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10/09 - W. Michael Thomas
CFP, CLU, GBA, RPA, CH.F.C., R.F.P.

    

Harmonized Sales Tax

How Will It Affect Group Insurance Premiums?

Both British Columbia and Ontario have entered agreements with the Federal Government with the intention to harmonize their provincial sales tax with the 5% GST.

The end result is that a single sales tax would apply to most goods and services in those provinces and be administered by the Federal Government’s Canada Revenue Agency and Canada Border Services Agency.

What is a HST?
The single sales tax, referred to as British Columbia Value-Added Tax (BCVAT) or Ontario Value-Added Tax (OVAT), will replace the provincial sales tax in each of those provinces.  The BCVAT and OVAT are often referred to as the Harmonized Sales Tax (HST).

British Columbia’s HST will be 12% and Ontario’s HST will be 13%.

How will HST impact employee benefit plans?
It is uncertain how the new HST will impact employee benefit plans.  Currently:
BC’s provincial sales tax of 7% does not apply to employee benefit plans.
Ontario’s provincial sales tax of 8% does apply to employee benefit plans.

It is anticipated that the introduction of the HST will not affect the current treatment of employee benefit plans.  BC will likely continue not taxing employee benefit plans and Ontario will likely continue taxing employee benefit plans at 8%.

However, there are some services that are subject to the current GST of 5%.  Most notably, GST is charged on the service fees on most ASO plans.  It is not clear at this point how the introduction of the HST will affect the taxation of ASO service fees.

When can we expect more information on the new tax?
British Columbia and Ontario has introduced legislation to implement the HST July 1, 2010.

To learn more, go to www.rev.gov.on.ca/en/taxchange/index.html and
www.sbr.gov.bc.ca/business/consumer_taxes/harmonized_sales_tax/hst.html

W. Michael Thomas is a Partner at The Investment Guild (the Investment Guild is a People Corporation company)


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