March 28, 2013

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Sickness and AD&D Plans

In a change affecting employers and employees, beginning in 2013, employer-paid premiums for critical illness insurance and accidental death and dismemberment (AD&D) insurance plans are now a taxable benefit. This change impacts traditional insurance plans as well as flexible benefit plans that allow employees to pay for benefits with funds provided by employers.

Mandatory E-Filing

Corporations have already gone paperless in terms of their tax return filing. This year, individual taxpayers must also take the paperless route if their taxes are prepared by a firm that prepares more than 10 T1s per year. Following this e-filing requirement is mandatory and applies to individual returns for tax years beginning in 2012.

Sales Tax Harmonization

As you know, British Columbia is reverting from Harmonized Sales Tax (HST) to separate Provincial Sales Tax (PST) and Goods and Services Tax (GST). The new PST for British Columbia will be 7% on taxable goods brought into the province, with the typical exceptions.

In an interesting twist highlighting that British Columbia is bucking the national movement towards HST, two provinces — Quebec and Prince Edward Island — will harmonize their provincial sales tax systems with the federal GST.

Quebec, unlike other provinces that have harmonized their sales tax, is keeping its own provincial tax act. Quebec’s new Quebec Sales Tax (QST) has increased to 9.975% (up from 9.5%), which results in a harmonized rate of 14.975%.

If your company charges sales tax in Quebec, the GST and the QST must be shown separately on invoices. Also, your company must now register for a federal business number and a provincial QST business number.

If you are in the financial services industry, note that providing financial services in Quebec has changed from being zero-rated to being exempt. This means that financial services providers doing business in Quebec can no longer claim an input tax refund of the QST paid on inputs to those services.

Prince Edward Island will harmonize its sales tax on April 1. The provincial component will be lowered to 9% (down from 10%) and the harmonized rate will be lowered to 14% (down from 15%). However, the harmonized tax allows for fewer exemptions. If your company is already GST-registered, no new harmonized sales tax (HST) registration is required.

If you were registered in British Columbia for a federal business number, you can still use your old business number for the GST, but will need to re-register for a PST business number.

 

For more information on any of these recent tax updates please contact one of your trusted tax advisors here.

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