Manitoba Home Builders’ Association

October 1, 2013 • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • •

Retail Sales Tax Rate Change

2013 Budget Announcement

The 2013 Budget announced that effective July 1, 2013 the retail sales tax rate will change from 7% to 8% until June 30, 2023.

Bill 20

The Province of Manitoba has introduced Bill 20, The Manitoba Building and Renewal Funding and Fiscal Management Act (Various Acts Amended), which provides for a change in the retail sales tax rate effective July 1, 2013.

Similar to other tax changes that came into effect on Budget day, the rate will be retroactive to July 1, 2013 and vendors will be obligated to remit the tax at 8% retroactive to that date.

Vendors are expected to charge and collect tax at the new rate as of July 1, 2013.

Transitional Rules

An RST Notice on the transitional rules regarding the retail sales tax rate change has been prepared and is available on Taxation Division’s website at www.gov.mb.ca/manitoba/finance/taxation.

This information notice outlines the transitional rules for taxable goods and services, insurance and real property contracts.

Real Property Contracts

Real Property Contracts

The 7% sales tax rate is grandfathered for taxable goods and services purchased for incorporation into real property for contracts executed prior to April 17, 2013 and completed by June 30, 2014.

Real Property Contracts

Machinery, equipment, tools and other taxable goods and services purchased by contractors for their own use to perform a real property contract are not grandfathered. This includes equipment rentals that may or may not be re-billed to the customer.

Real Property Contracts

Contractors with fixed price real property contracts that are grandfathered will be required to pay tax at 8% for taxable goods and services acquired after June 30, 2013 but can apply for a refund (or an internal credit) of the 1% tax difference.

Refund claims should be made upon completion of an eligible contract using form RT6 – Application for Refund – Real Property Contracts (Residential Properties).

Real Property Contracts For contracts executed after April 16, 2013, the

tax rate applies on taxable goods and services based on when they are acquired by the contractor for incorporation into real property and not on the sale of the real property.

The same applies for taxable goods acquired RST exempt and the tax is self assessed when they are used in performance of a contract.

Real Property Contracts

Goods and services acquired to fulfill change order requests after April 16, 2013 are taxable at 7% if acquired prior to July 1, 2013 or 8% if the acquired after June 30, 2013.

Change order requests made to contracts that are executed prior to April 17, 2013 will have the 8% rate apply and not be eligible for a refund if the change order requests were not completed prior to June 30, 2013.

Mechanical and Electrical Systems

Mechanical and Electrical Systems Contracts for the installation, maintenance or

other services to M & E systems executed prior to April 17, 2013 are taxable at the 7% rate for services provided to June 30, 2014.

Contracts executed after April 16, 2013 that

straddle July 1, 2013 must be segregated so that the tax apply at 7% for services performed prior to July 1, 2013 and tax applies at 8% for services performed after June 30, 2013.

Mechanical and Electrical Systems

The applicable tax rate on supply and install contracts for M & E systems is the same as outlined previously for services to M & E systems.

For these contracts, the tax rate applies based on the installation date, not when title passes (which is typically at the end of the work).

Mechanical and Electrical Systems

Holdbacks for contracts executed after April 16, 2013 should be segregated on the invoice into amounts before July 1st and after June 30th with the appropriate tax rate applied on each amount.

Billing for any holdback amounts for contracts

executed prior to April 17, 2013 are at 7% if completed by June 30, 2014. If not completed by this date, RST applies on the holdbacks as described above.

Mechanical and Electrical Systems M & E contracts executed prior to April 17, 2013

are grandfathered at the 7% tax rate for installations completed by June 30, 2014. If the work extends past this date, the portion of the work done after June 30, 2014 is taxable at 8%.

Mechanical and Electrical Systems Contractors with fixed price real property

contracts that are grandfathered will be required to pay tax at 8% for taxable goods and services acquired after June 30, 2013 but can apply for a refund (or an internal credit) of the 1% tax difference.

Refund claims should be made upon completion of an eligible contract using form RT6 – Application for Refund – Real Property Contracts (Residential Properties).

Mechanical and Electrical Systems

Change order requests made after April 16, 2013 are taxable at 7% for all work performed prior to July 1, 2013 and 8% for all work performed after June 30, 2013.

Change order requests made to contracts

that are executed prior to April 17, 2013 will have the 8% rate apply and not be eligible for a refund if the change order requests were not completed prior to June 30, 2013.

Application for Refund – Residential Properties

Application for Refund

Refunds request must be made by June 30, 2015 and include the following: a copy of the contract with the home owner

executed prior to April 17, 2013, a copy of the possession certificate provided to

the home buyer, a job cost summary for the contract, a summary of tax paid at 8% on direct materials

and M & E work up to June 30, 2014, along with supporting invoices,

invoices for real property supply and install sub contract work (done after July 31, 2013 and up to June 30, 2014) along with corresponding sub-contract/purchase order documents showing an effective date after April 16, 2013.

a summary of the job cost components for which a calm is being made for multiple contracts.

Application for Refund

Application for Refund

refund applicants requesting refund claims for more than 5 contracts can opt not to provide documentation for the tax paid at 8% on direct materials and M & E work. They may also not to provide invoices for real property supply and install sub-contract work performed after July 31, 2013 and up to June 30, 2014.

however, applicants will have to summarize the purchase invoices and retain the supporting documents. Taxation Division will contact these applicants to review these documents.

Purchases For Own Use

Purchases - Goods

Taxable goods purchased prior to July 1, 2013 are taxable at the 7% tax rate, including taxable goods purchased on credit or that are fully paid but delivery occurs after June 30, 2013.

The 8% tax rate applies on taxable goods

purchased after June 30, 2013, including taxable goods in which only a deposit has been paid on the purchase.

Purchases - Goods Lease payments made or billed prior to July 1,

2013 are taxable at the 7% tax rate and those payable after June 30, 2013 are taxable at 8%.

Taxable services are taxable at 7% if completed prior to June 30, 2013 regardless of the billing and payment date.

Taxable service contracts entered into prior to April 17, 2013 are taxable at 7% for services provided up to June 30, 2014 (this includes accommodations booked with a deposit).

Prepaid taxable services bought and paid for prior to April 17, 2013 are taxable at 7% regardless of when the service is performed.

Purchases – Services (Other Than Telecommunication Services)

Purchases – Telecommunication Services Telecommunication service packages invoices

dated prior to July 1, 2013 are taxable at 7% (even if the billing period straddles that date). Invoices dated after June 30, 2013 are taxable at 8%. The tax rate on optional services (such as long

distance) is based on the date the service is provided.

Purchases - Insurance The tax rate on definite term insurance

contracts is based on the effective date of the contract (including multi-year contracts).

Premiums payable on indefinite term or group

insurance contracts prior to July 1, 2013 are taxable at 7% regardless of the coverage period. Premiums payable after June 30, 2013 are taxable at 8%.

Contact Us:

Tax Inquiries and Interpretations: (204) 945-5603General Inquiries: (204) 945-6444Manitoba Toll-Free 1-800-782-0318E-mail: MBTax@gov.mb.caWeb Site: www.gov.mb.ca/finance/taxationTAXcess: manitoba.ca/TAXcess

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