Vol. 147, No. 24 — November 20, 2013

Registration SOR/2013-197 November 8, 2013

EXCISE TAX ACT

Regulations Amending Various GST/HST Regulations, No. 5

P.C. 2013-1150 November 7, 2013

His Excellency the Governor General in Council, on the recommendation of the Minister of Finance, pursuant to subsections 225.2(9) (see footnote a) and sections 236.01 (see footnote b), 277 (see footnote c) and 277.1 (see footnote d) of the Excise Tax Act (see footnote e), makes the annexed Regulations Amending Various GST/HST Regulations, No. 5.

REGULATIONS AMENDING VARIOUS GST/HST REGULATIONS, NO. 5

PART 1

SELECTED LISTED FINANCIAL INSTITUTIONS ATTRIBUTION METHOD (GST/HST) REGULATIONS

1. Section 40 of the Selected Listed Financial Institutions Attribution Method (GST/HST) Regulations (see footnote 1) is amended by striking out “and” at the end of paragraph (c), by adding “and” at the end of paragraph (d) and by adding the following after paragraph (d):

• (e) any particular amount of tax that became payable or was paid by a selected listed financial institution under any of subsection 165(2) and section 212.1 of the Act in respect of a supply or importation of property or a service in respect of which tax under any of subsection 165(1) and sections 212, 218 and 218.01 of the Act became payable by the financial institution, or was paid by the financial institution without having become payable, in a reporting period of the financial institution that ends before April 2013, provided that the particular amount of tax is payable as a consequence of the application of Part 3.1 of the New Harmonized Value-added Tax System Regulations or Divisions 2 and 3 of Part 9.1 of the New Harmonized Value-added Tax System Regulations, No. 2.

2. (1) The definition “qualifying energy” in subsection 42(1) of the Regulations is replaced by the following:

“qualifying energy”
« forme d’énergie admissible »

“qualifying energy” means specified energy, other than qualifying heating oil, that is a specified property or service.

(2) The definition “recapture rate” in subsection 42(1) of the Regulations is amended by striking out “and” at the end of paragraph (a), by adding “and” at the end of paragraph (b) and by adding the following after paragraph (b):

• (c) if the province is Prince Edward Island,
  • (i) in the case of a time that is on or after April 1, 2013 and before April 1, 2018, 100%,
  • (ii) in the case of a time that is on or after April 1, 2018 and before April 1, 2019, 75%,
  • (iii) in the case of a time that is on or after April 1, 2019 and before April 1, 2020, 50%,
  • (iv) in the case of a time that is on or after April 1, 2020 and before April 1, 2021, 25%, and
  • (v) in the case of a time that is on or after April 1, 2021, 0%.

(3) The portion of the definition “specified extent” in subsection 42(1) of the Regulations before paragraph (a) is replaced by the following:

“specified extent”
« mesure déterminée »

“specified extent” of property or a service in respect of a specified class of specified property or service, for a province that is Ontario, British Columbia or Prince Edward Island and for a reporting period of a person, means the percentage that is equal to

(4) The portion of subparagraph (a)(ii) of the definition “specified extent” in subsection 42(1) of the Regulations before clause (A) is replaced by the following:

• (ii) if the province is Ontario or Prince Edward Island and the specified property or service is provided to the person together with

(5) Subsection 42(1) of the Regulations is amended by adding the following in alphabetical order:

“qualifying heating oil”
« huile de chauffage admissible »

“qualifying heating oil” has the same meaning as in section 1 of the Deduction for Provincial Rebate (GST/HST) Regulations.

(6) Subsection 42(2) of the Regulations is amended by adding the following after paragraph (c):

• (c.1) qualifying heating oil;

(7) Subsection 42(4) of the Regulations is amended by striking out “and” at the end of paragraph (a) and by adding the following after that paragraph:

• (a.1) if the specified class is qualifying energy or qualifying heating oil, the percentage that would be the tax recovery rate of the financial institution for qualifying energy for the reporting period if the definition “qualifying energy” in subsection (1) were read without reference to “other than qualifying heating oil” and if the tax recovery rate were determined under paragraph (b); and

3. (1) The portion of paragraph 46(d) of the Regulations before the first formula is replaced by the following:

• (d) if the participating province is Ontario, British Columbia or Prince Edward Island, the positive or negative amount determined by the formula

(2) The description of C in subparagraph (i) of the description of G₁₉ in paragraph 46(d) of the Regulations is amended by adding the following after clause (B):

• (B.1) in the case where the specified class is qualifying heating oil and the participating province is Prince Edward Island, 0%,

(3) The portion of clause (C) of the description of C in subparagraph (i) of the description of G₁₉ in paragraph 46(d) of the Regulations before the formula is replaced by the following:

• (C) in the case where the specified class is qualifying energy or qualifying heating oil and the participating province is Ontario or British Columbia, the percentage determined by the formula

(4) The portion of subparagraph (i) of the description of G₂₃ in paragraph 46(d) of the Regulations before the formula is replaced by the following:

• (i) if the participating province is Ontario or British Columbia and if the particular reporting period begins before July 1, 2010 and ends on or after that day, the amount determined by the formula

(5) The portion of subparagraph (ii) of the description of G₂₃ in paragraph 46(d) of the Regulations before the formula is replaced by the following:

• (ii) if the participating province is Ontario or British Columbia and if the particular reporting period begins on or after July 1, 2010, the amount determined by the formula

(6) The description of G₂₃ in paragraph 46(d) of the Regulations is amended by striking out “or” at the end of subparagraph (i), by striking out “and” at the end of subparagraph (ii) and by adding the following after subparagraph (ii):

