On June 21, 2024, the Government of Canada enacted Regulations Amending Various GST/HST Regulations, No. 13 (SOR/2024-151). This regulatory update addresses a request from the Government of New Brunswick for the implementation of a 100% rebate on the provincial component of the Harmonized Sales Tax (HST) specifically for hospital authorities, school authorities, and public colleges. This decision represents a shift in tax policy as New Brunswick transitions from a constitutional immunity framework to a structured rebate system under the federal Excise Tax Act.

Historically, under the Constitution Act, 1867, properties owned by federal and provincial governments were immune from taxation, allowing eligible entities in New Brunswick to receive a 100% rebate of GST/HST. However, with the new Reciprocal Taxation Agreement (RTA) between Canada and New Brunswick set to take effect on April 1, 2024, this immunity is being replaced. The RTA aims to simplify tax administration between federal and provincial governments, facilitating better coordination and efficiency in tax collection. Under the RTA, eligible entities such as hospital authorities, school authorities, and public colleges will now be able to claim a 100% public service body rebate of the provincial component of the HST, rather than relying on the previous constitutional immunity.

The Canada-New Brunswick Comprehensive Integrated Tax Coordination Agreement (CITCA) governs the application of HST in New Brunswick, allowing the province flexibility in establishing the provincial HST rate and related rebate mechanisms. Federal legislation mandates that any changes to the provincial component of the HST must be executed through federal regulations. Starting April 1, 2024, New Brunswick entities will transition to a new rebate structure, wherein hospital authorities can claim an 83% rebate, school authorities a 68% rebate, and public colleges a 67% rebate on the federal portion of the HST.

The Amending Regulations formally implement this rebate system and involve modifications to several existing GST/HST regulations. First, the Public Service Body Rebate (GST/HST) Regulations enable the new rebate of the provincial component of the HST for eligible hospital authorities, school authorities, and public colleges. Second, the Streamlined Accounting (GST/HST) Regulations have been adjusted to allow eligible suppliers, including public service bodies, to apply revised percentages for calculating remittances instead of tracking actual GST/HST on sales and inputs. Third, the New Harmonized Value-added Tax System Regulations introduce an anti-avoidance transitional rule designed to prevent misuse of the rebate system, restricting rebate eligibility for specific transactions (e.g., property buybacks) that were entered into primarily to benefit from the rebate without a bona fide purpose.

The implementation of these regulations signifies a shift toward improved cooperation between federal and provincial governments in tax matters, ultimately benefiting public institutions and supporting public services in New Brunswick.

Canada (SOR/2024-151) August 7, 2024