Regulations Amending Various GST/HST Regulations, No. 13: SOR/2024-151

Canada Gazette, Part II, Volume 158, Number 14

Registration
SOR/2024-151 June 21, 2024

EXCISE TAX ACT

P.C. 2024-806 June 21, 2024

Her Excellency the Governor General in Council, on the recommendation of the Minister of Finance, makes the annexed Regulations Amending Various GST/HST Regulations, No. 13 under sections 277^{footnote a} and 277.1^{footnote b} of the Excise Tax Act ^{footnote c}.

Regulations Amending Various GST/HST Regulations, No. 13

Public Service Body Rebate (GST/HST) Regulations

1 (1) Subparagraph 5(c)(ii) of the Public Service Body Rebate (GST/HST) Regulations ^{footnote 1} is amended by striking out “and” at the end of clause (A), by adding “and” at the end of clause (B) and by adding the following after clause (B):

• (C) New Brunswick, 100%,

(2) Subparagraph 5(c)(iii) of the Regulations is amended by striking out “and” at the end of clause (A), by adding “and” at the end of clause (B) and by adding the following after clause (B):

• (C) New Brunswick, 100%,

(3) Paragraph 5(c) of the Regulations is amended by adding the following after subparagraph (iv):

• (iv.1) in the case of a public college that is resident in New Brunswick, 100%,

2 (1) Clause (i)(A) of the description of A in paragraph 5.4(2)(b) of the Regulations is replaced by the following:

• (A) a selected public service body described in any of paragraphs (a) to (e) of the definition selected public service body in subsection 259(1) of the Act that is resident in the participating province (other than a public college that is resident in New Brunswick) and the specified provincial percentage applicable to that selected public service body is 0%,

(2) The portion of subparagraph 5.4(2)(h)(ii) of the Regulations before the formula is replaced by the following:

• (ii) all amounts, each of which is determined — in relation to a provincial qualifying amount in respect of the property or service for the claim period for each participating province (other than New Brunswick) in which the person is resident — by the formula

(3) Subsection 5.4(2) of the Regulations is amended by adding the following after paragraph (i):

• (j) in the case of a person resident in New Brunswick that is a public college, the total of all amounts, each of which is determined — in relation to a provincial qualifying amount in respect of the property or service for the claim period — by the formula

  A × B × C

  where

  A

  is 50%,

  B

  is the provincial qualifying amount, and

  C

  is the extent (expressed as a percentage) to which the person intended, at the relevant time, to consume, use or supply the property or service, in the course of activities engaged in by the person in the course of operating a post-secondary college or post-secondary technical institute in New Brunswick,

Streamlined Accounting (GST/HST) Regulations

3 (1) Paragraph 19(3)(b) of the Streamlined Accounting (GST/HST) Regulations ^{footnote 2} is amended by adding the following after subparagraph (ii):

• (ii.1) if the registrant makes the particular supply through a permanent establishment of the registrant in New Brunswick,
  • (A) 11.1%, if the particular supply is made in Ontario,
  • (B) 12.7%, if the particular supply is made in Nova Scotia, New Brunswick, Prince Edward Island or Newfoundland and Labrador, and
  • (C) 4.4%, if the particular supply is made in a non-participating province,

(2) The portion of subparagraph 19(3)(b)(iii) of the Regulations before clause (A) is replaced by the following:

• (iii) if the registrant makes the particular supply through a permanent establishment of the registrant in Prince Edward Island or Newfoundland and Labrador,

(3) The portion of paragraph 19(3)(c) of the Regulations before subparagraph (i) is replaced by the following:

• (c) in the case of a registrant that makes the particular supply in the course of an activity engaged in by the registrant in the registrant’s capacity as a university or public college and otherwise than through a permanent establishment of the registrant in New Brunswick,

(4) The portion of clause 19(3)(c)(i)(C) of the Regulations before subclause (I) is replaced by the following:

• (C) if the registrant makes the particular supply through a permanent establishment of the registrant in Prince Edward Island or Newfoundland and Labrador,

(5) Subsection 19(3) of the Regulations is amended by adding the following after paragraph (c):