• (iii) if the participating province is Prince Edward Island and if the particular reporting period begins before April 1, 2013 and ends on or after that day, the amount determined by the formula
• A⁄B
• where
• A is the number of days in the particular reporting period after March 2013 on which the financial institution was a large business, and
  B is the number of days in the particular reporting period, or
• (iv) if the participating province is Prince Edward Island and if the particular reporting period begins on or after April 1, 2013, the amount determined by the formula
• (A × B)/C²
• where
• A is the total of all amounts, each of which is the recapture rate in respect of the province applicable on a day in the particular reporting period,
  B is the number of days in the particular reporting period on which the financial institution was a large business, and
• C is the number of days in the particular reporting period, and

(7) Section 46 of the Regulations is amended by striking out “and” at the end of paragraph (e) and by adding the following after paragraph (f):

• (g) if the participating province is Prince Edward Island, the positive or negative amount determined by the formula
• [(G₃₄ − G₃₅) × G₃₆ × (G₃₇⁄G₃₈)] − G₃₉
• where
• G₃₄ is the total of
  • (i) all amounts, each of which is an amount of tax under any of subsection 165(1) and sections 212, 218 and 218.01 of the Act that was paid or became payable by the financial institution before the beginning of the reporting period of the financial institution that includes April 1, 2013 and in respect of which the financial institution has claimed an input tax credit in the return for the particular reporting period under Division V of Part IX of the Act, to the extent that the amount was included in the total B amounts for the particular reporting period,
  • (ii) if the particular reporting period begins after March 2013, all amounts, each of which is determined by the following formula in respect of tax under any of subsection 165(1) and sections 212, 218 and 218.01 of the Act that was paid or became payable by the financial institution during another reporting period of the financial institution that includes April 1, 2013 and in respect of which the financial institution has claimed an input tax credit in the return for the particular reporting period under Division V of Part IX of the Act:
  • A × B × (C⁄D)
  • where
  • A is the amount of that tax,
  • B is the extent (expressed as a percentage) to which the amount of that tax was included in the total B amounts for the particular reporting period,
  • C is
    • (A) if the financial institution was a distributed investment plan in the other reporting period, the total of all amounts, each of which is determined by the formula
    • E × F
    • where
    • E is an amount of tax that became payable by the financial institution during the other reporting period, or that was paid by the financial institution during the other reporting period without having become payable,
      • (I) under any of subsection 165(1) and sections 212 and 218 of the Act in respect of a supply or importation of property or a service, or
      • (II) under section 218.01 of the Act for any specified year of the financial institution, and
    • F is
      • (I) in the case of an amount of tax described in subclause (I) of the description of E, the extent to which the property is delivered or made available, or the service is rendered, before April 2013, and
      • (II) in the case of an amount of tax described in subclause (II) of the description of E, the amount determined by the formula
      • G⁄H
      • where
      • G is the number of days before April 2013 in the specified year referred to in that subclause, and
      • H is the number of days in that specified year, and
    • (B) in any other case, the number of days in the other reporting period before April 2013, and
  • D is
    • (A) if the financial institution was a distributed investment plan in the other reporting period, the total of all amounts, each of which is an amount of tax that became payable by the financial institution during the other reporting period, or that was paid by the financial institution during the other reporting period without having become payable, under any of subsection 165(1) and sections 212, 218 and 218.01 of the Act, and
    • (B) in any other case, the number of days in the other reporting period, and
  • (iii) if the particular reporting period begins before April 1, 2013 and ends on or after that day, all amounts, each of which is determined by the following formula in respect of tax under any of subsection 165(1) and sections 212 and 218 of the Act that became payable by the financial institution during the particular reporting period or that was paid by the financial institution without having become payable during the particular reporting period — provided that the tax is in respect of property that is in whole or in part delivered or made available after the particular reporting period or in respect of a service that is rendered in whole or in part after the particular reporting period — or in respect of tax under section 218.01 of the Act that became payable by the financial institution during the particular reporting period, or that was paid by the financial institution without having become payable during the particular reporting period, and that is determined for a specified year of the financial institution that ends after the particular reporting period:
  • (A − B) × (C⁄D) × E
  • where
  • A is the amount of that tax,
  • B is the total of all input tax credits of the financial institution in respect of that tax,
  • C is
    • (A) if the financial institution is a distributed investment plan in the particular reporting period, the total of all amounts, each of which is determined by the formula
    • F × G
    • where
    • F is an amount of tax that became payable by the financial institution during the particular reporting period, or that was paid by the financial institution during the particular reporting period without having become payable
      • (I) under any of subsection 165(1) and sections 212 and 218 of the Act in respect of a supply or importation of property or a service, or
      • (II) under section 218.01 of the Act for any specified year of the financial institution, and
    • G is
      • (I) in the case of an amount of tax described in subclause (I) of the description of F, the extent to which the property is delivered or made available, or the service is rendered, before April 2013, and
      • (II) in the case of an amount of tax described in subclause (II) of the description of F, the amount determined by the formula
      • H⁄I
      • where
      • H is the number of days before April 2013 in the specified year referred to in that subclause, and
      • I is the number of days in that specified year, and
    • (B) in any other case, the number of days in the particular reporting period before April 2013,
  • D is
    • (A) if the financial institution is a distributed investment plan in the particular reporting period, the total of all amounts, each of which is an amount of tax that became payable by the financial institution during the particular reporting period, or that was paid by the financial institution during the particular reporting period without having become payable, under any of subsection 165(1) and sections 212, 218 and 218.01 of the Act, and
    • (B) in any other case, the number of days in the particular reporting period, and
  • E is
    • (A) in the case of tax under section 218.01 of the Act, the percentage determined by dividing the number of days in the specified year that are after March 2013 by the number of days in the specified year, and
    • (B) in any other case, 100% less the extent (expressed as a percentage) to which the property is delivered or made available, or the service is rendered, before the end of the particular reporting period, and
• G₃₅ is the total of
  • (i) all amounts, each of which is an amount determined by the following formula in respect of tax under any of subsection 165(1) and sections 212 and 218 of the Act that became payable by the financial institution during the particular reporting period or that was paid by the financial institution without having become payable during the particular reporting period — provided that the tax is in respect of a supply or importation of property (other than real property) that is in whole or in part delivered or made available before the reporting period of the financial institution that includes April 1, 2013, in respect of a supply of real property the ownership or possession of which is transferred before that reporting period or in respect of a supply of a service that is rendered in whole or in part before that reporting period — or in respect of tax under section 218.01 of the Act that became payable by the financial institution during the particular reporting period, or that was paid by the financial institution without having become payable during the particular reporting period, and that is determined for a specified year of the financial institution that ends before April 2013:
  • (A − B) × (C⁄D) × E
  • where
  • A is the amount of that tax,
  • B is the total of all input tax credits of the financial institution in respect of that tax,
  • C is
    • (A) if the particular reporting period begins before April 1, 2013 and ends on or after that day and if the financial institution is a distributed investment plan in the particular reporting period, the total of all amounts, each of which is determined by the formula
    • F × G
    • where
    • F is an amount of tax that became payable by the financial institution during the particular reporting period, or that was paid by the financial institution during the particular reporting period without having become payable
      • (I) under any of subsection 165(1) and sections 212 and 218 of the Act in respect of a supply or importation of property or a service, or
      • (II) under section 218.01 of the Act for any specified year of the financial institution, and
    • G is
      • (I) in the case of an amount of tax described in subclause (I) of the description of F, the extent to which the property is delivered or made available, or the service is rendered, after March 2013, and
      • (II) in the case of an amount of tax described in subclause (II) of the description of F, the amount determined by the formula
      • H/I
      • where
      • H is the number of days after March 2013 in the specified year referred to in that subclause, and
      • I is the number of days in that specified year, and
