Manitoba RST Reduction – July 2019

Manitoba homes and businesses will have plenty to celebrate this Canada Day 2019, including paying one percent less on the retail sales tax (RST).

The RST reduction to 7 percent from 8 percent was announced in the March 2019 provincial budget, to be effective July 1,2019. The provincial government stated the reduction was intended to have a bigger impact on households making large purchases and businesses which have PST costs within their supply chain.

More than $300 million will be put back into the hands of Manitobans annually, according to government estimates. Compared with other jurisdictions where RST is applicable, this change will put Manitoba as the third-lowest RST rate province in Canada, next to Alberta (no RST) and Saskatchewan (6 percent), and on par with B.C. (7 percent).

The change will also have an impact on RST-registered business which will have to introduce changes to their accounting systems to accommodate the new tax rate on invoices for goods and services, or account for self-assessed RST at a lower rate.

Manitoba Finance issued a notice in early March detailing the transitional rules to help businesses administer the change in a sales tax rate. MNP has summarized the most relevant aspects, below.

Taxable Goods

The new rate applies on goods purchased after June 30, 2019 (including where the purchaser only made a deposit).

The 8-percent rate will apply to goods purchased before July 1, 2019, including purchases on credit or deferred payments, where payment is made after June 30 and for goods fully paid prior to July 1 but where delivery occurs after that date.

Real Property Contracts

The 8-percent rule applies to contracts executed prior to March 7, 2019 and completed by June 30, 2019. It is important to note any tangible personal property or taxable service acquired by the contractor for his own use is taxable at the 8-percent rate if purchased prior to June 30, 2019.

For contracts executed after March 7, 2019, it will be the applicable tax rate in effect at the time of the purchase of the goods and services by the contractor (as the contractor is considered the consumer). The tax rate of contract inputs is is determined on the date of those purchases, not by the contract date.

Contractors who self-assess the tax are required to pay 8 percent if the goods were removed from inventory before July 1, 2019. Otherwise, the 7-percent rate will apply (e.g.; acquired after June 30, 2019).

For a complete list of goods and services, please review the Notice RST-19-01. It is critical registered business keep supporting documentation to be able to verify the dates of the supply and the tax rate being applied.

The takeaway here is to make sure you have implemented all the changes and modifications in your business before the effective date of the new rate.

For more information on the Manitoba RST tax rate change or any other needs, contact Daniel Schwersensky at 204.927.2922 or [email protected].