December 2012 – A publication of the Sales and Special Taxes Division

Changes to Quebec’s Tax System in 2013

  1) The GST will be removed from the QST base as of January 1, 2013; to ensure that this removal has no impact on Québec’s public finances, the 9.5% rate of the QST will, at the same time, be raised to 9.975%, i.e. the effective rate of the QST applicable until then.

 2) Financial services that are currently zero-rated under the QST system will become exempt as under the GST/HST system as of January 1, 2013; as a corollary, the portion of the compensation tax on financial institutions attributable to the impact on public finances to the fact that input tax refunds are granted to suppliers of financial services will be eliminated as of the same date.

 3) The existing exemption mechanism from payment of taxes by governments and certain of their mandataries will be replaced by a tax payment and rebate mechanism as of April 1, 2013.

 Prince Edward Island and the HST

 On April 18, 2012, the Government of Prince Edward Island (PEI) proposed a harmonized sales tax (HST) that would come into effect on April 1, 2013. The HST inPEIwould be administered by the CRA.

On November 8, 2012, the Government of PEI published a News Release announcing the publication of technical documents with general descriptions of transitional rules relating to the implementation of HST inPEI.

The CRA will soon be publishing notices containing questions and answers that further explain the transitional rules for personal property and services, and housing and other real property situated inPEI.

 What’s New in the Scientific Research and Experimental Development (SR&ED) Program.?

 The March 2012 federal budget proposed several changes to the Scientific Research and Experimental Development (SR&ED) Program. CRA have revised the guide to reflect the changes made to the SR&ED claim form (Form T661) to accommodate the legislative changes coming into effect starting January 1, 2013.

Changes to Form T661

The CRA have introduced a new line (529) in Part 4 to reduce by 20% the expenditures for arm’s length SR&ED contracts and third-party payments incurred after December 31, 2012, from the payer’s qualified SR&ED expenditure pool.

It has changed the description for line 820 to accommodate the 5% reduction in the prescribed proxy amount (PPA) for the number of 2013 calendar days in the tax year.

This revised version of Form T661 (revision code 1201) is effective as of its publication date. It encourage the filer to start using the new form immediately.

The filer can submit the T661(11) version of the form until December 31, 2012. Starting January 1, 2013, it will accept only the T661(12) version of the form for all tax years.

 CBSA Electronic Reporting – Saving exporters time and money

 The CBSA is making a major change in how exporters declare their exports. This is being undertaken to align the exporting program with the overall direction of the CBSA towards electronic transactions and to meet the commitment made to external stakeholders.

As of April 1, 2012, the CBSA began to phase out the manual reporting paper B13A form for exporters, and is revising the Reporting of Exported Goods Regulations to reflect the change. A transitional period will be in effect until the regulations are revised, which is expected by December 2014.

Mandatory electronic reporting will benefit exporters and the exporting community in general by reducing the risk of administrative monetary penalties being issued for incomplete information on the manual form. Service providers should see cost savings in time and money when electronic export reporting is fully implemented, as the existing requirement to stamp manual forms at a CBSA office will no longer apply.

Two options are available to report electronically: the Canadian Automated Export Declaration (CAED); and the G7 Export Reporting Electronic Data Interchange (G7-EDI). The CAED software is downloadable and available free of charge on the Statistics Canada Web site. The G7-EDI option provides a direct link to the CBSA’s ACROSS system and requires a greater investment. Please go to Electronic Commerce page for more information.

Exporters not yet registered for an alternate electronic reporting method are urged to do so as soon as possible. Please contact the CAED/G7 helpline at 1-800-257-2434 begin_of_the_skype_highlighting              1-800-257-2434      end_of_the_skype_highlighting to register or if you need more information on how to report goods electronically using CAED or G7-EDI.

 CBP Announces Six New Centers of Excellence and Expertise

U.S. Customs and Border Protection (CBP) Deputy Commissioner David V. Aguilar announced today the expansion of the Centers of Excellence and Expertise (CEE), which will create six new centers in 2013 for the Agriculture & Prepared Products; Apparel, Footwear & Textiles; Base Metals; Consumer Products & Mass Merchandising; Industrial & Manufacturing Materials; and Machinery industries.

“Centers of Excellence and Expertise are not only the centerpiece of our trade process transformation, they already are increasing our capacity,” said Deputy Commissioner David V. Aguilar. “This expansion will empower CBP to more effectively partner with industry to facilitate international trade throughU.S.ports of entry.”