    • (B) in any other case, the number of days in the particular reporting period after March 2013,
  • D is
    • (A) if the particular reporting period begins before April 1, 2013 and ends on or after that day and if the financial institution is a distributed investment plan in the particular reporting period, the total of all amounts, each of which is an amount of tax that became payable by the financial institution during the particular reporting period, or that was paid by the financial institution during the particular reporting period without having become payable, under any of subsection 165(1) and sections 212, 218 and 218.01 of the Act, and
    • (B) in any other case, the number of days in the particular reporting period, and
  • E is
    • (A) in the case of tax under section 218.01 of the Act or real property, 100%, and
    • (B) in any other case, the extent (expressed as a percentage) to which the property is delivered or made available, or the service is rendered, before the reporting period of the financial institution that includes April 1, 2013,
  • (ii) if the particular reporting period begins after March 2013, all amounts, each of which is an amount determined by the following formula in respect of tax under any of subsection 165(1) and sections 212 and 218 of the Act that became payable by the financial institution during the particular reporting period or that was paid by the financial institution without having become payable during the particular reporting period — provided that the tax is in respect of a supply or importation of property (other than real property) that is in whole or in part delivered or made available during another reporting period of the financial institution that begins before April 1, 2013 and ends on or after that day, in respect of a supply of real property the ownership or possession of which is transferred during the other reporting period or in respect of a service that is rendered in whole or in part during the other reporting period — or in respect of tax that became payable under section 218.01 of the Act by the financial institution during the particular reporting period, or that was paid by the financial institution without having become payable during the particular reporting period, and that is determined for a specified year of the financial institution that begins before April 1, 2013 and ends on or after that day:
  • (A − B) × (C⁄D) × E
  • where
  • A is the amount of that tax,
  • B is the total of all input tax credits of the financial institution in respect of that tax,
  • C is
    • (A) in the case of tax under section 218.01 of the Act, the number of days in the specified year before April 2013, and
    • (B) in any other case,
      • (I) if the financial institution was a distributed investment plan in the other reporting period, the total of all amounts, each of which is determined by the formula
      • F × G
      • where
      • F is an amount of tax that became payable by the financial institution during the other reporting period, or that was paid by the financial institution during the other reporting period without having become payable
        1. 1. under any of subsection 165(1) and sections 212 and 218 of the Act in respect of a supply or importation of property or a service, or
        2. 2. under section 218.01 of the Act for a particular specified year of the financial institution, and
      • G is
        1. 1. in the case of an amount of tax described in sub-subclause 1 of the description of F, the extent to which the property is delivered or made available, or the service is rendered, before April 2013, and
        2. 2. in the case of an amount of tax described in sub-subclause 2 of the description of F, the amount determined by the formula
        3. H⁄I
        4. where
        5. H is the number of days in the particular specified year before April 2013, and
        6. I is the number of days in the particular specified year, and
      • (II) in any other case, the number of days in the other reporting period before April 2013,
    • D is
      • (A) in the case of tax under section 218.01 of the Act, the total number of days in the specified year, and
      • (B) in any other case,
        • (I) if the financial institution was a distributed investment plan in the other reporting period, the total of all amounts, each of which is an amount of tax that became payable by the financial institution during the other reporting period, or that was paid by the financial institution during the other reporting period without having become payable, under any of subsection 165(1) and sections 212, 218 and 218.01 of the Act, and
        • (II) in any other case, the total number of days in the other reporting period, and
    • E is
      • (A) in the case of tax under section 218.01 of the Act or real property, 100%, and
      • (B) in any other case, the extent (expressed as a percentage) to which the property is delivered or made available, or the service is rendered, during the other reporting period, and
    • (iii) if the particular reporting period begins before April 1, 2013 and ends on or after that day, the amount determined by the formula
    • (A − B) × (C⁄D)
    • where
      A is the total of the following amounts, each of which is determined for the particular reporting period and the participating province:
      • (A) the total A amounts,
      • (B) the total for G₃ in paragraph (a),
      • (C) the total for G₇ in paragraph (b), and
      • (D) the total for subparagraph (i) of G₃₄,
    • B is the total of the following amounts, each of which is determined for the particular reporting period and the participating province:
      • (A) the total B amounts,
      • (B) the total for G₂ in paragraph (a), and
      • (C) the total for G₈ in paragraph (b),
    • C is
      • (A) if the financial institution is a distributed investment plan, the total of all amounts, each of which is determined by the formula
      • E × F
      • where
      • E is an amount of tax that became payable by the financial institution during the particular reporting period, or that was paid by the financial institution during the particular reporting period without having become payable
        • (I) under any of subsection 165(1) and sections 212 and 218 of the Act in respect of a supply or importation of property or a service, or
        • (II) under section 218.01 of the Act for any specified year of the financial institution, and
      • F is
        • (I) in the case of an amount of tax described in subclause (I) of the description of E, the extent to which the property is delivered or made available, or the service is rendered, before April 2013, and
        • (II) in the case of an amount of tax described in subclause (II) of the description of E, the amount determined by the formula
        • G/H
        • where
        • G is the number of days before April 2013 in the specified year referred to in that subclause, and
        • H is the number of days in that specified year, and
      • (B) in any other case, the number of days in the particular reporting period before April 2013, and
    • D is
      • (A) if the financial institution is a distributed investment plan, the total of all amounts, each of which is an amount of tax that became payable by the financial institution during the particular reporting period, or that was paid by the financial institution during the particular reporting period without having become payable, under any of subsection 165(1) and sections 212, 218 and 218.01 of the Act, and
      • (B) in any other case, the number of days in the particular reporting period,
  • G₃₆ is the specified percentage of the financial institution for the participating province and for the particular reporting period,
  • G₃₇ is the tax rate for the participating province,
  • G₃₈ is the rate set out in subsection 165(1) of the Act, and
  • G₃₉ is the total of all amounts, each of which is a particular amount of tax that was paid or became payable by the financial institution under any of subsection 165(2) and section 212.1 of the Act in respect of a supply or importation of property or a service in respect of which tax under any of subsection 165(1) and sections 212, 218 and 218.01 of the Act became payable by the financial institution, or was paid by the financial institution without having become payable, in the particular reporting period of the financial institution that ends after March 2013 — to the extent that the particular amount of tax has not been included in the total F amounts for any reporting period, including the particular reporting period, of the financial institution — provided that the particular amount of tax is payable as a consequence of the application of Part 3.1 of the New Harmonized Value-added Tax System Regulations or Divisions 2 and 3 of Part 9.1 of the New Harmonized Value-added Tax System Regulations, No. 2; and
  • (h) if the particular reporting period begins before April 1, 2013 and ends on or after that day and if the participating province is Ontario, Nova Scotia, New Brunswick, British Columbia or Newfoundland and Labrador, the negative amount determined by the formula
  • −1 × G₄₀ × G₄₁ × (G₄₂⁄G₄₃)
  • where
  • G₄₀ is the total of all amounts, each of which is an amount of tax under any of subsection 165(1) and sections 212 and 218 of the Act in respect of a supply or importation of property or service for consumption or use exclusively in Prince Edward Island that became payable by the financial institution, or that was paid by the financial institution without having become payable, during a reporting period of the financial institution that precedes the particular reporting period, to the extent that the amount is included in the total A amounts for a reporting period that precedes the particular reporting period and is not included in the total B amounts for any reporting period, including the particular reporting period, of the financial institution, provided that tax is payable in respect of the supply or importation under any of subsection 165(2) and section 212.1 of the Act as a consequence of the application of Part 3.1 of the New Harmonized Value-added Tax System Regulations or Divisions 2 and 3 of Part 9.1 of the New Harmonized Value-added Tax System Regulations, No. 2,
  • G₄₁ is the specified percentage of the financial institution for the participating province and for the particular reporting period,
  • G₄₂ is
    • (i) if the participating province is British Columbia, 7%, and
    • (ii) in any other case, the tax rate for the participating province, and
  • G₄₃ is the rate set out in subsection 165(1) of the Act.

