Last January 4, at the time when most are still in the Holiday spirits, Canada Revenue Agency, (CRA) announced sweeping changes to the GST/HST reporting and filing requirements. Effective July 1, 2010, all registrants with annual taxable ( including zero-rated and export) sales exceeding $1.5 million will be required to file their GST/HST return electronically or through the internet.
Electronic or internet filing also becomes mandatory for anyone required to "recapture" input tax credits for the provincial part of the HST paid on certain taxable supplies acquired in Ontario or British Columbia; the new filing requirements are also mandatory for most house builders who are subject to transitional rules regarding the shift from the RST to the HST or are reporting the new provincial housing rebate.
Accordingly, it may well be that most businesses and clearly all medium or large businesses are subject to these new filing requirements. It is important to stress that electronic or internet filing for those subject to the changes is not optional but mandatory; failure to comply, or continuing to file returns and declarations on paper format will result in penalties and interest (not yet defined) according to CRA's release.
What about Quebec?
Revenue Quebec, not CRA, is responsible for administration and collection of the GST/HST for registrants located in Quebec; however, interestingly enough, these changes also apply to Quebec GST/HST registrants. This is acknowledged by Revenue-Quebec's website which states that "we plan to support agents in filing their GST returns electronically by providing an additional way for them to do so beginning in July 2010."
It is not yet clear whether these changes will also apply to QST registrants or exactly how Quebec registrants will file their GST return; Quebec registrants also had the option of filing combined GST and QST returns and it is also not clear how this question will be dealt with. In all likelyhood, the QST should be "harmonized" with these new requirements if Quebec is to continue its ro;e of GST collector in Quebec.
Payment of GST/HST
CRA's news release states that registrants, although required to file their return electronically, will not be forced to pay the GST/HST electronically or through the internet. However, CRA strongly recommends that registrants also make their GST/HST payments electronically or through the internet, once the new system is in place in July.
We would add that, based on past experience, registrants required to file their returns electronically or by internet, should also pay their taxes electronically or by internet, unless it is absolutely impossible to do so. Considering CRA's or Revenue Quebec's past record, filng a return electronically and sending a check by mail ( with or without a printed copy of the return?) increases the chances that the payments are deposited in the wrong account, which may result in interest and penalties (arduous to get cancelled) as well as delayed or blocked subsequent refunds.
Finally, we would add, that if, as CRA states, electronic filing, "enables registrants to receive refunds faster, speeds up processing time, reduces paperwork and potential errors", we strongly feel that sending payments separately than returns would cancel all these advantages.
In our next column we will discuss the new filing requirements concerning "recaptured ITCs" for the provincial portion of the HST. Please do not hesitate to send your HST compliance question to the Ottawa Tax Matter Examiner.
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