Section 4
Subsection 4(1) - Tax on Premiums in Respect of Insurance Effected Outside Canada
Articles
Brent F. Murray, "Excise Tax & Insurance Premiums", Canadian GST Monitor No. 245, February 2009, p. 1.
Subsection 4(3) - Residence of Corporation
Administrative Policy
20 October 2011 Interpretation Case No. 134951
A non-resident corporation which invested in shares of producing oil and gas wells in Canada, was not considered to be carrying on business in Canada, so that it was not subject to the 10% tax on insurance premiums paid to an unauthorized insurer for related risks.
Section 122 - Application
Cases
Reference re Bill C-62, [1992] GSTC 2 (SCC)
The collection and remittance obligations imposed on a province by s. 122(b) could not be equated to an appropriation of money from the Provincial Consolidated Revenue Fund, without the consent of the provincial legislature, for federal purposes. Accordingly, the province was required to bear this administrative burden.
Administrative Policy
31 May 2012 Quebec Information Bulletin 2012-4
To achieve greater harmonization of Québec's sales tax (QST) system with the federal goods and services tax (GST) and harmonized sales tax (HST) system, the governments of Canada and Québec entered into, in March 2012, a comprehensive integrated tax coordination agreement (Canada-Québec CITCA) with various commitments in this regard. This information bulletin specifies the changes that will be made to the QST system pursuant to the undertakings to harmonize it with the GST/HST system applicable in 2013. Essentially, these commitments are as follows:
- the GST will be removed from the QST base as of January 1, 2013; to ensure that this removal has no impact on Québec's public finances, the 9.5% rate of the QST will, at the same time, be raised to 9.975%, i.e. the effective rate of the QST applicable until then;
- financial services that are currently zero-rated under the QST system will become exempt as under the GST/HST system as of January 1, 2013; as a corollary, the portion of the compensation tax on financial institutions attributable to the impact on public finances to the fact that input tax refunds are granted to suppliers of financial services will be eliminated as of the same date;
- the existing exemption mechanism from payment of taxes by governments and certain of their mandataries will be replaced by a tax payment and rebate mechanism as of April 1, 2013.
Section 123 - Interpretation
Subsection 123(1) - Definitions
Basic Tax Content
Administrative Policy
4 April 2011 Interpretation Case No. 113955
a university which is the registered and beneficial owner of three contiguous parcels of land (A, B and C) reconfigures its ownership so that it is the owner of parcel AB consisting of all of (former) parcels A and B plus a portion of (former) parcel C, and parcel C1 representing the balance. Such reconfiguration would cause parcels A, B and C to cease to exist for ETA purposes. However, the basic tax content of parcel AB will consist of that of former parcels A and B plus that portion of the basic tax content of parcel C (calculated immediately before that parcel ceased to exist) that can fairly and reasonably attributed to the area in parcel C that became part of parcel AB.
Builder
Administrative Policy
Excise and GST/HST News – No. 91 under "Head leases and subleases of new residential property: who must self-supply and who may be entitled to a rebate?" May 2014
If a person purchases newly constructed or substantially renovated housing for the purpose of leasing or licensing it to an individual as a place of residence, the person will generally not be a builder of the housing for GST/HST purposes, even if the person hires a property manager as agent for the purpose of renting the housing. However:
If a particular person purchases such housing for the purpose of supplying it under a head lease to another person (lessee/sub-lessor) who in turn leases the housing to an individual as a place of residence, the particular person will be a builder for GST/HST purposes and different rules apply. Where such a builder enters into a head lease that is exempt under section 6.1 or 6.11 of Part I of Schedule V to the Act with a lessee/sub-lessor who is acquiring the housing for the purpose of making exempt supplies that include giving possession or use of the housing (e.g., under a sublease that provides for the continuous occupancy of the housing as a place of residence or lodging by an individual for at least one month) and possession of the housing is given to the lessee/sub-lessor, the builder is considered to have made a taxable sale and repurchase (a self-supply) of the housing.
In such case, the builder is considered to have collected and paid the GST/HST on such deemed sale and repurchase on the fair market value of the housing at the time possession of the housing is given to the lessee (or on completion of construction or substantial renovation, if later) - and if a registrant may claim an ITC for the tax paid on the housing purchase.
Business
Cases
Calgary v. Canada, [2012] 1 S.C.R. 689, 2012 SCC 20
The Court found that the City's activity of acquiring public transportation facilities and assets would have been a "business" but for the fact that this activity was part of its making of exempt municipal transit services to the Calgary public. Rothstein J. stated (at para. 25) "I see no reason why the words 'undertaking of any kind whatever' would exclude the construction of a public transit facility."