4. (1) The portion of subparagraph 59(d)(i) of the Regulations before clause (A) is replaced by the following:

• (i) for the purposes of these Regulations and the description of C in subsection 225.2(2) of the Act and despite sections 19 and 32, the investment plan’s percentage for a participating province and for the preceding taxation year is equal to whichever of the following is applicable:

(2) Subparagraph 59(d)(ii) of the Regulations is replaced by the following:

• (ii) for the purposes of these Regulations and the description of C in subsection 225.2(2) of the Act and despite sections 19 and 32, the investment plan’s percentage for a participating province and for the taxation year in which the particular fiscal year ends is equal to
  • (A) if an election under section 50 is in effect throughout the particular fiscal year, the investment plan’s percentage for the participating province and for the preceding taxation year, or
  • (B) if no election under section 50 is in effect throughout the particular fiscal year, the percentage that would be the investment plan’s particular percentage for the participating province and for the preceding taxation year if the particular percentage were determined in accordance with the rules set out in
    • (I) paragraph 60.1(b), if the investment plan has elected in prescribed form containing prescribed information to have that paragraph apply, or
    • (II) paragraph 60.1(c), in any other case, and

(3) Clauses (A) and (B) of the description of A in subparagraph 59(d)(iii) of the Regulations are replaced by the following:

• (A) when no election under section 50 is in effect throughout the particular fiscal year, the investment plan’s percentage for a participating province and for the preceding taxation year were determined in accordance with the rules set out in section 60.1, and
• (B) when an election under section 50 is in effect throughout the particular fiscal year, the investment plan’s percentage for a participating province and for the taxation year in which the particular fiscal year ends were determined in accordance with the rules set out in section 60.1, and

