As part of the 2017-18 Budget, a key change to the Education Property Tax (EPT) system is that EPT collected by municipalities will be paid to the provincial government’s General Revenue Fund instead of to school divisions, starting in 2018. Your monthly EPT return will now be filed electronically with the Ministry of Finance starting with the January 2018 monthly EPT return. The January 2018 EPT return and payment is due by February 10, 2018.
Filing your Monthly EPT using the Saskatchewan Electronic Tax Service (SETS)
Beginning with 2018, municipalities will be required to use the Saskatchewan Electronic Tax Service (SETS) to file their monthly EPT returns. This will begin for the January 2018 EPT return by February 10, 2018. All monthly returns will be entered into SETS. Municipal administrators should have received a User ID and password in two separate letters at the end of October. If you have not received these, please call the Ministry of Finance at 1-800-667-6102 or send an email to email@example.com. Read the “Transition to the new EPT System” in this article for filing the December 2017 monthly EPT return in January 2018.
SETS testing occurred during the month of November and it is now closed. We are compiling user responses to the testing and will make any adjustments necessary based on the feedback survey. It appears that many municipalities had success in testing the system. Should you encounter issues in early 2018, please contact the Ministry of Finance at 1-800-667-6102 or firstname.lastname@example.org. Instructional webinars were held in November and many municipalities signed up for these.
Separate School Divisions that choose to set their own mill rate for EPT
EPT returns will also be sent by the municipality to separate school divisions when a municipality is collecting EPT for a separate school division that has established its own EPT rates by bylaw. Municipalities will continue to collect and remit funds to the separate school board directly when a bylaw is in place. The monthly return submitted in SETS will be for information purposes only in this circumstance.
Penalties and Interest
Monthly EPT returns are due by the 10th of the month following the reporting period. To avoid penalty and interest, submit the completed return and payment to Finance by the due date (including nil returns). Penalty and interest charges are applied to taxes that are not remitted by the due date. These charges are necessary to ensure that taxes are collected and remitted on time.
A penalty of 10 per cent of the EPT payable, to a maximum of $500 is applied to each return period. In addition, there is a $75 penalty for failure to remit a return. Interest is charged at the prime interest rate plus 3 per cent from the date the EPT was to have been remitted.
Municipalities should consider adopting a municipal bylaw or policy to authorize that EPT collected for the month can be paid by the due date rather than waiting for a council meeting. Establishing this process will help to avoid the new fines and penalties for late payment. This bylaw would be similar to what you may already have in place for payment of salaries, payroll remittances, utility billings, etc. A sample Expenditure-Authorization bylaw is available online.
Transition to the new EPT System
2017 Monthly Returns (Form H2)
The EPT that municipalities collect in December 2017 will be remitted directly to school divisions in January 2018. The December 2017 monthly EPT return will be filed using the existing process. Please complete Form H2 and send a copy of the form to the appropriate school division and the Ministry of Government Relations. The December 2017 monthly EPT return is due on January 10, 2018.
2017 Annual EPT Return (Form H)
Please note that the 2017 annual EPT return will be filed using the existing process. Please complete Form H and send a copy of the form to the appropriate school division, the Ministry of Education and the Ministry of Government Relations. The 2017 annual EPT return is due on January 15, 2018.
Beginning January 1, 2018, the Interim return, usually submitted in September, is no longer required.
EPT Exemptions and Abatements
The rules about granting an exemption or abatement for EPT have changed starting in the 2018 taxation year.
- Any multiyear exemptions that have been granted by a municipal council prior to January 1, 2018, under previous legislation, will continue. Existing agreements will run their course until they expire, after which the new legislation will apply. The Education Property Tax Act comes into effect January 1, 2018.
- Council may continue to enter into multiyear exemption agreements for EPT. The agreement must exempt EPT in the same percentage as municipal tax. The agreement must be for 5 years or less.
- Council may continue to use multiyear abatement policies or programs for EPT for a specified time period in accordance with the Municipal Acts.
- Municipal council can choose to exempt/abate EPT taxes in the same percentage as municipal tax on an annual basis.
- If the EPT portion of the proposed abatement/exemption for a single property or parcel of land will result in EPT loss of $25,000 or more for the tax year, the municipality must seek prior provincial approval annually. If the EPT amount is less than this threshold, no provincial approval is required.
- Multi-year agreements between the municipality and the province for exemptions and abatements (no more than 5 years) are possible, so EPT treatment is consistent with municipal property tax.
- The municipality must submit any information requested in the agreement to the province.
- The province can terminate the agreement if:
- the municipality fails to comply with the terms and conditions of the agreement; or
- the minister considers it necessary and in the public interest to do so.
- If a municipality chooses to exempt/abate more than 5 per cent of the total EPT levy within that municipality for the year, the province will undertake an audit and approval process of the abatements and exemptions given.
Note: Providing property tax exemptions will remain a local choice at this time, subject to the above approval requirements. Providing property tax exemptions means less tax revenue for essential public services, or a potential taxation shift to other properties and owners. Local governments understand the unique needs and circumstances of residents in their municipality. However, if future EPT exemption and abatement trends begin to significantly increase, causing a large loss of revenue and taxation shift, the province will reconsider the rules and thresholds established for the EPT exemption/abatement approval process.
EPT Exemption and Abatement Approval Process
When a municipality seeks approval from the province to exempt or abate EPT revenue that is over the $25,000 threshold or more than 5 per cent of the total EPT levy, the target will be to make the decision within 15 business days after receiving all pertinent information.
Applications will be sorted into three main categories:
- Economic Development
- Non-Profit/ Community based organization
A fourth category called “Other” may be used if an unusual or unprecedented circumstance arises that is not captured in one of the three main categories. Applications submitted under this category will be assessed case by case based on their merits.
An application form is being developed at this time to ensure that key information required is captured during the application process. The application form, applicable criteria for each of the three categories and information required to accompany the application form will be available online soon. This information will also be distributed to municipalities in January, 2018.
Regulations have been adopted under The Education Property Tax Act, addressing EPT exemptions and abatements, among other things. These will be available shortly.