See Also
Wadley v. The Queen, 2006 DTC 3401, 2006 TCC 440
The taxpayer let her neighbour's cattle graze on her pasture in consideration for a monthly fee per head, and agreed with her neighbour that he could crop-share her hay field. In finding that the activities of the taxpayer with respect to the pasture went beyond what was normally expected of the landlord in the maintenance of her rental property, Sheridan J. noted that the taxpayer cut brush and weeds along the fence line, trapped moles, harrowed the pasture to remove their burrows, kept water troughs full and salt supplies replenished. In finding that the taxpayer also was engaged in business activity with respect to the hay field, he noted that she had to fertilize and harrow the hay field and decide how often the hay should be cut in order to maximize the field production. In addition, her own equipment was used in the hay production and harvest and she cut brush, bailed hay and hauled bails.
Richter & Associates Inc. as trustee of Castor Holdings Ltd. v. The Queen, 2005 TCC 92,
The trustee in bankruptcy for a company ("Castor") which had essentially only engaged in investing in high-yield loans brought an action in its capacity of trustee for the Castor estate against the former auditors ("C&L") for $40 million in damages for breach of contract, and also began a "litigation support business" of providing assistance to most of the creditors (the "Participating Creditors"), including hiring professionals and experts, in connection with their action sounding in negligence against C&L for $800 million in damages. To the extent that, on settlement of the litigation, Richter was not able to recover its costs out of the proceeds of an award made to it on its own claim, Richter at such time would invoice the creditors for its remaining unrecovered costs, to be paid by set-off against loans they had made to it in the interim.
After noting (at para. 21) that "the word ‘undertaking' has been defined in … Drumheller v. M.N.R., 59 DTC 1177, 1180 (Exch. Ct.), as embracing ‘. . . trades, manufactures, professions, or callings, and any other conceivable kinds of enterprise as well," Archambault J stated (at para. 32):
[T]he litigation support services to the Participating Creditors constitute, if not a profession as defined in the Maxse case [[1919] 1 K.B. 647], at least an undertaking as this term is used in the definition of a "business". Given the nature of these activities and the continuous involvement required from the Estate in order to provide the services during the relevant period and that will be required from it in future years, this undertaking amounts to a business being carried on by the Estate.
See summary under s. 141.01(2).
Institute of Chartered Accountants in England and Wales v. Customs & Excise Commissioners, [1997] BTC 5355 (C.A.)
In finding that the taxpayer, which exercised delegated powers to issue licenses and certificates to its members and exercised public control over those engaged in financial services, auditing and insolvency practice, was not engaged in a "business", Beldam L.J. referred to community jurisprudence that rested on the touchstone of "economic activities" and then stated (at p. 5365):
"... The concept of 'an economic activity' is an activity which typically is performed for a consideration and is connected with economic life in some way or another. But it is not an essential characteristic that it should be carried on with a view to profit or for commercial reasons but it must be an activity which is analogous to activities so carried on. An activity which consists in the performance of a public service to which the idea of commercial exploitation with a view to profit or gain is alien is not of an economic nature particularly where the activity is one typically of a public authority."
Administrative Policy
13 June 2013 Interpretation Case No. 109782
ACo was a registrant which, in order to promote sales of its products, provided purchasers with a chance to win a cash prize directly from it by participating in a "game of chance [which] is conducted through having certain labels affixed to a product's packaging." In finding that s. 188(1) did not permit ACo to claim an input tax credit with respect to the payment of the cash prizes, CRA found that the promotional contest was not itself a business or an adventure in the nature of trade, but instead was part of the retail business which it promoted given the "high degree of interconnection and interdependence between the retailing of products that are taxable for purposes of the GST/HST and the promotional contest."
15 May 2012 Ruling Case No. 142436
Company A, which is the parent of Company B and C, will hire, remunerate and manage employees on its own behalf and in an agency capacity for its two subsidiaries, so that they are joint employees of the three companies. It will be responsible for all source deductions, and the employees will receive a T4 only from it. Company A and B are parties to a s. 150 election. Ruling that GST/HST will not apply to the reimbursement amounts paid by the subsidiaries to Company A for their respective shares of the remuneration. CRA stated:
Where an agent remunerates a principal's employee, the amount of money the principal pays the agent as a reimbursement for the employee's wages is not consideration for a supply and therefore is not subject to tax. Therefore, since Company A acts as an agent of Company B and Company C in remunerating the Employees, the amount of money Company B and Company C pay Company A as the reimbursement for the Employees' wages is not consideration for a supply and would not be subject to tax.
However, CRA emphasized that the ruling depended on there, in fact, being a joint employment relationship, and cautioned that:
Whether an employer-employee relationship exists between any two parties is a question of fact and is determined by the CPP/EI Rulings Division based on the facts of a particular situation. The Excise and GST/HST Rulings Directorate does not determine employer/employee relationships.
