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
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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HST Overview
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. 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
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. Harmonization Overview
• 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
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. 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
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. Harmonization Overview
• 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
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.
B.C. Harmonization Overview
• Residential energy rebate
• Provincially administered rebate for energy (e.g., natural gas, electricity) acquired for residential use
• Mechanics of rebate not yet determined
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. Harmonization Overview
• 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
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. Harmonization Overview
• 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
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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• 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
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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Application to Golf Club Operations
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. 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?
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.
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
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.
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?
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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Transitional Rules
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. HarmonizationTransitional Rules (Other Than Residential Housing)
• Important dates:
October 14,2009
July 1, 2010
Announcement date Harmonization
May 1, 2010
Specified pre-implementation
date
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. 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
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. 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.
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. 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?
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. 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?
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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Planning/Implementation
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. 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?
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. HarmonizationPlanning Considerations
• Defer purchases of PST-taxable items
• e.g., new mowing machinces
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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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]