5. The Regulations are amended by adding the following after section 60:

New non-stratified investment plan — percentage

60.1 If units of a non-stratified investment plan that is a selected listed financial institution and not an exchange-traded fund are issued, distributed or offered for sale in a particular fiscal year that ends in a particular taxation year of the investment plan, if immediately before the issuance, distribution or offering for sale no units of the investment plan are issued and outstanding, if no election is in effect under section 49 or 61 in respect of the investment plan throughout the particular fiscal year and if paragraph 59(d) does not apply to the investment plan, the following rules apply:

• (a) for the purposes of this section,
  • (i) the “particular attribution point” is the attribution point in respect of the investment plan for the taxation year of the investment plan that precedes the particular taxation year (in this section referred to as the “preceding taxation year”), and
  • (ii) the “particular calendar year” is the calendar year that includes the particular attribution point;
• (b) if the investment plan has elected in prescribed form containing prescribed information to have this paragraph apply, subsections 32(1) and (2) apply for the purpose of determining the investment plan’s percentage for a participating province and for the preceding taxation year, except that the description of C in paragraph 32(1)(a) and the description of C in paragraph 32(1)(b) are each to be read without reference to subparagraph (ii);
• (c) if paragraph (b) does not apply,
  • (i) for the purposes of these Regulations and the description of C in subsection 225.2(2) of the Act and despite sections 19 and 32, the investment plan’s percentage for the preceding taxation year and for any one participating province (in this paragraph referred to as the “selected province”) having the highest tax rate on the first day of the particular fiscal year is the percentage determined by the formula
  • (A⁄B) + (C × A⁄D) + [(1 − C) − (D⁄B)]
  • where
  • A is the total of all amounts, each of which is the total value of the units of the investment plan held, on the particular attribution point, by a person that the investment plan knows, on December 31 of the particular calendar year, is resident in the selected province on the particular attribution point,
  • B is the total value, on the particular attribution point, of the units of the investment plan other than units held, on the particular attribution point, by a person that the investment plan knows, on December 31 of the particular calendar year, is not resident in Canada on the particular attribution point,
  • C is the lesser of 0.1 and the amount determined by the formula
  • C₁⁄C₂
  • where
    • C₁ is the total of all amounts, each of which is the total value of the units of the investment plan held, on the particular attribution point, by a person in respect of which the investment plan does not know, on December 31 of the particular calendar year, whether or not the person is resident in Canada on the particular attribution point or, in the case of persons resident in Canada, the province in which the person is resident on the particular attribution point, and
    • C₂ is the amount determined for B, and
  • D is the total of all amounts, each of which is the total value of the units of the investment plan held, on the particular attribution point, by a person resident in Canada on the particular attribution point and in respect of which the investment plan knows, on December 31 of the particular calendar year, the province in which the person is resident on the particular attribution point,
  • (ii) for the purposes of these Regulations and the description of C in subsection 225.2(2) of the Act and despite sections 19 and 32, the investment plan’s percentage for the preceding taxation year and for a participating province (other than the selected province) in which the investment plan has a permanent establishment in the particular taxation year is the percentage determined by the formula
  • (A⁄B) + (C × A⁄D)
  • where
  • A is the total of all amounts, each of which is the total value of the units of the investment plan held, on the particular attribution point, by a person that the investment plan knows, on December 31 of the particular calendar year, is resident in the participating province on the particular attribution point,
  • B is the total value, on the particular attribution point, of the units of the investment plan other than units held, on the particular attribution point, by a person that the investment plan knows, on December 31 of the particular calendar year, is not resident in Canada on the particular attribution point,
  • C is the lesser of 0.1 and the amount determined by the formula
  • C₁⁄C₂
  • where
    • C₁is the total of all amounts, each of which is the total value of the units of the investment plan held, on the particular attribution point, by a person in respect of which the investment plan does not know, on December 31 of the particular calendar year, whether or not the person is resident in Canada on the particular attribution point or, in the case of persons resident in Canada, the province in which the person is resident on the particular attribution point, and
    • C₂ is the amount determined for B, and
  • D is the total of all amounts, each of which is the total value of the units of the investment plan held, on the particular attribution point, by a person resident in Canada on the particular attribution point and in respect of which the investment plan knows, on December 31 of the particular calendar year, the province in which the person is resident on the particular attribution point, and
  • (iii) for the purposes of subparagraphs (i) and (ii), if, for the particular attribution point, the total of all amounts — each of which is the total value of the particular units of the investment plan held on the particular attribution point by a person in respect of which the investment plan knows, on December 31 of the particular calendar year, whether or not the person is resident in Canada on the particular attribution point and knows, in the case of persons resident in Canada, the province in which the person is resident on the particular attribution point — is less than 50% of the total value of the units of the investment plan on the particular attribution point,
    • (A) the units of the investment plan, other than the particular units, are deemed to be held on the particular attribution point by a particular person and not by any other person,
    • (B) the particular person is deemed to be resident on the particular attribution point in Canada and in the selected province referred to in subparagraph (i) for the preceding taxation year, and
    • (C) the investment plan is deemed to know on December 31 of the particular calendar year that the particular person is, on the particular attribution point, resident in Canada and in the selected province; and
• (d) if the particular attribution point is after September 30 of the calendar year in which the particular fiscal year ends, for the purposes of these Regulations and the description of C in subsection 225.2(2) of the Act and despite sections 19 and 32, the investment plan’s percentage for a participating province and for the particular taxation year is equal to the investment plan’s percentage for the participating province and for the preceding taxation year.