• (c.1) in the case of a registrant that makes the particular supply in the course of an activity engaged in by the registrant in the registrant’s capacity as a university through a permanent establishment of the registrant in New Brunswick,
  • (i) if the condition described in the portion of subparagraph (c)(i) before clause (A) is satisfied in respect of the registrant,
    • (A) 7%, if the particular supply is made in Ontario,
    • (B) 8.6%, if the particular supply is made in Nova Scotia, New Brunswick, Prince Edward Island or Newfoundland and Labrador, and
    • (C) 0%, if the particular supply is made in a non-participating province, and
  • (ii) if subparagraph (i) does not apply,
    • (A) 8.9%, if the particular supply is made in Ontario,
    • (B) 10.5%, if the particular supply is made in Nova Scotia, New Brunswick, Prince Edward Island or Newfoundland and Labrador, and
    • (C) 2%, if the particular supply is made in a non-participating province;
• (c.2) in the case of a registrant that makes the particular supply in the course of an activity engaged in by the registrant in the registrant’s capacity as a public college through a permanent establishment of the registrant in New Brunswick,
  • (i) if the condition described in the portion of subparagraph (c)(i) before clause (A) is satisfied in respect of the registrant,
    • (A) 10.9%, if the particular supply is made in Ontario,
    • (B) 12.4%, if the particular supply is made in Nova Scotia, New Brunswick, Prince Edward Island or Newfoundland and Labrador, and
    • (C) 4.1%, if the particular supply is made in a non-participating province, and
  • (ii) if subparagraph (i) does not apply,
    • (A) 11.1%, if the particular supply is made in Ontario,
    • (B) 12.7%, if the particular supply is made in Nova Scotia, New Brunswick, Prince Edward Island or Newfoundland and Labrador, and
    • (C) 4.4%, if the particular supply is made in a non-participating province;

(6) The portion of paragraph 19(3)(d) of the Regulations before subparagraph (i) is replaced by the following:

• (d) in the case of a registrant that makes the particular supply in the course of an activity engaged in by the registrant acting in the registrant’s capacity as an external supplier, a facility operator or a hospital authority and otherwise than through a permanent establishment of the registrant in New Brunswick,

(7) The portion of subparagraph 19(3)(d)(iii) of the Regulations before clause (A) is replaced by the following:

• (iii) if the registrant makes the particular supply through a permanent establishment of the registrant in Prince Edward Island or Newfoundland and Labrador,

(8) Subsection 19(3) of the Regulations is amended by striking out “and” at the end of paragraph (d) and by adding the following after paragraph (d):

• (d.1) in the case of a registrant that makes the particular supply in the course of an activity engaged in by the registrant acting in the registrant’s capacity as an external supplier or a facility operator through a permanent establishment of the registrant in New Brunswick,
  • (i) 8.5%, if the particular supply is made in Ontario,
  • (ii) 10.1%, if the particular supply is made in Nova Scotia, New Brunswick, Prince Edward Island or Newfoundland and Labrador, and
  • (iii) 1.6%, if the particular supply is made in a non-participating province;
• (d.2) in the case of a registrant that makes the particular supply in the course of an activity engaged in by the registrant acting in the registrant’s capacity as a hospital authority through a permanent establishment of the registrant in New Brunswick,
  • (i) 11.3%, if the particular supply is made in Ontario,
  • (ii) 12.8%, if the particular supply is made in Nova Scotia, New Brunswick, Prince Edward Island or Newfoundland and Labrador, and
  • (iii) 4.5%, if the particular supply is made in a non-participating province; and

New Harmonized Value-added Tax System Regulations

4 The New Harmonized Value-added Tax System Regulations ^{footnote 3} are amended by adding the following after section 58.63:

PART 3.7
New Brunswick — 2024 Rebate Change for Hospital Authorities, School Authorities and Public Colleges

Definitions

58.64 (1) The following definitions apply in this section.

initial supply

of property by a person means

• (a) if any supply by way of sale of the property was made by the person after December 1, 2023 but before April 2024, the last supply by way of sale of the property made by the person before April 2024; and
• (b) in any other case, the first supply by way of sale of the property made by the person after March 2024. (fourniture initiale)

rebate entitlement

means the amount of a rebate that a person is entitled to claim under section 259 of the Act in respect of an acquisition of property or that the person would have been so entitled to claim if the property had been acquired for use exclusively in activities that are not commercial activities. (remboursement admissible)

specified portion of the basic tax content,

at any time, of property of a person means the amount that would be the basic tax content of the property at that time if only amounts of tax under subsection 165(2), sections 212.1 and 218.1 and Division IV.1 of Part IX of the Act were included in determining that basic tax content. (fraction déterminée de teneur en taxe)

specified tax

means an amount of tax payable under subsection 165(2), section 212.1 or 218.1 or Division IV.1 of Part IX of the Act. (taxe déterminée)

