Canadian Consulting Engineer

Harmonized sales tax in Ontario benefits consulting firms

The Ontario government's decision to harmonize the Goods and Services Tax (GST) with the provincial retail services...

March 30, 2009   Canadian Consulting Engineer

The Ontario government’s decision to harmonize the Goods and Services Tax (GST) with the provincial retail services tax will bring a small benefit to consulting engineering firms, says Brian Wurts of PriceWaterhouseCoopers LLP.

In its recent budget, Ontario said it intends to harmonize the two taxes effective July 1, 2010. Instead of a 5% federal GST and 8% Ontario Retail Sales Tax, there will be a single 13% Harmonized Sales Tax (HST).

At present, Ontario consulting engineers have to add only the 5% GST when billing their clients. From July 1 next year they will have to charge the full 13% harmonized tax. That sounds as if it’s an increased tax burden. However, Wurts explains, most clients will simply be able to claim a credit for the full 13% HST paid, similar to how they claim a credit for the GST they pay now.

In other words, for most of the clients of consulting engineers, there will be no difference, says Wurts.

On the other hand, when consulting engineers make purchases, such as for computer equipment, they will be slightly better off because they will be able to reclaim the 13% harmonized tax. At present, firms are only able to claim a rebate for the 5% GST. There are exceptions in the new regime, however, Wurts warns. For example businesses with taxable sales of more than $10 million per annum will not be able reclaim the HST on vehicle purchases, fuel and repair services.

Newfoundland and Labrador, Nova Scotia and New Brunswick have had a harmonized sales tax since 1997.


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