6. (1) The portion of subparagraph 62(d)(i) of the Regulations before clause (A) is replaced by the following:

• (i) for the purposes of these Regulations and the description of A₆ in subsection 225.2(2) of the Act, as adapted by subsection 48(1), and despite sections 19 and 30, the investment plan’s percentage for the series, for a participating province and for the preceding taxation year is equal to whichever of the following is applicable:

(2) Subparagraph 62(d)(ii) of the Regulations is replaced by the following:

• (ii) for the purposes of these Regulations and the description of A₆ in subsection 225.2(2) of the Act, as adapted by subsection 48(1), and despite sections 19 and 30, the investment plan’s percentage for the series, for a participating province and for the taxation year in which the particular fiscal year ends is equal to
  • (A) if an election under section 50 is in effect throughout the particular fiscal year, the investment plan’s percentage for the series, for the participating province and for the preceding taxation year, or
  • (B) if no election under section 50 is in effect throughout the particular fiscal year, the percentage that would be the investment plan’s particular percentage for the series, for the participating province and for the preceding taxation year if the particular percentage were determined in accordance with the rules set out in
    • (I) paragraph 63.1(b), if the investment plan has elected in prescribed form containing prescribed information to have that paragraph apply to the series, or
    • (II) paragraph 63.1(c), in any other case, and

(3) Clauses (A) and (B) of the description of A in subparagraph 62(d)(iii) of the Regulations are replaced by the following:

• (A) when no election under section 50 is in effect throughout the particular fiscal year, the investment plan’s percentage for the series, for a participating province and for the preceding taxation year were determined in accordance with the rules set out in section 63.1, and
• (B) when an election under section 50 is in effect throughout the particular fiscal year, the investment plan’s percentage for the series, for a participating province and for the taxation year in which the particular fiscal year ends were determined in accordance with the rules set out in section 63.1, and

7. The portion of section 63 of the Regulations before paragraph (a) is replaced by the following:

New series — elected method

63. If units of a series of an investment plan that is a selected listed financial institution are issued, distributed or offered for sale in a particular fiscal year that ends in a particular taxation year of the investment plan, if immediately before the issuance, distribution or offering for sale no units of the series are issued and outstanding and if no election is in effect under section 49 or 64 in respect of the series and the particular fiscal year, the investment plan may elect in prescribed form containing prescribed information to have the following rules apply:

8. The Regulations are amended by adding the following after section 63:

New series — percentage

63.1 If units of a series (other than an exchange-traded series) of an investment plan that is a selected listed financial institution are issued, distributed or offered for sale in a particular fiscal year that ends in a particular taxation year of the investment plan, if immediately before the issuance, distribution or offering for sale no units of the series are issued and outstanding, if no election is in effect under section 49 or 64 in respect of the series throughout the particular fiscal year and if paragraph 62(d) does not apply to the series, the following rules apply:

• (a) for the purposes of this section,
  • (i) the “particular attribution point” is the attribution point in respect of the series for the taxation year of the investment plan that precedes the particular taxation year (in this section referred to as “the preceding taxation year”), and
  • (ii) the “particular calendar year” is the calendar year that includes the particular attribution point;
• (b) if the investment plan has elected in prescribed form containing prescribed information to have this paragraph apply to the series, subsections 30(1) and (2) apply for the purpose of determining the investment plan’s percentage for the series, for a participating province and for the preceding taxation year, except that the description of C in paragraph 30(1)(a) and the description of C in paragraph 30(1)(b) are each to be read without reference to subparagraph (ii);
• (c) if paragraph (b) does not apply,
  • (i) for the purposes of these Regulations and the description of A₆ in subsection 225.2(2) of the Act, as adapted by subsection 48(1), and despite sections 19 and 30, the investment plan’s percentage for the preceding taxation year, for the series and for any one participating province (in this paragraph referred to as the “selected province”) having the highest tax rate on the first day of the particular fiscal year is the percentage determined by the formula
  • (A⁄B) + (C × A⁄D) + [(1 − C) − (D⁄B)]
  • where
  • A is the total of all amounts, each of which is the total value of the units of the series held, on the particular attribution point, by a person that the investment plan knows, on December 31 of the particular calendar year, is resident in the selected province on the particular attribution point,
  • B is the total value, on the particular attribution point, of the units of the series other than units held, on the particular attribution point, by a person that the investment plan knows, on December 31 of the particular calendar year, is not resident in Canada on the particular attribution point,
  • C is the lesser of 0.1 and the amount determined by the formula
  • C₁⁄C₂
  • where
    • C₁ is the total of all amounts, each of which is the total value of the units of the series held, on the particular attribution point, by a person in respect of which the investment plan does not know, on December 31 of the particular calendar year, whether or not the person is resident in Canada on the particular attribution point or, in the case of persons resident in Canada, the province in which the person is resident on the particular attribution point, and
    • C₂ is the amount determined for B, and
  • D is the total of all amounts, each of which is the total value of the units of the series held, on the particular attribution point, by a person resident in Canada on the particular attribution point and in respect of which the investment plan knows, on December 31 of the particular calendar year, the province in which the person is resident on the particular attribution point,
  • (ii) for the purposes of these Regulations and the description of A₆ in subsection 225.2(2) of the Act, as adapted by subsection 48(1), and despite sections 19 and 30, the investment plan’s percentage for the preceding taxation year, for the series and for a participating province (other than the selected province) in which the investment plan has a permanent establishment in the particular taxation year is the percentage determined by the formula
  • (A⁄B) + (C × A⁄D)
  • where
  • A is the total of all amounts, each of which is the total value of the units of the series held, on the particular attribution point, by a person that the investment plan knows, on December 31 of the particular calendar year, is resident in the participating province on the particular attribution point,
  • B is the total value, on the particular attribution point, of the units of the series other than units held, on the particular attribution point, by a person that the investment plan knows, on December 31 of the particular calendar year, is not resident in Canada on the particular attribution point,
  • C is the lesser of 0.1 and the amount determined by the formula
  • C₁⁄C₂
  • where
    • C₁ is the total of all amounts, each of which is the total value of the units of the series held, on the particular attribution point, by a person in respect of which the investment plan does not know, on December 31 of the particular calendar year, whether or not the person is resident in Canada on the particular attribution point or, in the case of persons resident in Canada, the province in which the person is resident on the particular attribution point, and
    • C₂ is the amount determined for B, and
  • D is the total of all amounts, each of which is the total value of the units of the series held, on the particular attribution point, by a person resident in Canada on the particular attribution point and in respect of which the investment plan knows, on December 31 of the particular calendar year, the province in which the person is resident on the particular attribution point, and
  • (iii) for the purposes of subparagraphs (i) and (ii), if, for the particular attribution point, the total of all amounts — each of which is the total value of the particular units of the series held on the particular attribution point by a person in respect of which the investment plan knows, on December 31 of the particular calendar year, whether or not the person is resident in Canada on the particular attribution point and knows, in the case of persons resident in Canada, the province in which the person is resident on the particular attribution point — is less than 50% of the total value of the units of the series on the particular attribution point,
    • (A) the units of the series, other than the particular units, are deemed to be held on the particular attribution point by a particular person and not by any other person,
    • (B) the particular person is deemed to be resident on the particular attribution point in Canada and in the selected province referred to in subparagraph (i) for the series and for the preceding taxation year, and
    • (C) the investment plan is deemed to know on December 31 of the particular calendar year that the particular person is, on the particular attribution point, resident in Canada and in the selected province; and
• (d) if the particular attribution point is after September 30 of the calendar year in which the particular fiscal year ends, for the purposes of these Regulations and the description of A₆ in subsection 225.2(2) of the Act, as adapted by subsection 48(1), and despite sections 19 and 30, the investment plan’s percentage for the series, for a participating province and for the particular taxation year is equal to the investment plan’s percentage for the series, for the participating province and for the preceding taxation year.

