Ministry --- of --Finance
Thanks for the Invitation • •
Colin Chicoine Greg Flottorp, CMA-CPA
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TIC Branch
Compliance & Outreach Interpretations & Rulings
Legislation Publications PST Rulings Information Officers Compliance Officers (Outreach)
Tax Changes (March 2017 Budget Items) •
The changes announced impact a number of taxes administered by Revenue Division Fuel & Tobacco Beverage Container (BCP) PST CCT Allowance for commissions were removed from LV accounts
2017 Budget Agenda • The Premier announced a shift toward consumption taxes, but away from taxes on income and productivity. • • "This fundamental change in our tax system is designed to keep our economy strong while generating the revenue needed to ensure important public services are sustainable and affordable in the long run." • • Consumption taxes are typically seen as PST and sin taxes, like the levy on cigarettes and alcohol. • • The government is fighting a 1.2 billion dollar deficit mainly from a sustained drop in non-renewable resource revenues like oil and potash.
Information on Tax Changes (March 2017 Budget Items) • • • •
Information Notices and Updated Bulletins are prepared for each of the tax changes and posted to the website Common Q&A’s and Transition Rules will be posted to the website The on-line PST Rulings were pulled from the website to update information. Currently working with Associations including SCA, to develop new material and refine existing publications to help clarify our position on matters, like transition rules.
PST – Rate and Base Change •
PST Rate increases from 5% to 6% effective March 23, 2017 on goods and services purchased on or after that date.
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PST Base is expanded effective April 1, 2017, on contracts entered into on or after that date. (simplification and modernization)
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PST applies to Insurance Premiums effective July 1, 2017
Fuel Tax • • • •
No Tax Rate Changes Elimination of Farm Use Gasoline Credit (12¢/L) Elimination of Aviation Fuel Tax Rebate Reduced tax rate (3¢ per litre) for Dyed Diesel Fuel
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Marked Heating Fuel still fully exempt.
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(Purchases by permit holders no longer fully exempt.) (Must be sold/purchased as heating fuel.)
Changes are effective April 1st
Provincial Sales Tax (PST) changes • •
Rate change: Increase from 5% to 6% Tax base is expanded:
PST on Insurance Premiums - Effective July 1 st PST on Restaurant Meals & Snack Foods (GST Rules) – Effective April 1 st PST on Children’s Clothing - effective April 1 st Remission/Exemption for PME removed – effective date April 1 st • •
Purchase or lease of PME now subject to PST. Regulations exempting EOR projects remains.
Trade-in removed for Light Vehicles (new and taxable used) - effective April 1st •
- effective March 23 rd
$3000 exemption still in place
New taxable service – Real Property contracts – effective Apr 1 st Penalty and offence provisions added to the Act
RCP to Licensed Vendor •
RCP accounts directly affected by the Base Change are being converted to Licensed Vendors (LV) and will be notified by mail.
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A LV is required to collect and remit PST on their services but they are allowed to purchase items for resale exempt of PST.
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A supplier can check the on-line Registry to ensure the LV account is registered with the Ministry. http://www.skpstregistry.gov.sk.ca/
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Provincial Sales Tax (PST) changes Real Property (RP) Service Contracts • Contractors will be converted to Vendors
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Required to collect PST on Retail Sale of taxable RP service contracts and services to TPP • Value includes materials, labour, and other charges As a vendor, contractors will now purchase materials for resale, exempt of tax • Can claim Inventory credits – apply against tax reported, no refunds • Still accountable for tax on goods for own use or consumption (tools, vehicles, etc.)
