The Harmonized Sales Tax (HST) has been a touchy subject in British Columbia ever since it was introduced in July 2010. Since then, the public has launched multiple campaigns against the HST, citing that a 12% sales tax is just too much for consumers to pay. In fact, under the HST, families pay an average of $350 MORE in sales tax than they paid under the PST plus GST system.

With so much negative feedback regarding the HST, the provincial government has nevertheless agreed to hold a referendum on the matter this June. A “Yes” vote would mean returning to the old system of PST plus GST at 12% sales tax. A “No” vote would mean keeping the HST, but lowering it down to 10% by July 2014.

As it turns out, the Province has indeed been listening to the complaints of British Columbians and a law will be passed governing the HST following a “No” vote this summer. This means the tax would go down to 6% by July 1, 2012 and down to 5% on July 1, 2014. The result would be a 10% HST. This is much lower than both the current 12% sales tax and the two-tax system of PST plus GST.  It is estimated that under a 10% HST, B.C. families will pay on average $120 less tax than under the PST. This tax comparison chart from HST in BC shows what this change could bring:

In addition, the government will be issuing one-time transition cheques to help offset the costs of HST before the first rate reduction in 2012. Both families with children under 18 years old and low- and modest-income seniors will receive cheques of $175 by the end of 2011. Furthermore, the government will increase the general corporate income tax rate to 12 percent on Jan 1, 2012 on big businesses, which is a temporary measure until the fiscal situation allows for further reductions.

The referendum ballots will be mailed out in June and must be returned to Elections B.C. or a Services B.C. office by 4:30pm on Friday, July 22, 2011.

Acton Accounting and Bookkeeping can guide you through the muddy waters of the HST changes and help you make an informed decision regarding the referendum. For more information on how a 10% HST will affect your family or a 12% HST will affect your business, we invite you to give us a call!

You may have heard about Tax Free Savings Accounts (TFSA) for individuals, which are a form of registered savings accounts. Introduced in January 2009, it’s a flexible, general-purpose savings vehicle that Canadians can use to earn tax-free investment income.

According to a CIBC World Markets report, the TFSA market could mushroom to $115 billion by 2013, with cumulative tax savings of nearly $2 billion. Here are some defining features of the TFSA (via http://www.tfsa.gc.ca/):

• Canadian residents age 18 or older can contribute up to $5,000 annually to a TFSA.

• Investment income earned in a TFSA is tax-free.

• Withdrawals from a TFSA are tax-free.

• Unused TFSA contribution room is carried forward and accumulates in future years.

• Full amount of withdrawals can be put back into the TFSA in future years. Re-contributing in the same year may result in an over-contribution amount which would be subject to a penalty tax.

• Choose from a wide range of investment options such as mutual funds, Guaranteed Investment Certificates (GICs) and bonds.

• Contributions are not tax-deductible.

• Neither income earned within a TFSA nor withdrawals from it affect eligibility for federal income-tested benefits and credits, such as Old Age Security, the Guaranteed Income Supplement, and the Canada Child Tax Benefit.

• Funds can be given to a spouse or common-law partner for them to invest in their TFSA.

• TFSA assets can generally be transferred to a spouse or common-law partner upon death.

Linda McQuaig explains that “While the annual contribution limits make the program appear modest, the sheltered amounts can grow very large over time. So, by the age of 40, an investor could have $220,000 in the account. But that’s only the beginning. Had the money had been well invested, that $220,000 could have grown to $500,000.”

The particularly useful thing about TFSA’s is that it can be accessed multiple times during your lifetime, which means that it can serve as a great emergency fund while still earning you interest on your investments.

Consensus appears to be that TFSA’s are particularly good for low income Canadians or seniors over the age of 71 because there is no cut off period unlike an RRSP. Nonetheless, Canadians at all income levels could benefit from investing in a TFSA, especially with the high potential for lucrative returns over their lifetime.

If you would like to learn more about how Tax Free Savings Accounts can benefit you and your family, feel free tocontact Acton Accounting and Bookkeeping and we’ll be happy to answer your questions.

British Columbia Provincial Service Tax (PST) was charged on most new and used products and many services. As of February 21, 2007, registration and collection of PST was optional for those who had gross sales of qualifying goods and services in the past twelve months of $10,000 or less. As at July 1, 2010, PST 7% no longer exists as it is now replaced by the Harmonized Sales Tax (HST) 12%.

Some items which were exempt from PST in BC included:

• Clothing patterns, and yarn or fabrics purchased for the purpose of making ore repairing clothing

• Food products

• Clothing and footwear for children 14 and under

• Abrasives used in a business

• Books, newspapers, and magazines

• Insulation

• Smoke alarms

• Specified energy conservation materials

• Bicycles

• Many medications sold on the prescription of a physician, dentist, or veterinarian

• Equipment rental

• Work-related safety equipment

• General safety equipment

A taxable service in BC was any service provided to install, assemble, dismantle, repair, adjust, restore, recondition, refinish or maintain tangible personal property; such as repairs or maintenance of automobiles, furniture, computers, televisions, watches, business equipment, software, gas, and electricity.