Limitation — New Brunswick

(2) For the purposes of determining the rebate entitlement of a person for a claim period, as defined in subsection 259(1) of the Act, of the person that ends after March 2024 in respect of all amounts of specified tax that are payable in respect of an acquisition of property by the person after the person last made a supply of the property by way of sale and that are included in the provincial qualifying amount, as defined in section 2 of the Public Service Body Rebate (GST/HST) Regulations, in respect of the property for the claim period of the person, or would have been so included if the property had been acquired for use exclusively in activities that are not commercial activities, that rebate entitlement (in this section referred to as the “specified rebate entitlement”) is to be adjusted, as applicable, in accordance with the rules set out in subsection (3) if

• (a) the property is property of the person at any time before April 2024;
• (b) the person makes a particular taxable supply by way of sale of the property after December 1, 2023;
• (c) the person is the recipient of another taxable supply of the property (in this section referred to as the “reacquisition”) after the time at which the particular taxable supply was made and an amount of specified tax in respect of the reacquisition becomes payable, or is paid without having become payable, on a particular day that is after March 2024;
• (d) on the last day of the claim period of the person that includes the particular day, or on the last day of the person’s fiscal year that includes that claim period, the person is a hospital authority, school authority or public college; and
• (e) the particular taxable supply and the reacquisition of the property are part of a transaction or series of transactions that may not reasonably be considered to have been undertaken or arranged primarily for bona fide purposes other than to, directly or indirectly, benefit in any manner from a change made to the specified provincial percentage, as defined in subsection 259(1) of the Act, applicable to the person in relation to New Brunswick as a result of the Regulations Amending Various GST/HST Regulations, No. 13 being made.

Amount of reduction

(3) For the purposes of subsection (2), the adjustment rules are the following:

• (a) if the reacquisition is a supply by way of sale, the specified rebate entitlement is reduced by the amount determined by the formula

  A − B

  where

  A

  is the specified portion of the basic tax content of the property at the time at which the initial supply of the property was made, and

  B

  is the amount that would be, if no improvements had been made by the person to the property since the last acquisition of the property by the person and in the absence of this paragraph, the specified portion of the basic tax content of the property at the end of the claim period; and

• (b) if the reacquisition is a supply made otherwise than by way of sale,
  • (i) if the total (in this paragraph referred to as the “total tax”) of all amounts — each of which is an amount of specified tax in respect of an acquisition of the property by the person after the person last made a supply of the property by way of sale that becomes payable, or is paid without having become payable, during the claim period — is less than the specified portion of the basic tax content of the property at the time at which the initial supply of the property was made, the specified rebate entitlement is nil, or
  • (ii) if subparagraph (i) does not apply and the total tax minus the amount that would be the specified rebate entitlement in the absence of this subparagraph is less than the specified portion of the basic tax content of the property at the time at which the initial supply of the property was made, the specified rebate entitlement is the amount determined by the formula

  A − B

  where

  A

  is the total tax, and

  B

  is the specified portion of the basic tax content of the property at the time at which the initial supply of the property was made.

Application and Coming into Force

5 Sections 1 and 2 apply for the purpose of determining a rebate, under section 259 of the Excise Tax Act, of a person for any claim period ending after March 2024, except that the rebate is to be determined as if sections 1 and 2 had not come into force for the purpose of determining a rebate of a person for the claim period of the person that includes April 1, 2024 in respect of

• (a) an amount of tax that became payable by the person before April 2024;
• (b) an amount that is deemed to have been paid or collected by the person before April 2024; or
• (c) an amount that is required to be added in determining the person’s net tax as a result of
  • (i) a branch or division of the person becoming a small supplier division before April 2024, or
  • (ii) the person ceasing to be a registrant before April 2024.

6 Section 3 applies for the purpose of determining the net tax of a registrant for reporting periods ending after March 2024, except that the special quick-method rate of the registrant for the reporting period of the registrant that includes April 1, 2024 and that applies in respect of a supply is, in respect of consideration for the supply that is paid or becomes due before April 2024, the special quick-method rate of the registrant for that reporting period that would apply if that section had not come into force.

7 Section 4 is deemed to have come into force on December 1, 2023.

REGULATORY IMPACT ANALYSIS STATEMENT

(This statement is not part of the Regulations.)

