INDIRECT TAX KPMG LLP B.C. Harmonization Golf Club Operators Association B.C. Chapter November 11,...

INDIRECT TAX

KPMG LLP

B.C. HarmonizationGolf Club Operators AssociationB.C. Chapter

November 11, 2009

KPMG and the KPMG logo are registered trademarks of KPMG International, a Swiss cooperative. © 2009 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved.

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B.C. HarmonizationAgenda

• HST Overview

• Application to Golf Club Operations

• Transition Rules

• Planning / Implementation


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HST Overview


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B.C. Harmonization Overview

• Effective July 1, 2010, proposed 12% HST

• 5% federal component and 7% provincial component

• NOT a new tax

• Same general rules and tax base as GST

• Some differences

• Federally administered

• One return/one administration/one audit


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• Consequential sales tax changes• Social Service Tax (PST)

- 7% PST on TPP, certain services, telecom, parking eliminated•PST on private sales of used vehicles, aircraft and boats retained

- $5 tire and battery levy eliminated- .4% ICE levy eliminated- $1.50 per day vehicle rental eliminated

• Hotel Room Tax- 8% HRT eliminated- 2% tax collected for eligible municipalities retained to July 1,

2011• Liquor Markups

- Adjusted to ensure no revenue loss


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B.C. HarmonizationOverview

• Differences between B.C. HST and GST:

• Point-of-sale rebates

• Residential energy rebates

• Input tax credit (ITC) restrictions

• No B.C. HST collected on commercial imports

• Public service body (PSB) rebates calculated at different rates

• New housing rebates calculated on different amounts


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• Point-of-sale rebates for B.C. HST on purchases by consumers:

• Books

• Children’s clothing and footwear

• Children’s car seats and car booster seats

• Diapers and feminine hygiene products

• Gasoline, diesel fuel, marine diesel fuel and aviation fuel including bio-fuel components for motor vehicles, boats and aircraft



• Residential energy rebate

• Provincially administered rebate for energy (e.g., natural gas, electricity) acquired for residential use

• Mechanics of rebate not yet determined


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• Temporary ITC restrictions for Large Businesses (over $10M taxable sales) and financial institutions (FIs)

• As per MOA, full denial up to 5 years with 3-year phase-out, subject to acceleration by B.C.

• ITCs denied for provincial portion of B.C. HST for the following:• Energy, except where purchased by farmers or used to produce

goods for sale • Telecommunications services other than internet access and toll-

free numbers • Road vehicles weighing less than 3,000 kilograms (and parts and

certain services) • Meals, beverages and entertainment


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• Generally reduced costs for businesses given no more unrecoverable PST (subject to ITC restrictions):

• Reduced compliance: • No exemption certificates• No dealing with PST complexities

-Scope of exemptions

-Goods for own use

-Self-assessment

• One return and one audit


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• Export

- Positive (subject to cash flow concerns)

• ENR / Manufacturing / Wholesale

- Generally positive

• Retail

- Mixed – goods positive, services negative (at least in short term)

• Financial Services

- Negative, costly and complex

• Hospitality

- Negative to some components (at least in short term)

• Real Estate

- Mixed – commercial positive, residential negative

• Public sector

- Mixed

Harmonization – Impact by Sector


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Application to Golf Club Operations


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B.C. HarmonizationGolf Club Revenues

• Any revenues currently subject to 5% GST will now be subject to 12% HST

• Green fees

• Lessons

• Club dues

• Equipment rentals

• Pro shop sales

-Children’s clothing?


B.C. HarmonizationGolf Club Expenditures

• Will cease paying PST on any expenditures currently subject to PST

-Materials and equipment

-Equipment Repair and Maintenance Costs

-Telecommunications

-Energy (electricity / natural gas)

-Legal services

• Will pay HST on all expenditures currently subject to GST• Can claim ITC for all HST unless revenues over $10M in which case

restricted from claiming on energy and telcom


B.C. HarmonizationGolf Club Impact

• Some reduction in costs but likely not significant

• 7% cost increase in cost to consumer (except on items currently subject to PST – cart rentals, pro shop sales)

• Will consumers accept increase?


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Transitional Rules


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B.C. HarmonizationTransitional Rules (Other Than Residential Housing)

• Important dates:

October 14,2009

July 1, 2010

Announcement date Harmonization

May 1, 2010

Specified pre-implementation

date


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B.C. HarmonizationTransitional Rules – General

GST (and PST where applicable) apply to property and services supplied prior to July 2010

HST applies to property and services supplied after June 2010


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B.C. HarmonizationTransitional Rules - Prepayments

•Club Dues• HST applicable to club dues payable after April 2010 to the extent period

covered is post June 2010- E.g. – annual payment on May 1, 2010 – HST collectible on 10/12’s of payment

- E.g. – quarterly payment on June 1, 2010 – HST collectible on 2/3 of payment

- E.g. – annual payment on April 1, 2010 – no HST

•Memberships• Same rules as club dues except lifetime memberships

- Where consideration for lifetime membership is payable after October 14, 2009 and before July 2010 and that consideration exceeds 25% of total consideration for membership the amount in excess of 25% is subject to HST.


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B.C. HarmonizationTransitional Rules – Prepayments

•Lesson Packages- HST applies where package sold after April 2010 to the extent lessons

will take place after June 2010 unless 90% or more take place prior to July 2010

• E.g. – 10 lesson package sold June 1 for 5 lessons each in June and July, HST applies to 50%

•Power Cart Rental Packages- HST applies where package sold after April 2010 to the extent rentals will

be after June 2010 – issue how to apply given timing uncertain• Charge GST/PST and reallocate based on actual use?

• Allocate based on time covered?


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B.C. HarmonizationTransitional Rules – Prepayments

•Green Fee Packages• HST applies where package sold after April 2010 to the extent package

covers post June 2010 period- Charge based on time period covered?


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Planning/Implementation


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B.C. HarmonizationAre You Ready?

• Have you considered the following? (in no particular order)

B.C. Announcement

July 23, 2009 How will the transitional rules apply?

What about tax saving

opportunities?

What are the differences

between GST and HST?

B.C. HST July 1, 2010

How much will it cost?

Will we need to hire and budget

for external resources?

How will our cash flow be

affected?

Will our IT

systems be

ready?

Should we provide GST

refresher training?

Can our software handle the

required changes? Do we need an

internal implementation

committee?

What is our implementation

strategy?

Should we develop a detailed

implementation plan?


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B.C. HarmonizationPlanning Considerations

• Defer purchases of PST-taxable items

• e.g., new mowing machinces


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Presenter’s contact details

Information is current to October 15, 2009. The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

KPMG and the KPMG logo are registered trademarks of KPMG International, a Swiss cooperative.

Mark WorrallKPMG LLP(604) 691-3106 [email protected]

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