You must register for a PST account if you:

• Regularly sold taxable goods

• Leased Taxable goods as a lessor

• Provided legal services

• Sold parking rights within the Greater Vancouver transportation services region

• Provided taxable services

• Provided telecommunication services

• Sold propane

Reporting periods for PSTwas set at the time of registration based on what was reported as the estimated monthly PST collectable. PST return was to be filed and remitted by the 23rd of the month following the reporting period end date.

Contact Acton Accounting and Bookkeeping if you have any questions or need more information.

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Goods and services tax (GST 5%) is a tax that applies on most supplies of goods and services made in Canada. Examples of goods and services for which GST is not charged and collected include:

• Used residential housing

• Long-term residential accommodation

• Most health, medical, and dental services

• Child-care services

• Most domestic ferry services

• Legal aid services

• Many educational services or tutoring services

• Music lessons

• Most services provided by financial institutions

• Insurance policies

• Most goods and services provided by charities

Certain goods and services provided by non-profit organizations, governments, and other public service bodies.

Companies which provide taxable supplies in Canada, and have total revenues from taxable supplies of $30,000 or more in the last four consecutive calendar quarters must register for GST. When registering for GST, the reporting period should be the same as your fiscal year for income tax purposes. Input Tax Credits (ITC’s) can be claimed on the GST return to recover GST paid or owed on purchases and expenses for the business. When completing the GST return, deduct the total Input tax credits (ITC’s) for the reporting period from the GST collected and the result would be the net GST Refund (or payable ).

For companies with $500,000 or less in annual taxable revenues, there is an option to either have a quarterly reporting period or an annual reporting period. If your reporting period is monthly or quarterly, the filing and remittance deadline is one month after the end of the reporting period. If your reporting period is annual, the filing and remittance deadline is usually three months after the end of the reporting period.

For annual filers, if your net tax for the current or previous quarter is less than $3000, then paying quarterly installments is not necessary. For those who need to make installment payments, the deadline is one month after your fiscal quarter end date.

Effective July 1, 2010, GST 5% is replaced by Harmonized Sales Tax (HST) 12% in the province of British Columbia and HST 13% in the province of Ontario.

Please refer to article on HST in BC for more information.

Harmonized Sales Tax (HST) was implemented in Ontario and BC on July 1, 2010. The BC HST is to replace the existing PST, and GST at 12% for BC and 13% for Ontario. HST is administered by Canada Revenue Agency prior to July 1, 2010 in Nova Scotia, New Brunswick, Newfoundland and Labrador.

HST in BC includes certain rebates.

Point-of-sale rebates include:

•         Children’s clothing and footwear

•         Children’s car seats and car booster seats

•         Children’s diapers

•         Books (including audio books)

•         Feminine hygiene products

•         Motor fuel

No action is required for purchasers to take advantage of these point-of-sale rebates, as the retailer would automatically provide the purchaser with the point-of-sale rebate, crediting the B.C. component of the HST (7%) and only collecting the 5% federal component of the HST on that item. In the event that a purchaser does pay the B.C. component of the HST on the purchase of a designated point-of-sale rebate item, or in other words the retailer did not credit the B.C. Component of the HST to the purchases, the purchaser would be entitled to apply to the Canada Revenue Agency, within 4 years of the day that the tax became payable, for a rebate of the B.C. component of the HST paid.

New Housing Rebate

There is a common misconception that we must pay 12% HST on housing. The truth is HST at 12% only applies to a builder’s sales of a newly constructed or substantially renovated residential complex. Sale of housing previously occupied by an individual as a place of residence that is exempt from GST continues to be exempt from HST. Where the new house is purchased for use as a primary place of residence of the purchaser, the purchaser would be entitled to claim a B.C. new housing rebate of 71.43% of the provincial part of the HST, subject to a maximum rebate amount of $26,250.

Place of Supply Rules

HST Place of Supply rules for tangible properties has not changed. HST is applied based on the place at which the consumer has possession of the property or at the place the service is performed. HST Place of Supply rules for intangible personal property has changed to have less reliance on the supplier’s location and greater reliance on where the consumer of the intangible personal property or service is located.

Accounting & Reporting Requirements

Businesses already registered for GST are automatically registered for HST. Registrants will report their HST according to their GST filing frequency. If you are a business owner, you might ask, how does this affect my business’ profitability? All businesses can benefit from reduced paperwork and lower costs by combining the two taxes into one. The idea is that products will go down in price as farmers, manufacturers and other businesses will receive a 12% tax credit for the HST they pay; thus, the cost of making their products will go down. However, the downfall is that revenues can also go down if consumers are feeling the costs are higher with an added HST to pay. Another downfall can be a dip in cash flow as businesses have to spend more initially to pay HST on items they purchase.

