Income Tax Status of HST Transition Support Payment for Small Businesses

Posted on November 3, 2010 by Cyndee Todgham Cherniak

A number of readers of the HST Blog have asked whether the Ontario HST Transition Support Payment for Small Businesses is subject to income tax. The answer is "yes" - sorry to be the bearer of bad news.  I was informed a number of months ago by a representative of the federal Department of Finance that the payment is subject to income tax and that the Ontario negotiators were/are aware of this interpretation.

So, please make sure that you make a record of the payment for 2010 income tax calculation purposes.  The reality is that th tax authorities will know about the payment to you - so, please do not forget it (even if it is really small).

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Alert to Non-Residents - It is a Good Time to Take a Closer Look at Canadian Business Activities

Posted on September 8, 2010 by Cyndee Todgham Cherniak

I have helped many non-residents of Canada register for goods and services tax (GST) purposes over the years. These GST registered non-residents must apply the HST place of supply rules to their transactions involving Canadian buyers/clients.

In addition, many of these non-resident clients have filed extra-provincial registrations to carry on business in a Canadian province so that they could open a bank account and pay the Receiver General any GST collected. 

These non-resident entities have made two representations to the Government of Canada and/or a provincial government that they are 'carrying on business" in Canada.  Many have done so without considering income tax and/or withholding tax consequences.

The implementation of HST should trigger a closer look at a non-resident's Canadian business activities.  So far, I am close to 100% in finding mistakes that could be or are already very costly.

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