PART 2

NEW HARMONIZED VALUE-ADDED TAX SYSTEM REGULATIONS

9. The New Harmonized Value-added Tax System Regulations (see footnote 2) are amended by adding the following after section 58.45:

Exception — election to use production proxy

58.46 Despite subsection 31(9) of the New Harmonized Value-added Tax System Regulations, No. 2, if a person produces tangible personal property for sale and if the production of tangible personal property carried on by the person in Canada during the last fiscal year of the person that is before April 1, 2013 is carried on primarily in Prince Edward Island, an election made by the person under subsection 31(8) of those Regulations that sets out July 1, 2012 as the day on which the election is to become effective shall be filed with the Minister on or before September 1, 2014.

PART 3

APPLICATION

10. (1) Sections 1 to 3 and 9 apply in respect of a reporting period of a person that ends on or after April 1, 2013.

(2) Sections 4 to 6 and 8 apply in respect of a reporting period of a person that ends on or after July 1, 2010.

REGULATORY IMPACT ANALYSIS STATEMENT

(This statement is not part of the Regulations.)

Issue

On April 18, 2012, the Government of Prince Edward Island (P.E.I.) announced its intention to adopt the Harmonized Sales Tax (HST) at a rate of 14%, to be composed of a 5% federal component and a 9% provincial component, with an effective date of April 1, 2013. This was confirmed when, on November 26, 2012, a Comprehensive Integrated Tax Coordination Agreement (Canada-P.E.I. CITCA) was signed between the Government of Canada and the Government of P.E.I., providing the necessary framework for the implementation of the HST in P.E.I.

In order to facilitate the transition to the HST, P.E.I. announced proposed transitional rules and input tax credit recapture rules on November 8, 2012. These rules generally specify the tax rate that should be applied for transactions that straddle the April 1, 2013, implementation date. With the passage of the Provincial Choice Tax Framework Act on December 15, 2009, Parliament approved mechanisms to facilitate the application of the harmonized value-added tax system by way of regulations. The bulk of the transitional rules have already been implemented in the Regulations Amending Various GST/HST Regulations (Prince Edward Island), but additional transitional rules mainly affecting certain financial institutions are also required to implement P.E.I.’s decision to adopt the HST.

A technical amendment, related to the implementation of the HST in P.E.I., and technical and housekeeping amendments to the Selected Listed Financial Institutions Attribution Method (GST/HST) Regulations (the SLFI Regulations) are also needed.

Objectives

• Formalize and give legal effect to P.E.I.’s decision to adopt the HST.
• Make necessary housekeeping and technical amendments.

Description

The SLFI Regulations, along with certain sections of the Excise Tax Act, set out special rules by which certain financial institutions are required to calculate the amount of the provincial component of the HST remittable by them, or refundable to them, for each of their reporting periods. These rules are collectively referred to as the “special attribution method” and the financial institutions to which these rules apply are referred to as “selected listed financial institutions” or “SLFIs.” The SLFI Regulations also prescribe which financial institutions are selected listed financial institutions (generally speaking, financial institutions operating in an HST province and in at least one other province).

Under the special attribution method, SLFIs make adjustments to their net tax otherwise determined under the general rules of the Excise Tax Act. The adjustments take into account the provincial component of the HST in respect of the SLFI’s purchases of goods and services for use in activities carried out within both the HST-participating provinces and the non-participating provinces. In the absence of the special attribution method, the SLFI would be required to track the actual extent to which goods and services purchased by it were for use in each of the HST-participating provinces and in the non-participating provinces. The net tax adjustments provided for under the special attribution method rules serve as a proxy for the amount of the HST that should be borne by an SLFI on property and services consumed by it in its activities undertaken in relation to the HST-participating provinces, while avoiding the complexity of detailed tracking.