Issues

The Government of New Brunswick has requested the implementation of a 100% rebate of the provincial component of the Harmonized Sales Tax (HST) for hospital authorities, school authorities and public colleges. The introduction of this measure is a provincial tax policy decision with implementation under federal regulations. Therefore, amendments to various Goods and Services Tax/Harmonized Sales Tax (GST/HST) regulations are needed.

Background

Reciprocal taxation

Under the Constitution Act, 1867 (the Constitution), the property of the federal and provincial governments is immune from taxation. Since 1991, the Governments of Canada and New Brunswick have been operating under a letter of agreement governing the payment of certain taxes and fees in defined circumstances.

Following negotiations, the two governments have agreed to replace the 1991 letter of agreement with a comprehensive Reciprocal Taxation Agreement (RTA), effective April 1, 2024. RTAs are bilateral agreements under which the federal and participating provincial governments agree to pay each other’s specified taxes and fees for administrative simplicity. RTAs are intended to reduce complexity for vendors and administrators while ensuring that certain government entities pay taxes where appropriate: for example, where they are in direct competition with private businesses. With the coming into force of the Canada-New Brunswick RTA on April 1, 2024, Canada has comprehensive RTAs with all provinces and territories except Alberta.

Prior to April 1, 2024, eligible New Brunswick hospital authorities, school authorities and public colleges were entitled to a 100% rebate of the GST/HST based on immunity under the Constitution. Under the new RTA, starting April 1, 2024, these entities are no longer eligible for that rebate. Instead, under the terms of the RTA, New Brunswick has requested that the federal government implement a 100% public service body rebate of the provincial component of the HST for hospital authorities, school authorities and public colleges.

Application of the HST in New Brunswick

The Canada-New Brunswick Comprehensive Integrated Tax Coordination Agreement (CITCA) is a separate federal-provincial agreement that sets out the parameters that govern the HST in New Brunswick. The HST is levied under federal legislation on the same tax base as the GST and is administered by the Canada Revenue Agency. Under the CITCA, New Brunswick is entitled to some elements of provincial tax policy flexibility, such as establishing the rate of the provincial component of the HST, limited point-of-sale rebates for the provincial component of the HST and the rate of some targeted provincial rebates, including the public service body rebates for hospital authorities, school authorities and public colleges.

Under the Excise Tax Act, the legislation that governs the GST/HST, a change in the provincial component of the HST is made by way of federal regulations. The GST/HST legislation also sets out a framework to accommodate an HST participating province’s decision to make tax policy changes pursuant to their provincial tax policy flexibility permitted under the CITCA.

Recovery of the federal portion of the HST

As of April 1, 2024, eligible New Brunswick hospital authorities, school authorities and public colleges will use the existing public service body rebate system to recover the federal portion of the HST. Hospital authorities will be eligible for a rebate of 83% of the federal portion of the HST, school authorities a 68% rebate of the federal portion of the HST, and public colleges a 67% rebate of the federal portion of the HST.

Announcements

The Government of New Brunswick announced the introduction of the 100% rebate of the provincial component of the HST in a motion tabled in the Legislative Assembly of New Brunswick on December 1, 2023. This motion was debated and carried on December 8, 2023.

On March 21, 2024, New Brunswick announced details of the rules relating to the parameters of the rebate for hospital authorities, school authorities and public colleges and consequential amendments.

Regulations are required to implement, in accordance with the CITCA, the decision by New Brunswick to introduce this rebate.

Objective

The overall objective of the Regulations Amending Various GST/HST Regulations, No. 13 (the Amending Regulations) is to amend existing GST/HST regulations made under the Excise Tax Act to formalize and give legal effect to New Brunswick’s decision to introduce a rebate of the provincial component of the HST for hospital authorities, school authorities and public colleges. The regulatory amendments are necessary for Canada to fulfill its obligations under the Canada-New Brunswick CITCA.

