New Harmonized Value-added Tax System Regulations, No. 2

Marginal note:Effect of election

• 36 (1) For the purposes of paragraph 236.01(4)(a) of the Act and despite sections 31 and 32, if an election made under subsection 35(1) by a person is in effect during an instalment period, the amount to be added to the net tax of the person for each particular reporting period of the person during which the person is a large business that ends at a time in the instalment period when the election is in effect is the total of all amounts each of which is determined, for a specified provincial input tax credit, by the formula

  (A/B) × C × D

  where

  A

  is all or part of the specified provincial input tax credit that would have been required to be added under subsection 236.01(2) of the Act for each reporting period of the person ending in the last fiscal year of the person that ends before the first day of the instalment period if

  • (a) where the first day of that fiscal year is before July 1, 2010, the new harmonized value-added tax system had been in effect, with all modifications as the circumstances may require, throughout that fiscal year in respect of each specified province and the harmonization date for the specified province had been the first day of that fiscal year,

  • (b) no election under subsection 35(1) had been in effect, and

  • (c) the recapture rate applicable at all times throughout that fiscal year had been 100%;

  B

  is the number of fiscal months in the last fiscal year of the person that ends before the first day of the instalment period;

  C

  is

  • (a) if the particular reporting period is a fiscal year, 12,

  • (b) if the particular reporting period is a fiscal month, 1, or

  • (c) if the particular reporting period is a fiscal quarter, 3; and

  D

  is the recapture rate applicable on the last day of the particular reporting period in respect of the specified provincial input tax credit.

• Marginal note:Reconciliation

  (2) For the purposes of paragraph 236.01(4)(a) of the Act, if an election made under subsection 35(1) by a person is in effect during a fiscal year of the person, the person shall, in determining the net tax of the person for a reporting period of the person that includes the last day of that fiscal year or for a reporting period of the person that begins after that fiscal year and ends on or before the last day of the third fiscal month following the last day of that fiscal year, add the positive amount or deduct the negative amount determined by the formula

  A - B

  where

  A

  is the total of all amounts that, in the absence of subsection (1), would have been required under subsection 236.01(2) of the Act to be added to the net tax of the person as a consequence of section 31 or 32 for each reporting period of the person ending in the fiscal year; and

  B

  is the total of all amounts each of which is added to the net tax of the person as a consequence of subsection (1) or section 31 or 32 for each reporting period of the person ending in the fiscal year.

• Marginal note:Reconciliation on cessation

  (3) Despite subsection (2), for the purposes of paragraph 236.01(4)(a) of the Act, if an election made under subsection 35(1) by a person is in effect during a particular fiscal year of the person and the person ceases to be a registrant at any time in the particular fiscal year, the person shall, in determining the net tax of the person for the particular reporting period in which the person ceases to be a registrant, add the positive amount or deduct the negative amount determined by the formula

  (A - B) + (C - D)

  where

  A

  is the total of all amounts that, in the absence of subsection (1), would have been required under subsection 236.01(2) of the Act to be added to the net tax of the person as a consequence of section 31 or 32 for each reporting period of the person ending in the particular fiscal year;

  B

  is the total of all amounts each of which was added to the net tax of the person as a consequence of subsection (1) or section 31 or 32 for each reporting period of the person ending in the particular fiscal year;

  C

  is

  • (a) if an election made under subsection 35(1) was in effect during the fiscal year (in this subsection referred to as the “prior fiscal year”) immediately preceding the particular fiscal year and the person has not added or deducted an amount under subsection (2) in respect of that prior fiscal year in a reporting period ending before the particular reporting period, the total of all amounts that, in the absence of subsection (1), would have been required under subsection 236.01(2) of the Act to be added to the net tax of the person as a consequence of section 31 or 32 for each reporting period of the person ending in the prior fiscal year, and

  • (b) in any other case, zero; and

  D

  is

  • (a) if an election made under subsection 35(1) was in effect during the prior fiscal year and the person has not added or deducted an amount under subsection (2) in respect of that prior fiscal year in a reporting period ending before the particular reporting period, the total of all amounts each of which was added to the net tax of the person as a consequence of subsection (1) or section 31 or 32 for each reporting period of the person ending in the prior fiscal year, and

  • (b) in any other case, zero.

• Marginal note:Prescribed person

  (4) If a person is required under subsection (2) or (3) to add a positive amount, or deduct a negative amount, in determining its net tax for a reporting period of the person, for the purposes of the definition large business in subsection 236.01(1) of the Act, the person is a prescribed person in respect of that addition or deduction.