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Easy Peasy Oracle EBTax GST, HST and PST for Canada

by | Feb 22, 2019 | VAT/GST

General

Canada essentially has three Sales/VAT style taxes  GST, HST and PST. In some places PST has no recovery when collected as PST alone.  HST is simply a combination of GST + HST in an effort to streamline the whole collection and reporting process.  QST/RST are essentially specific flavors of PST. One named with Quebec in the tax (QST)  and Retail Sales Tax (RST in Manitoba.)

GST from a practical perspective is just like any other VAT oriented country in that it is a national (country-wide) tax, that is until it is then not. Well the minute you inject HST things then get twisted in that you no longer can simply charge GST leveraging just a country as the sole jurisdiction. 

So yes GST is a nationwide tax technically but from an implementation perspective the true GST is NOT charged nationally. It is only charged nationally where HST is not in the mix. Then again it is part of HST and one could simply just create a GST/HST tax and run with that. Why not..?

The PST/HST flavors are all essentially the net equivalent of US States in that you don’t need a city or a zip code to figure out where the transaction is taking place. Province is always included in Canadian address (at least it should be.) You don’t have scenarios where a zip code crosses two provinces as say for example Martin/Port St Lucie cross two counties in Florida. There are 20,000 plus tax jurisdictions in the US for Sales Tax. Got tax?

Reverse Charge should be handled by using an Offset Tax.

Notable Horse Trading

Oh I figure I should mention for the fun of it, no one really seemed to want GST. It replaced MST but is largely not something that most Canadians really wanted shoved down their throats by using archaic political maneuvers to add 8 Senate votes temporarily to pass the measure back in the late 1980’s early 1990’s.  Who would have guessed that adding a new tax would have been controversial.  

Quirks

HST is a combination of GST and PST and is recoverable. However, in some provinces PST by itself (usually the higher rate in the HST combo) IS NOT recoverable. Some Provinces allow for either and some only do HST and then are still some that have GST and PST separate (no HST). Also one has to be on alert with regards to the recoverability of Meals and Entertainment.
 

Rules, Rules Rules…

Setup (configuration in EBTax) of a Canadian Indirect Tax Regime is relatively straightforward for those skilled in the Art of Oracle EBTax (most folks who have EBTax Responsibilities assigned to them with configuration access either should in fact not or thankfully are disciplined enough not to mess with the configurations, especially if the firm processes 1000’s of AR/AP transactions.)

Provinces and their Rates

  • GST Only Provinces (currently 5%)
    • Alberta 
    • Northwest Territories 
    • Nunavut 
    • Yukon
  • HST Provinces (GST of 5% plus the PST % shown in each below)
    • New Brunswick (10%)
    • Newfoundland & Labrador (10%)
    • Nova Scotia (10%)
    • Ontario ((8%)
    • Prince Edward Island (10%)
  • GST/PST Provinces (GST of 5% plus the PST % shown in each below)
    • Manitoba-RST (8%)
    • Quebec-QST (9.975%)
    • Saskatchewan (6%)
    • British Columbia (7%)

A bit about Juridictions

While Canada has more Jurisdictions than most other VAT implementing countries in that they have a Jurisdiction for each Province/Territory, they are still far away from the Jurisdiction madness of the US Sales Tax approach.

Regime(s)

  • Canada VAT/Sales Tax (just one is fine)
  • Note: If you want to do one “Regime for GST/HST and one for PST then by all means. Oracle support seems to like the two regime approach. More is not always better in IT.  Two is not better or worse than doing a single Regime.  Their logic is that the two regime one needs less testing?  We fully test any Tax Solution no matter whose idea it was. 

Taxes

  • GST/HST and GST/HST Offset
  • PST/QST/RST and PST/QST/RST Offset

Statuses (Could Divi Up By AP and AR)

  • Standard
  • Zero Rated
  • Exempt
  • Out of Scope
  • Reverse Charge

Jurisdictions

  • Alberta 
  • Northwest Territories 
  • Nunavut 
  • YukonNew Brunswick
  • Newfoundland & Labrador
  • Nova Scotia
  • Ontario
  • Prince Edward Island
  • Manitoba
  • Quebec
  • Saskatchewan
  • British Columbia

Rates (Could Divi Up by AP and AR)

  • Standard
  • Zero Rated
  • Exempt
  • Out of Scope
  • Reverse Charge

Recovery Rates

  • 100%
  • Various (Meals and Entertainment, etc for phase ins and phase outs)
  • 0%

Rules

  • Define the defaults for PoS, Applicability, Registration, Status, Rate
  • Upon a full review of the particular company’s exposure and based an elaborated category taxonomy  a full suite of rules would be devised accordingly
  • Special attention on Recovery Rules where PST is not recoverable 

This is not to simply say….

Keep in mind, this is not to say that designing a Canadian Indirect Tax solution should be done by someone who says they do Oracle Financials per se as the complexity in the solution is NOT in the configuration, but rather in understanding Indirect Tax Law.  By fully understanding the Law/Regulations one can then set about in addressing such nuances in the Rules engine in combination with leveraging a thoughtfully established Category Taxonomy in Inventory (leveraging the Inventory Items as the lowest common denominator) or at a minimum using The categorization facility in EBTax.

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