Whether you should lease or buy a car depends mainly on cash flow and the interest rates. If interest rate on the lease is high, then financing is better. If monthly loan installments are too high, then leasing would be better. Leases also have 2 types – capital leases and operating leases. The difference between the two leases is that in an operating lease, there is an option for the lessee to buy the car at the end of the term of the lease. In a capital lease, the lessee must purchase the car or pay an option price as low as the final monthly lease payment. Therefore, capital leases are like financing your own car and should be treated as such.

If you use your car for business, certain amounts of your lease payments can be deducted for business. If you own the car, then certain amounts of the loan interests and depreciation of your car can be deducted. Your accountant will be able to calculate reasonable amounts to deduct at tax filing time. And so you may also wonder, would it be better to finance the purchase of the car or purchase it with cash? If your cash after tax is earning lower than that charged by the lender or the bank, then you probably should purchase with cash. Or course, this also depends on your cash flow.

Therefore, you will need to consider the following factors which affect a car lease in order for you to decide on whether you would prefer to lease or buy a car:

Acton Accounting and Bookkeeping Inc. starts a new bookkeeping special: save 50% on the first month with us! This special offer is valid for a limited time so hurry up signing up with us.

There are lots of benefits outsourcing your accounting and bookkeeping. Just like you can read on the flyer above, you realize costs saving thanks to the flexibility offered by outsourcing your bookkeeping work only when you need it.

Also, the accounting fee is variable, depending on the level of your business activity. Moreover, this is a cheaper way than hiring a permanent accountant or bookkeeper.

Our professional expertise in accounting and in particular tax planning will provide you new opportunities  as income can be projected prior to fiscal year end. Cash flow management ensures that the company will meet its financial obligations; or if there is a cash flow issue, the business owner is aware of it before the consequences are felt.

Your government remittances will always be made on time and accounting records are in order ensuring compliance with government regulations: you don’t have time to keep yourself updated? We do.

We will help increase your profitability as well, thanks to timely financial reports and analysis. And, finally, you won’t have to invest in new equipments and administrative features (computers software, desks, office space and personnel).

So if you are a stressed business owner who don’t want to deal with the bookkeeping part of your company, but want professional accounting services to be done on a regular basis, Acton Accounting and Bookkeeping Inc. is the company you need. Again, you will have 50% off the first month if you are a first time client and if you sign up with us for at least 3 months. Don’t wait any longer and call us at 604.737.8800 or contact us by email.

Taxable or Non-Taxable? People don’t really know what’s exactly going on with the Harmonized Sales Tax. Here is a table to see what is taxable.

Source: “Harmonized Sales Tax in Canada British Columbia Edition” prepared by BC’s CGAs.

Please read it carefully. If you still have second thoughts regarding HST, please contact Acton Accounting and Bookkeeping.

The Recession has had many detrimental effects on British Columbians for the last few years  and with the introduction of the HST many fear that the recession is more apparent than ever. Jim Sinclair President of the BC Federation of Labour states, “It’s the wrong tax, wrong time and for the wrong reasons.” He believes that “tax cuts haven’t worked in the past, leaving us with a legacy of closed schools, unfunded health care facilities and growing Unemployment.”  About a month ago, an Anti-HST petition has also been created which is causing a lot of controversy between BC residents and indeed the Government, moreover since opponents reached 10% of registered voters in 56 ridings out of 85 already.

On the other side, a report in The Vancouver Sun has illustrated that “Recession is now history in BC” according to an increase of good business news.  KPMG announced that “the host of the 2010 Winter games now offers the best business tax climate of 41 countries measured around the world.”

According to various surveys and reports there is evidence of an increase in business and a slight improvement in the economy however, this is insignificant news to the majority of households across BC who are finding it difficult to make ends meet.

CAD vs. US: Overview

Just one year ago, the Canadian Dollar was at its lowest exchange rate with US dollar since July 2005. This month, the Loonie reached the par and is expected to stay there within the next little while.

From January to March 2010, a dollar CAD was blocked at around 0.95 US dollar, when strong economic data and expectations for higher domestic interest rates were supporting the Loonie. CAD rose to parity for the first time since July 2008 earlier this month, on April 6th, and finally closed above parity about a week later on April 14th.

Why is the Canadian currency raising such a wave of popularity?

Like I said above, Canadian economic data are stronger then expected. In fact, Canada is now seen as the leader of economic grows this year (over other G7 countries). Such good results allow us to believe in expecting an early raise of the general interest rates by the Bank of Canada, while United States is still trying to recover from the economic downturn.

How will it affect Canadian investors’ behavior?

With a strongest national currency, the purchasing power of Canadians increases, making the foreign products relatively less expensive in CAD. Also, Canadians will have lots of opportunities on the foreign markets, in particular in real estate. Canadian companies can invest abroad, by means of taking stakes in foreign companies.

As of April 24^th the CAD/USD exchange rate was below par, but the expected trend is in favor of the Loonie beginning next week.