Vancouver’s additional 2.5% hotel tax will increase the overall rate to above the 12% specified tax rate, thereby causing GST to be applied to the 13.5% provincial tax

Effective February 1, 2023, Vancouver has been imposing the Major Events Municipal and Regional District Tax (Major Events MRDT) of 2.5% to supplies of short-term accommodation made in the City. When combined with the regular 8% provincial sales tax (PST) and the 3% Vancouver Municipal and Regional District Tax (MRDT), this increases the combined rate to 13.5%, which is above the “specified tax rate” of 12% that applies for purposes of ETA s. 154. The significance of this is that GST applies to all of such provincial tax so that the combined tax rate increased to over 19%.

CRA has also belatedly announced the cancellation of Policy Statement P-194R2, Application of Penalties and Interest when a Return and/or Rebate Application, and/or Another Return, is Received After the Due Date in recognition of the Villa Ste-Rose decision (which found that interest and penalties on a late-filed GST return should be computed after netting rebate claims against the gross GST payable).

Neal Armstrong. Summaries of Excise and GST/HST News - No. 114, August 2023 under ETA s. 154 and s. 280(1).