Description

The Amending Regulations amend the following regulations:

• Public Service Body Rebate (GST/HST) Regulations. The amendments to these regulations implement the rebate of the provincial component of the HST in New Brunswick for hospital authorities, school authorities and public colleges.
• Streamlined Accounting (GST/HST) Regulations. Certain optional streamlined accounting methods under the GST/HST permit certain suppliers, including eligible public service bodies, to multiply eligible GST/HST-included sales revenue by a specified percentage and remit that amount to the government in lieu of tracking the GST/HST that they collect on sales and pay on inputs to those sales. The amendments to these regulations set out revised specified percentages that are required for those methods as a result of the introduction of the rebate for hospital authorities, school authorities and public colleges in New Brunswick.
• New Harmonized Value-added Tax System Regulations. These regulations contain various rules that relate to the HST. To facilitate an orderly transition to the introduction of the rebate for hospital authorities, school authorities and public colleges, amendments to these regulations introduce an anti-avoidance transitional rule. This rule could reduce the amount of a rebate otherwise available in respect of certain specific transactions, such as a sale and buyback of property, which was originally acquired before the introduction of the rebate, where the transactions were entered into without a bona fide purpose other than benefiting from the rebate.

Regulatory development

Consultation

The Amending Regulations amend existing GST/HST regulations made under the Excise Tax Act to formalize and give legal effect to New Brunswick’s decision to introduce a rebate of the provincial component of the HST for hospital authorities, school authorities and public colleges. The Government of New Brunswick has requested these changes and has been consulted.

The Amending Regulations were exempted from the requirement to prepublish regulations in the Canada Gazette, Part I, because they are implementing a matter of provincial tax policy which has already been announced by the Government of New Brunswick.

Modern treaty obligations and Indigenous engagement and consultation

No impacts have been identified in respect of the government’s obligations in relation to Indigenous rights protected by section 35 of the Constitution Act, 1982, modern treaties or international human rights obligations.

Instrument choice

Under the Excise Tax Act, the Governor in Council has the authority to make regulations related to the application of the GST/HST. The Amending Regulations are a necessary and appropriate mechanism for Canada to fulfill its obligations under the CITCA to implement New Brunswick’s desired tax changes. Therefore, no other instruments were considered.

Regulatory analysis

Benefits and costs

By codifying the previously announced rules, the Amending Regulations provide certainty about the legal application of the rules to taxpayers and tax practitioners. No impacts on business are anticipated.

The Amending Regulations formalize and give legal effect to New Brunswick’s decision to introduce a rebate of the provincial component of the HST for hospital authorities, school authorities and public colleges. Any benefits and costs of the rebate are attributable to New Brunswick. The Amending Regulations are necessary for Canada to fulfill its obligations under the Canada-New Brunswick CITCA.

The Amending Regulations will be administered and enforced as part of the existing HST regime under the Excise Tax Act, so there are no incremental costs for their administration and enforcement. There would be minor costs related to introducing the rebate. The Canada Revenue Agency would incur minimal costs to update forms, systems, and training materials, as well as outreach strategies to prepare affected entities for the proposed changes. Hospital authorities, school authorities and public colleges in New Brunswick would incur minor costs to update their own systems to transition to the new rebate.

Small business lens

Analysis under the small business lens concluded that the Amending Regulations will not impact Canadian small businesses.

One-for-one rule

The one-for-one rule does not apply, as there is no impact on businesses.

Regulatory cooperation and alignment

The introduction of a rebate of the provincial component of the HST is linked to the Canada-New Brunswick CITCA, which is a Canadian intergovernmental agreement. The Amending Regulations are necessary for Canada to fulfill its obligations under the CITCA to implement the province’s desired tax changes to which it is entitled under the CITCA.

Strategic environmental assessment

The introduction of a rebate of the provincial component of the HST is a tax policy decision of the province and not the federal government. Any environmental impacts associated with this measure would be attributable solely to provincial policy decisions and not to changes made to the GST/HST regulations.

Gender-based analysis plus

The introduction of a rebate of the provincial component of the HST is a tax policy decision of the province and not the federal government. Any gender-based analysis plus (GBA+) impacts associated with this measure would be attributable solely to provincial policy decisions and not to changes made to the GST/HST regulations.

Implementation, compliance and enforcement, and service standards

The Amending Regulations will be administered by the Canada Revenue Agency. The rebate of the provincial component of the HST for hospital authorities, school authorities and public colleges generally comes into force on April 1, 2024.

Contacts

Dominic DiFruscio
Director
GST/HST General Operations and Border Issues
Sales Tax Division
Department of Finance
90 Elgin Street
Ottawa, Ontario
K1A 0G5
Email: Dominic.DiFruscio@fin.gc.ca

Carol Gaudet
Director
Public Service Bodies and Governments Division
GST/HST Rulings Directorate
Canada Revenue Agency
320 Queen Street
Ottawa, Ontario
K1A 0L5
Email: Carol.Gaudet@cra-arc.gc.ca