P-167R "Meaning of the First Part of the Definition of Business"
In establishing that an activity is sufficiently "business-like" to qualify as an "undertaking", a number of factors should be considered, including: 1. whether the activity is serious and earnestly pursued; 2. whether the activity is actively pursued with reasonable and recognizable continuity; 3. whether the activity is conducted in a sound manner using recognized business principles and records are maintained to that effect; 4. whether the supplies, if any, are of a kind which, subject to differences of detail, are commonly made by those who seek to profit from them; 5. whether the activity facilitates or promotes the making of supplies (whether by the person itself or by other persons); and 6. whether the activity supports other activities which are directed towards earning revenue. [I]t may be possible, in the appropriate circumstances, to conclude that a business exists even if only two of the six factors are met.
GST M 200-1-1 "Carrying on Business in Canada"
Articles
Paul V. Casuccio, "The Requirement to Register, Charge and Remit GST/HST on the Provision of Executor Services", Sales and Use Tax, Vol XI, No. 4, 2011, p. 598
Suggests (partly based on IT-377R, para. 5) that fees received from an estate by an individual who does not normally act as an executor may not be considered to be from a business.
Commercial Activity
Cases
Bowden v. R., [2011] GSTC 109, 2011 FCA 218
The appellant had claimed input tax credits (ITCs) in respect of alleged businesses conducted from his home for which he had only minimal revenues ($300 in sales over a three year period.) Before allowing a portion of the appellant's ITC claims on procedural grounds, Sharlow JA rejected the appellant's submission that a business which has no personal or hobby element is not required (on the authority of Stewart) to have a reasonable expectation of profit (REOP) in order to qualify as a commercial activity, after noting (at para. 8) that the definition of commercial activity specifically requires that an individual have a REOP.
398722 Alberta Ltd. v. Canada, [2000] FCJ No. 644 (CA)
The registrant was required to build an apartment building as a condition precedent for obtaining a permit to build a hotel, and argued that the residential housing operation therefore was an integral part of is hotel business and thus was a "commercial activity". The Court held that input tax credits under s. 169(1) were not available to a registrant who was fulfilling an obligation to meet another business objective rather than a commercial activity, so that the registrant here was not entitled to an input tax credit in respect of the GST payable on a deemed self supply of the apartment building on its substantial completion. Sharlow J.A. stated (at para. 22) that the definition of "commercial activity" recognized that although a business may "consist of a number of components, each of which is integral to the business as a whole", it required for GST purposes "that any part of the business that consists of making exempt supplies be notionally severed".
See Also
Klemen v. The Queen, 2014 DTC 1170 [at 3613], 2014 TCC 244
The appellant, who directly or through corporations, acquired equipment to refurbish and rent to junior oil companies, transferred to his corporation ("CHL") equipment which previously he had provided to CHL free of charge. His contention, that this transfer (made in consideration for a credit to his shareholder loan account) was not made in the course of commercial activity and was thus not a taxable supply, was directly contradicted by his testimony that his intention when acquiring the equipment was "to make money with it."
The Children's Clean Air Network Society v. The Queen, 2013 TCC 352
The appellant ("CCAN") was a not-for-profit organization which, in the second of the three years in question, was registered as a charity for the promotion of environmental responsibility. Part of this promotion entailed the production and distribution of tailgate magnetic stickers, posters, signs, etc., to discourage idle engine operation. CCAN printed its sponsors' logos on these materials. CCAN collected HST on the amounts received from the sponsors, which represented a mark-up over the related costs incurred by it. It claimed input tax credits for the HST on such expenses. C Miller J found that s. 135 deemed CCAN not to make a supply to each sponsor as "the sponsor's sole use was to publicize its business" (para. 10). However, CCAN was engaged in commercial activity as it made a margin in its sponsor dealings (para. 12), the publicity it provided to them was commercial in nature (para. 16) and "there is no reasonable expectation of profit test in the definition of commercial activity" (para. 15). The sponsor arrangements entailed both the promotion of the sponsor and the advancement of CCAN's mission, but with former characterized as merely a way to accommodate CCAN's mission (para. 18). C Miller J found the commercial portion of use of the promotional purchases was 30%. ITCs for HST incurred after CCAN became a registered charity was denied under s. 225.1(2).
Sydney Mines Fireman's Club v. R., [2011] GSTC 126, 2011 TCC 403
The Appellant was a non-profit society which purchased and held title to all equipment used by the local fire department (a distinct entity consisting of volunteer firefighters). The Appellant claimed input tax credits ("ITCs") on its purchase of one such item of equipment (a boat) on the basis that some of the funding for the boat purchase came from the Nova Scotia government, and that such funding should be viewed as the consideration for a taxable supply of the boat to the government. The Minister denied the ITC claim on the basis that the boat instead was used in making exempt supplies for no consideration under Sched. V, Part VI, s. 10. In rejecting the Appellant's ITC claim, Campbell J found (at para. 37) that the Appellant had failed to adduce sufficient evidence to establish a "direct link" between the government funding and the purchase of the boat.