The centers that are to be established in FY 2013 are:

1. Agriculture & Prepared Products:Miami

2. Apparel, Footwear & Textiles:San Francisco

3. Base Metals:Chicago

4. Consumer Products & Mass Merchandising:Atlanta

5. Industrial & Manufacturing Materials:Buffalo

6. Machinery:Laredo

These virtual centers will provide one-stop processing to lower the Trade’s cost of business, provide greater consistency and predictability and enhance CBP enforcement efforts. The Centers represent CBP’s expanded focus on “Trade in the 21st Century,” transforming customs procedures to align with modern business. The CEEs will also serve as resources to the broader trade community and to CBP’sU.S.government partners.

CBP currently operates centers for Electronics inLong Beach; Pharmaceuticals, Health & Chemicals inNew York City; Automotive & Aerospace inDetroit; and Petroleum, Natural Gas & Minerals inHouston.

 

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Issue: April 2012 – A publication of the Sales and Special Taxes Division

Canadian trade increases again in 2011

Statistics Canada says Canada’s international merchandise trade bounced back in 2011 for a second consecutive year of gains after the 2009 recession. The agency says total trade in 2011 — exports and imports combined — came within 2.0 per cent of the record levels posted in 2008.

New cross-border shopping limits

In the 2012 federal budget, duty-free cross-border shopping limits rise this summer to $200 for 24-hour trips and $800 for trips of 48 hours or more. So no surprise that most Canadians cheered the new cross-border shopping limits set out in last week’s federal budget. You can now bring back $200 worth of goods duty free, instead of $50, on 24-hour trips. The limit has been doubled for trips of 48 hours, all the way up to $800.

Canada-Japan Free Trade Agreement Negotiations 

On March 25, 2012, Prime Minister Harper and Japanese Prime Minister Noda announced the launch of comprehensive and high-level economic partnership agreement (EPA) negotiations, or free trade negotiations, in Tokyo, Japan. The announcement follows the March 7, 2012, release of a Canada and Japan Joint Study examining the feasibility for a free trade agreement and outlining a broad range of issues which could be negotiated, including trade in goods, services, investment and trade facilitation. The Joint Study examines each country’s approach to these various issues, and the areas of common ground. The study also summarizes the significant economic gains to be achieved through free trade with Japan. For instance, it projects potential gross domestic product gains of approximately US$4 billion each for Canada and Japanas a result of free trade. According to the study’s findings, there remains much untapped potential in the Canada-Japan trade relationship.

The Scientific Research and Experimental Development (SR&ED) changes

Minister Flaherty’s Budget 2012 reduces SR&ED credit payouts to large businesses massively; and minimally reduces SR&ED credit payouts to small and medium sized business.

SR&ED Highlights 2012  

  • Labour: 100%
  • Contractors: 80% as of Jan 1, 2013
  • Proxy for Overhead: 55% as of Jan 1, 2014
  • Consumed Materials: 100%
  • Federal ITC rate for small companies: 35%
  • Federal ITC rate for large companies: 15% as of Jan 1, 2014 

1)      Most of the changes to the program will begin in two years time on January 1, 2014. This leaves companies almost two years to plan.

2)      SR&ED tax credits on capital expenditure eliminated completely. This seems the most extreme measure in the budget but really does not affect most businesses that greatly. For Capital to qualify for SR&ED it needs to be used at least 50% of the time on R&D.

3)      Large company SR&ED ITC on labour reduced by 21% and SR&ED ITC on contractors reduced by 33% (in BC and AB). This is the most extreme measure in the budget. Large, Foreign and Public Companies will see a 20 to 33 percent reduction in their ITC.

4)      Small company SR&ED ITC on labour reduced by only 6% and SR&ED ITC on contractors reduced by 20% (in BC and AB). This is bad news for large companies, a relief for smaller companies. Small company claims are overwhelmingly labour based. The changes will reduce these claims by only 6% whereas large companies see 20% lobbed off their claims.

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Issue: December 2011 – A publication of the Sales and Special Taxes Division

Inside this issue: 

  • B.C. HST update          
  • What’s new for GST/HST return and PSB rebate filers
  • Changes to the Canada Pension Plan (CPP)              
  • Election to Use the SR & ED Proxy to Report the Recapture of ITC
  • Release of CAED version 2012
  • Certified Customs Specialist

B.C. HST Update: Action Plan in place to return B.C. to 12% PST/GST

The Province will reinstate the combined 12 per cent PST and GST tax system following the referendum decision by British Columbians to extinguish the HST in B.C. The PST will be reinstated at seven per cent with all permanent PST exemptions. The Province may make some common sense administrative improvements to streamline the PST. The transition period is expected to take a minimum of 18 months, consistent with the report of the independent panel on the HST. During this period, the provincial portion of the HST will remain in place at seven per cent. Eligible lower-income British Columbians will continue to receive the B.C. HST Credit until the PST is re-implemented. The B.C. HST credit will then be replaced by the re-implemented PST credit. During the transition period, the Province will provide quarterly updates on the progress of returning to the PST. 