The Regulations Amending Various GST/HST Regulations, No. 5 (the Regulations) amend the SLFI Regulations in order to provide transitional rules applicable to SLFIs for the adoption of the HST in P.E.I., effective April 1, 2013. Generally, as announced by P.E.I. on November 8, 2012, these transitional rules provide that if a reporting period of an SLFI straddles April 1, 2013, the SLFI’s liability for the provincial component of the HST for P.E.I. is determined on an apportionment basis based on the number of days in the reporting period before and after April 1, 2013. However, for investment plans that distribute or sell their units to the public (e.g. mutual funds, exchange-traded funds, mortgage investment corporations or segregated funds of insurers), the prorating factor is instead the ratio of the amount of the Goods and Services Tax and the federal component of the HST that becomes payable, or that is paid without having become payable, during the reporting period before April 1, 2013, to the total amount of that tax that becomes payable, or that is paid without having become payable, during the reporting period.

In addition, the Regulations amend the SLFI Regulations in order to implement in P.E.I. the input tax credit recapture rules for SLFIs, as announced by P.E.I. on November 8, 2012, and as provided for under the Canada-P.E.I. CITCA. These rules apply to SLFIs making annual taxable supplies in Canada worth more than $10 million and those that are prescribed by regulations. SLFIs that are prescribed for this purpose include an SLFI such as a bank, a credit union, an insurer or an investment plan, or an SLFI related to such entities.

The Canada-P.E.I. CITCA provides for P.E.I. temporarily requiring large businesses, including the SLFIs described above, to repay or “recapture” input tax credits otherwise available to them in respect of the provincial component of the HST payable on certain property and services acquired by those businesses. P.E.I. has announced that, between April 1, 2013, and March 31, 2021, any such SLFI will be required to make an adjustment to its net tax that has the effect of recapturing the provincial portion of the SLFI’s input tax credits that are attributable to P.E.I. and that are in respect of the following property and services:

• road vehicles that weigh less than 3 000 kg and motive fuel (other than diesel fuel) for use in those vehicles;
• energy (e.g. electricity and natural gas), other than heating oil or energy used directly in the production of goods;
• telecommunication services; and
• meals and entertainment.

After the first five years, during which time these input tax credits would be fully recaptured, the proportion of input tax credits that must be recaptured will be decreased over the following three years, after which the input tax credits could be fully claimed without a requirement to repay (except for meals and entertainment, where only 50% will continue to be claimable as input tax credits under the general GST/HST rules).

The Regulations also make technical and housekeeping amendments to the SLFI Regulations, including technical amendments that were announced in the backgrounder to a Department of Finance news release dated January 28, 2011, concerning the HST rules relating to newly created investment plans. Pursuant to the rules, as announced in the backgrounder, an investment plan, or a series of an investment plan, created by way of an initial distribution of units is entitled to use a simplified method to determine its “provincial attribution percentages” for its first fiscal year. These percentages determine its HST liability for each of the participating provinces for that year, unless the investment plan opts to use the default method in the SLFI Regulations to determine its provincial attribution percentages. Under the SLFI Regulations, an investment plan or a series of an investment plan is normally required to ascertain the provincial attribution percentages of its unit holders that are “institutional investors” (i.e. generally other investment plans) in order to determine its own provincial attribution percentages. However, under the simplified rules available to a newly created plan or series, the plan or series is only required to know the province of residency of its institutional investors in order to determine its provincial attribution percentages. The amendments to the SLFI Regulations in the Regulations implement this simplified method for newly created investment plans and series and make other minor editorial corrections to the SLFI Regulations.

The Regulations also amend the New Harmonized Value-Added Tax System Regulations in order to expand the availability of the election to use a production proxy in respect of the recapture of input tax credits in P.E.I. Input tax credits in respect of energy acquired by a large business for use in P.E.I. are generally subject to recapture. However, input tax credits in respect of energy used in qualifying production activities (i.e. generally energy that is used directly in the production of tangible personal property for sale) are not subject to recapture. As a simplification measure, qualifying large businesses can elect to use a proxy to determine what percentage of their energy use in P.E.I. is attributable to qualifying production activities. Currently, most large businesses in P.E.I. cannot elect to use the proxy in respect of the period from April 1, 2013, to June 30, 2013, because the deadline to file this election for that period predates the announcement by P.E.I. of the recapture of input tax credits in P.E.I. An amendment is therefore made to extend the deadline to September 1, 2014, for filing the election to use the proxy in respect of the period from April 1, 2013, to June 30, 2013.

“One-for-One” Rule

The Regulations may have an impact on administrative costs for businesses. As the Regulations address tax or tax administration, they are carved out from the “One-for-One” Rule.

Small business lens

The small business lens does not apply to the Regulations as no disproportionate impact on small businesses is expected.

Consultation

The Regulations were developed in consultation with the Government of P.E.I. The Regulations are designed to reflect previous announcements, including HST announcements of proposed rules by P.E.I. on November 8, 2012.

Rationale

The Regulations are required to support the adoption of the HST in P.E.I., effective April 1, 2013, and to make technical and housekeeping amendments. The Regulations formalize and give legal effect to previously announced amendments.

Contacts

Yuki Bourdeau
Sales Tax Division
Department of Finance
140 O’Connor Street
Ottawa, Ontario
K1A 0G5
Telephone: 613-996-4222

Dawn Weisberg
Excise and GST/HST Rulings Directorate
Canada Revenue Agency
320 Queen Street
Ottawa, Ontario
K1A 0L5
Telephone: 613-952-9210

• Footnote a
  S.C. 2009, c. 32, 2. 20(5)
• Footnote b
  S.C. 2009, c. 32, s. 23(1)
• Footnote c
  S.C. 1993, c. 27, s. 125(1)
• Footnote d
  S.C. 2009, c. 32, s. 37(1)
• Footnote e
  R.S., c. E-15
• Footnote 1
  SOR/2001-171
• Footnote 2
  SOR/2010-117