Please note that the following document, although correct at the time of issue, may not represent the current position of the Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence.
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Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 15th floor
320 Queen Street
Ottawa ON K1A 0L5
Case Number: 123244
Business Number: XXXXX
Attention: XXXXX XXXXX
April 19, 2010
Dear XXXXX:
Subject:
GST/HST INTERPRETATION
Application of the Transitional Rules for the HST in Ontario to Prepaid Funeral Arrangements
Thank you for your XXXXX of XXXXX, and our telephone conversation of XXXXX, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to prepaid funeral arrangements in Ontario.
The Government of Canada and the Government of Ontario have signed a Comprehensive Integrated Tax Coordination Agreement for the implementation of HST in Ontario. The HST will come into effect in Ontario on July 1, 2010, at a rate of 13%, consisting of a 5% federal part (equivalent to the existing GST) and an 8% provincial part.
Legislation required to implement the HST in Ontario has received Royal Assent by the Parliament of Canada and the Legislative Assembly of Ontario. However, many of the rules which would apply to transactions will be contained in regulations made under the Excise Tax Act (ETA). Although the Government of Ontario has announced details of the rules which may eventually apply, the required regulations have not yet been made by the Government of Canada.
The following interpretation is based on the transitional rules as announced in Information Notice No. 3, General Transitional Rules for Ontario HST, released by the Government of Ontario on October 14, 2009 (the Notice). This interpretation should not be taken as a statement by the Canada Revenue Agency (CRA) that the transitional rules will be made in their current form.
We understand that you have received several questions regarding partially paid arrangements for prepaid funeral services and whether the transitional rules for prepaid funeral arrangements will apply to these arrangements.
Interpretation Requested
You would like to know if the provincial part of the HST will apply to partially paid funeral arrangements if the arrangement is entered into before the implementation of the HST, and fulfilled after July 1, 2010.
You have provided a number of examples, based on the following scenario: Mary Smith enters into a written prepaid arrangement for funeral services, valued at $5,000 plus GST, before June 30, 2010.
1. Mary Smith pays $105, which includes an estimate of $5 GST. The outstanding balance is to be paid at the time of need by her estate. Would the provincial part of the HST apply to the balance owing?
2. Mary Smith is scheduled to make payments of $105 per month until the arrangement is paid in full. She meets the payment schedule, but dies after July 1, 2010 before she has paid the full amount. Would the provincial part of the HST apply to the balance owing?
3. Mary Smith pays $4,200, which includes an estimate of $200 GST. The outstanding balance is to be paid before she dies, but not before July 1, 2010. She dies before she can make the final unscheduled payment. Would the provincial part of the HST apply to the balance owing?
You indicated that the money would primarily be put into trust in these examples, but the same situation could occur with respect to a prepaid funeral arrangement that is funded by an insurance policy. The insurance policy purchased in advance may only pay for a portion of the costs of the funeral services, with the outstanding balance to be paid by the estate at the time of need.
You have also asked for confirmation that the Appendix to GST/HST Technical Information Bulletin B-091R, Application of the GST/HST to Prepaid Funeral Arrangements, will apply to prepaid funeral arrangements entered into in Ontario.
Interpretation Given
The Notice indicates that the HST would not apply to consideration for the part of a funeral or cemetery service that is performed on or after July 1, 2010 if the service is supplied pursuant to an arrangement in writing that was entered into before July 2010.
This rule would only apply if it was reasonable, at the time the arrangement was entered into, to expect that all or a part of the consideration for the service would be paid (or put into trust) before the service is performed.
The consideration for the funeral services does not necessarily have to be paid in full (or the full amount put into trust) for these transitional rules to apply. The transitional rules will apply if, at the time the arrangement was entered into, it is reasonable to expect that a part of the funds for the funeral service will be paid or put into trust before the services are rendered.
In the three examples provided, Mary Smith has written prepaid arrangement for funeral services before July 2010, has paid part of the consideration for the funeral services, and the amounts paid are put into trust. The transitional rules will apply in each example. The provincial part of the HST would not apply to the consideration paid for the funeral services when the funeral services are provided after July 1, 2010. Therefore, in each example, the provincial part of the HST (8%) would not apply to the remaining consideration for the funeral services provided under the written arrangement.
The consideration paid by the estate for funeral services under the arrangement, as well as the consideration paid with the amounts held in trust, will be subject to GST only.
The Appendix to GST/HST Technical Information Bulletin B-091R, Application of the GST/HST to Prepaid Funeral Arrangements, is based on the ETA provisions for prepaid funeral arrangements entered into before the implementation of the GST and the implementation of the HST in Nova Scotia, New Brunswick and Newfoundland and Labrador. We cannot confirm that the Appendix to TIB B-091R will apply with respect to the transition to the HST in Ontario. Until the Department of Finance releases the regulations that will apply, we do not know what exactly the transitional rules will be.
The foregoing comments represent our general views with respect to the transitional rules as announced in Information Notice No. 3, General Transitional Rules for Ontario HST, released by the Government of Ontario on October 14, 2009, as they relate to the subject matter of your request. Any change to the wording of the transitional rules or any regulations regarding the HST in Ontario, if made, could have an effect on the interpretation provided herein. These comments are not rulings and, in accordance with the guidelines set out in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service, do not bind the CRA with respect to a particular situation.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-952-7909. Should you have additional questions on the interpretation and application of GST/HST, please contact a GST/HST Rulings officer at 1-800-959-8287.
Yours truly,
Jacqueline Russell, CGA
Services and Intangibles Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate
UNCLASSIFIED
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