For more info:  http://www.fin.gov.bc.ca/docs/PST_Transition_Backgrounder.pdf

What’s new for GST/HST return and PSB rebate filers?

CRA has added new and enhanced online services. To use these online services, you need to first register at www.cra.gc.ca/mybusinessaccount to create a CRA user ID and password. Your authorized representative or employee can also access these online services through Represent a Client at www.cra.gc.ca/representatives.

The new and enhanced services include:

View a return
The “View return status” service is renamed to “View a return”. In addition to viewing the return status, you can also now view the detailed line-by-line information for returns that are assessed or reassessed.

File a PSB rebate
Non-registered public service body (PSB) filers can now file their PSB rebate electronically, by using the “File a PSB rebate” service. Registered PSB filers can use this service to file their PSB rebate separately from their return, or continue to file both their return and PSB rebate together using GST/HST NETFILE.

Adjust a PSB rebate
The “Adjust a PSB rebate” service provides an easy way to revise rebates that you have filed previously (some restrictions apply).

Changes to the Canada Pension Plan (CPP)

The Canada Pension Plan (CPP) is changing. The changes which the Government will gradually introduce from 2011 to 2016. What you need to know if you are:

You will not be affected by these changes if you started receiving a CPP retirement pension before December 31, 2010, and you remain out of the work force.

The CPP operates throughout Canada, except in Quebec, where the Quebec Pension Plan (QPP) provides benefits. These changes do not apply to the QPP. For information about the QPP, visit the QPP Web site.

Information for employers – Changes to the Canada Pension Plan

As an employer, you may be affected by some of these changes. The changes to the Canada Pension Plan (CPP) will be phased in over a six-year period beginning in 2011, with full implementation by 2016. Many of  the changes will reduce barriers to labour force participation for older individuals inCanada. This may also benefit employers, who can access the skills and experience of older workers.

The following changes are of most importance to you.

Election to Use the Scientific Research and Experimental Development Proxy to Report the Recapture of Input Tax Credits

 Use Form RC4613 if you are a large business and you have to recapture input tax credits (ITCs) for the provincial part of the harmonized sales tax (HST) on specified energy, you are engaged in scientific research and experimental development (SR&ED) activities, you are eligible and you will actually claim SR&ED expenditures or investment tax credits for income tax purposes; and you want to use a proxy to determine the portion of the specified energy that you do not use directly in qualifying SR&ED activities in Ontario and/or in British Columbia.

For more detail, please go to http://www.cra-arc.gc.ca/E/pbg/gf/rc4613/README.html

Release of Canadian Automated Export Declaration (CAED) Version 2012

1. 2012 version of the Canadian Automated Export Declaration (CAED) software will be released on December 19, 2011. The 2011 version of CAED will expire on January 30, 2012 at which point, only the 2012 version will be valid.

2. CAED participants should upgrade to CAED 2012 by downloading the software from the CAED Web site along with the release notes at www.statcan.gc.ca/exp.

3. The following office will be eliminated from the “place of exit” field in the 2012 version of CAED:

– Saskatchewan: Big Beaver (614).

4. North Koreahas recently been added to the Area Control List, therefore permits are now required for all shipments destined for this location. Note: The Democratic People’sRepublic ofKorea (North Korea) is designated by Country Code “KP” in CAED.

5. Canada Border Services Agency will be moving towards mandatory electronic reporting effective April 1, 2012.

Certified Customs Specialist (CCS)

GRS continues to strive for excellence in all areas of profit recovery. In order to maintain a professional level of expertise in the field of Customs Duty and Import/Export, our team of specialists gained extensive experience in the field and received professional designation of Certified Customs Specialist (CCS). We want to make sure that all our clients are up to date with the current Import/Export legislation and any future changes and development that may affect your bottom line. Our specialists will ensure to maximize any refund opportunities that may arise. 

 

 

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Issue: December 2010 – A publication of the Sales and Special Taxes Division

Ontario and B.C. Provincial Transitional New Housing Rebates
Builders of newly constructed or substantially renovated housing in Ontario and British Columbia (B.C.) may be entitled to claim a provincial transitional new housing rebate to recover the estimated Ontario retail sales tax (RST) or the estimated B.C. provincial sales tax (PST) embedded in the cost of housing that was completed in full or in part before July 2010. For more information on the conditions for claiming a provincial transitional new housing rebate and calculating the amount of the rebate, refer to GST/HST Info Sheet GI-096, Harmonized Sales Tax: Provincial Transitional New Housing Rebates for Housing in Ontario and British Columbia.

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