Changing HST Regulations for Charities

On July 13, 2023, the Canadian government enacted the “Regulations Amending Various GST/HST Regulations, No. 12” (SOR/2023-161) based on the recommendation of the Minister of Finance. This regulation updates provisions under the Excise Tax Act, primarily impacting the Goods and Services Tax (GST) and Harmonized Sales Tax (HST) in Prince Edward Island (P.E.I.), as well as specific rebates for charities and literacy organizations.
Notably, the regulation revises the rebate rate for P.E.I. charities and qualifying non-profit organizations (QNPOs) from 35% to 50%, effective retroactively from January 1, 2023. This change aligns with P.E.I.’s announcement on February 24, 2022, regarding the increase. Additionally, the Streamlined Accounting (GST/HST) Regulations have been adjusted to simplify remittance calculations for small businesses and eligible public service bodies (PSBs), with new remittance rates reflecting the increased P.E.I. rebate also effective from January 1, 2023. The introduction of anti-avoidance rules in the New Harmonized Value-added Tax System Regulations aims to prevent the exploitation of the rebate increase; transactions that appear designed to benefit from this increase without legitimate commercial intent will lead to adjustments in rebate entitlements. Furthermore, the Federal Book Rebate (GST/HST) Regulations now include the charity “Twice Upon a Time/Il était deux fois” among the organizations eligible for the federal printed book rebate, enabling it to claim refunds on GST/HST paid for printed literacy materials.
These regulatory changes arise from commitments made under the Comprehensive Integrated Tax Coordination Agreement between Canada and P.E.I., ensuring that provincial tax policy adjustments are reflected in federal regulations. The increase in the rebate for charities is part of a broader initiative to support public service bodies engaged in non-commercial activities.
The Comprehensive Integrated Tax Coordination Agreement (CITCA) is an arrangement between the federal government of Canada and participating provincial governments concerning the Harmonized Sales Tax (HST), which merges the federal Goods and Services Tax (GST) with provincial sales taxes.
The regulations are designed to enhance financial support for P.E.I. charities, allowing these organizations to more effectively claim rebates that facilitate their operations. By raising the provincial rebate to 50%, the amendments aim to relieve some financial burdens, thereby fostering greater support for community services. Additionally, these changes emphasize compliance and the integrity of the tax system, incorporating measures to mitigate potential abuses related to the increased rebate.
SOR/2023-161 introduces changes to GST/HST regulations that particularly benefit charities in P.E.I. by increasing the rebate on the provincial HST component.
Canada (SOR/2023-161) August 2, 2023