OT- Contractor

[Pete Lancashire]

Maybe when I move to TO I should give up on selling my software and
hardware engineering skills
and go into accounting ..

-pete

On Wed, Jun 23, 2010 at 12:53 PM, D. Hugh Redelmeier <hugh-pmF8o41NoarQT0dZR+AlfA at public.gmane.org> wrote:
> 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).
> --
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