Transition Rules Developed (with SCA) Bonding now required for Resident & Non-Resident Contractors performing a service to RP, • Section 29 and Clearance Process Remains
Provincial Sales Tax (PST) changes Real Property Services - New Definition: “3(1)(k)(xix) services performed by one person for another person for consideration, relating to: (A) the construction, alteration, repair, erection, demolition, remodeling or improvement of real property or a building or other structure on real property, or (B) any other thing done or agreed to be done in relation to real property or a building or other structure on real property ; Whether: (C) for improvement of the value of the property as real property; or (D) relating to the use, enjoyment or manipulation of the property for purposes other than an increase in its value as real property; And includes all related charges and fees in providing the services.�
Taxable Services Already had 3(1)(k)(vii) : “Repair or Installation Services” – means any service to repair, install assemble, dismantle, adjust, restore, recondition, examine, refinish, or maintain Tangible Personal Property Have now added (3(1)(k)(xix): “Services relating to construction, alteration, repair, erection, remodeling or improvement , or any other thing done in relation to real property or a building or other structure on real property, whether for…” 1) Improvement of the property as RP 2) Relating to the use, enjoyment, or manipulation of the property for a purpose other than an increase in its value as RP 3) For others, and 4) Includes all related charges and fees in providing the services.
Principals & Contractors • • •
Principal is the owner of property, invoiced for the services (consumer). General is the contractor purchasing services from subcontractors (vendor). Subcontractors typically provide services to a General, who will quote VL.
Manufactured Cost •
The guidelines for manufactured cost will now only apply on items produced for your own use and not for resale purposes (where tax is collected on the contract). Items used to complete a contract that has been grandfathered under the old rules (tax on cost)
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Under the new rules, a business that produces asphalt to pave their own facilities (not for resale) will self assess PST on the manufactured cost
Transition rules •
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Binding agreements, terms, and contracts that extend past April 1, 2017 that relied on the old rules (PST on cost of materials) for pricing and costs will be transitioned to avoid undue hardship for parties (unable to recover or pass the added cost to the customer). Materials purchased on or after March 23rd are subject to PST at the new rate 6%. Although not announced to date a sunset clause is being contemplated. A registry of grandfathered contracts is being developed with SCA to help certify and track these projects.
New Contracts •
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PST is no longer paid by the contractor (now a vendor) on the taxable inputs used in the real property services (materials & subcontracted services). PST not an embedded cost in the construction contract as it is collected on the value of the contract to the Principal. Principal is now the consumer (not the contractor/subcontractor) PST continues to be paid on taxable equipment, tools, etc. used by contractors (no change).
Grandfathered Contracts •
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Established terms and pricing had been negotiated and agreed upon under the existing rules at that time (PST on cost of materials) for pricing and costs, via a binding contract, tender or Letter of Intent (LOI). Principal or GC will advise contractors which rules apply to a given contract (during transition period). Contractors will self assess PST on materials purchased exempt of PST when they are used in one of these grandfathered contracts.
Clearance Process •
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The clearance process remains in place to help ensure that the PST collected on services to real property is remitted to the Ministry of Finance on behalf of the principal. The process will now apply to both resident and non-resident contractors. Information concerning the process is available on the Finance website, via the noted link. http://www.finance.gov.sk.ca/ProvincialSalesTaxForms
Inventory & Internal Credits •
The change in tax application begins after March 31, 2017. At this point, contractors will be able to purchase eligible supplies PST exempt.
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Inventory on hand as of March 31, 2017, will be eligible for a credit of PST paid providing this inventory will form part of the supply to your customer on a PST taxable basis.
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You can claim a PST credit for that inventory. It is claimed on the next available return by reducing PST collectible but it cannot generate a refund. Any excess PST credits will be claimed in the next available PST return.
Additional Information •
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Information Notices, Bulletins and Website are updated on a regular basis. Questions can be sent to an Information Officer via phone, mail, email, or Fax. Toll Free 1-800-667-6102 Regina 306-787-6645 E-mail: sask.tax.info@gov.sk.ca Fax: 306-787-9644 To receive automatic e-mail notification when a bulletin or notice is revised, go to www.finance.gov.sk.ca/taxes, click on the “What’s New” information then click on the “subscribe” button.