Government Announces Changes to GST/HST Rules for Carbon Emission Allowances

Government Announces Changes to GST/HST Rules for Carbon Emission Allowances
The Canadian Government through the Department of Finance recently released a draft technical changes to the Goods and Services Tax / Harmonized Sales Tax (GST/HST) rules for sales of carbon emission allowances, such as those traded in cap and trade systems.

Effective as of June 27th, 2018, the purchaser of carbon emission allowances is responsible for self-assessing the tax amount when the GST/HST is payable on such a sale. This change replaces the previous requirement where the seller of the allowance collected the tax from the purchaser and remitted it to the CRA. The Department of Finance notes that this rule change is in line with how these allowances are treated internationally.

Note that these changes will generally only apply to the secondary market of carbon pollution pricing instruments in which businesses with spare allowances typically sell their surplus to companies that have exceeded targets.

Also, the initial supply of emission allowances by a Canadian government entity generally remains exempt from GST/HST.

Source: https://www.fin.gc.ca/fin-eng.asp
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