New GST/HST 370: Yes, It’s Complicated

Tax Year 2010 was a complicated one for the GST and HST. On July 1^st, the HST rate in Nova Scotia rose to 15% and British Columbia and Ontario introduced the HST with rates of 12% and 13% respectively. The new GST370 (Employee and Partner GST/HST Rebate Application) reflects this new reality and tax and financial advisors need to be prepared to complete the form accurately and explain it to their clients.

What's new? For Ontario and BC, the employee or partner has to indicate whether the deductible expense was subject to GST (before July1, 2010) or HST (July 1, 2010 and after) on the applicable reporting form. For Nova Scotia residents, expenses have to be manually allocated between 13% and 15% HST depending on the date incurred. This is because NS was an HST province before July 1, 2010 so every eligible expense is included under HST on form GST370.

An individual may be eligible for the Employer and Partner GST/HST Rebate if his employer is a GST/HST registrant (not including financial institutions) or he is a member of a GST/HST registered partnership and has reported a share of the partnership income on his tax return. Partnership expenses that were not included on the T5013 Partnership Information Return may be eligible. The partnership had to have been able to claim input tax credits if these expenses had been incurred directly

It's important to let your employee and partner clients know now that they are going to have to supply more detailed expense information to you this year in order to file accurately. Data for the GST370 flow from reporting forms including Employment Expenses (T777) and Claim for Meals and Lodging Expenses (TL2). Other expenses with a GST/HST component include union dues on the T4 and by receipt, which are included under "Other Deductionsî on line 212. The employee has to indicate whether the expense occurred on and after July 1, 2010 and whether he is eligible for the GST/HST rebate. Since union dues are paid monthly, some would have been subject to GST and some to HST, so there has to be a manual separation on the GST/HST 370 if your tax program doesn't separate the union dues for you.

Section 5 of the GST370 concerns goods brought into an HST participating province from a non-participating location. A rebate on the provincial portion of the HST is available for expenses on which you did not pay the full HST. CRA suggests calling the Business Enquiries Line at 1-800-959-5525 if you need assistance.

There is a chart attached to the GST370 that allows manual calculation for the Employee and Partner GST/HST Rebate. Most tax programs should do this for you but check your numbers for expense allocations before completing the tax return. Finally, don't forget to include last year's Employee and Partner GST/HST Rebate in income on line 104!

ADDITIONAL EDUCATIONAL RESOURCES: DFA-Tax Services Specialist Program