OT- Contractor

[D. Hugh Redelmeier]

NOTE: don't rely on what I say about taxes.  I'm not an expert.

This is not about Linux.  But it is a very technical subject.

| From: Dave Cramer <davec-zxk95TxsVYDyHADnj0MGvQC/G2K4zDHf at public.gmane.org>

| Speaking of the HST, the only people to benefit from it are going to
| be companies, so having a company will allow you to claim back all of
| your HST for company purchases.

If you mean by "companies", "Limited Companies", you are not correct.
Individuals may claim ITCs for business activities.

| From: Dave Cramer <davec-zxk95TxsVYDyHADnj0MGvQC/G2K4zDHf at public.gmane.org>

|  Since we do not charge GST to clients outside
| of Canada.
|...
|  Now if it is sold
| across the border there is no tax.

You are correct, but the fiction is that you are charging tax, just at the 
rate of 0%.  "Zero rated" sales are quite different from exempt sales.  I 
think (but don't know) ITCs are available for inputs to Zero Rated sales 
but not for exempt sales.

| From: phiscock-g851W1bGYuGnS0EtXVNi6w at public.gmane.org

| OK, here's the definitive (Canada Revenue Agency) word on HST: you
| *cannot* apply for an ITC (input tax credit) on capital property. That is,
| you pay out the HST when you purchase the equipment, and you can't get a
| refund of the HST later.

I don't think that this is correct.  See 
  <http://www.gst-tax.com/GST/Accounting_for_GST.htm>

There are different kinds of capital property.  At least "real
property" and "personal property" (and "Passenger vehicles and
aircraft" which have their own complex GST rules).

Most stuff you care about is "personal property".  If it is used
mostly to provide taxable supplies, then you get to claim an ITC.

| You *can* of course apply the depreciation of the equipment as an expense
| against your company income.

Depreciation as a tax concept (which may well differ from your
accounting concept) is called Captal Cost Allowance (CCA).

In the case of "Passenger vehicles and aircraft", you may get to claim
an ITC based on a GST component of the CCA.

| Here's what it says:
| =======================================================================

| There are some purchases and expenses for which you cannot claim an input
| tax credit (ITC) such as:
| 
|     * certain capital property (for more information, see ITCs for Capital
        =======
| property);

Note: "certain" does not mean "all".


| From: Lennart Sorensen <lsorense-1wCw9BSqJbv44Nm34jS7GywD8/FfD2ys at public.gmane.org>

| I think it would be more fair if given that the HST is adding PST to
| a number of items that previously did not have it, then they should
| remove PST from those items that are GST except (like used car sales).
| But no, they don't want to loose that income, so the PST gets to stick
| around for those.

Actually, the used-car sales, at least private ones, are going to be
charged at the rate of HST, but it isn't HST!  They have retained the
PST (RST) and increased the rate to create a "level playing field".
See footnote 4.
  <http://www.rev.gov.on.ca/en/taxchange/taxable.html>
Wow.

Furthermore, the Province decides what it feels a fair price for the
car would be and charges tax on that if your sale price is less.

You are allowed to give a vehicle to a certain limited class of
relatives (brothers, aunts, etc are not close enough!).
  <http://www.rev.gov.on.ca/en/guides/rst/209.html>
You are only allowed to do this once in every 12 month period.  It
requires a sworn statement with a signature of a Commissioner for
Taking Affidavits.  Sheesh.

I don't really understand why a used car dealer needs to charge HST
without getting an ITC for buying it.  It seems that the original
owner ought to only pay the value subtracted tax.

Here's how I think that it ought to work (but not how it does work):
    Hugh is an ordinary consumer, not an HST registrant.
    Hugh buys a new car for $20K + 13% HST ($2600)

    Hugh uses it for 2 years

    Hugh sells car to Joe's Used and New Kars LTD (JUNK) for $10K
    	JUNK is an HST registrant.
	Imputed HST on transaction: $10K * 13/113 = $1150.44.
	No money is sent to CRA since the HST of $2600 was already
	paid.
    JUNK gets an ITC of $1150.44.

    JUNK sells it to Fred for $13K + HST.

Net effect: CRA gets the HST on the value of the car once.  Plus tax
on the value added by subsequent registered vendors.

A level playing field would not require any non-registrant to deal
with CRA (unless the value of a car was increased by something other
than capital appreciation).
--
The Toronto Linux Users Group.      Meetings: http://gtalug.org/
TLUG requests: Linux topics, No HTML, wrap text below 80 columns
How to UNSUBSCRIBE: http://gtalug.org/wiki/Mailing_lists