Aviva Canada Inc. v. the Queen, 2006 TCC 57
In order to settle a dispute between two insurance companies (Aviva and Underwriters) regarding the ownership of trademarks, the two companies agreed to a transfer of the trademarks to Aviva for $5 million. Underwriters first transferred the trademarks on s. 85 rollover basis to a related company, NN, to allow NN to utilize non-capital losses, before their on-sale by NM. Aviva paid GST to NN and applied to CRA for a rebate of tax paid in error. CRA refused. Woods J found that the sale by NN did not have "any of the characteristics of a trading transaction" (para. 24), noting that NN "did not negotiate the sale and likely acted as an accommodation party in order to minimize the income tax payable on the sale," so that the sale was not an adventure in the nature of trade. She also found that the sale was not a "business," noting that a business must be "carried on" to fall within para. (a) of the definition of "commercial activity" – nor was there any evidence that the sale was connected to any existing commercial activity of NM (including any connection which could engage ss. 141.1(1)(a) and (2)(a).) Accordingly, the sale was not a taxable supply and Aviva was entitled to the rebate.
City of Regina v. The Queen, No. 1999-4570 (GST) G (TCC)
The activity of the City of Regina in constructing highway connector routes was "an undertaking of any kind whatever" and, therefore, a commercial activity.
Administrative Policy
CBAO National Commodity Tax, Customs and Trade Section – 2014 GST/HST Questions for Revenue Canada, Q. 29
The position (not following Aviva except on the same facts) in Q. 21 of the 2013 CBAO Q&A [infra] that "generally where a corporation makes a sale of property that is not exempt from GST/HST, it is engaged in a commercial activity for GST/HST purposes, and the sale of the property is taxable, regardless of whether there is a reasonable expectation of profit from the sale, or whether the transaction is part of a business the corporation regularly carries on," also applies to an intermediary that is a partnership rather than a corporation.
CBAO National Commodity Tax, Customs and Trade Section – 2013 GST/HST Questions for Revenue Canada, Q. 21. ("Interpretation of Commercial Activity")
It is CRA's "position that the decision in Aviva applies to a specific fact situation and we will apply the Court's decision in fact situations that are the same as those in the Aviva case."
P-032, 20 July 1992
"It is the Department's position that the provision of management services by a holding corporation to a subsidiary corporation for nil consideration is considered to be a commercial activity".
P-167R
"Meaning of the first part of the definition of business", 29 March 2000, No. 11635-3.
GST M 400-1-2 "Documentary Requirements" under "Meals and Entertainment - Reimbursements"
Tips and gratuities are not subject to GST.
Guide for Providers of Financial Services under "Special Provisions" - "Distribution by Trust"
Trust companies will be required to collect GST from the trust for administration or trustee fee charges.
Articles
Donald N. Cherniawsky, Christopher J. Sprysak, "Escaping the GST Net Through Use of Agency Law", Sales and Use Tax, Vol. IV, No. 2, p. 190.
Consideration
Cases
Global Cash Access (Canada) Inc. v. Canada, 2013 FCA 269
In the course of finding that the appellant was receiving a financial supply from the casinos it contracted with, Sharlow JA stated (at para. 15):
In the context of this appeal, the word "consideration" should be understood to mean anything that would be consideration under the law of contract, and "taxable supply" should be understood to include anything supplied in the course of a commercial activity except a "financial service" as defined in subsection 123(1) of the Excise Tax Act. It is undisputed that the business of the Casinos is a commercial activity, and the acts of Casinos pursuant to its contract with Global are acts in the course of that commercial activity.
Boardwalk Equities Inc. v. The Queen, 2013 FCA 140, aff'g Calgary Board of Education v. The Queen, 2012 TCC 7
The appellant ("Boardwalk Equities") was entitled to receive amounts under an Alberta energy assistance program to defray additional costs to consumers and businesses from a spike in natural gas and electricity costs. The suppliers invoiced Boardwalk Equities for the full value of the natural gas and electricity supplied, plus GST thereon; but showed a "credit" on the same invoices for the Alberta grant to be received by the suppliers on or after the invoice due date (with the suppliers' entitlement to be paid the grant being based on having previously credited the amount of the grant to the customer - Boardwalk Equities). Boardwalk Equities applied for a GST rebate under s. 261 on the basis that the GST payable by it should reflect consideration net of the credit, and was denied that rebate. In dismissing the appeal on the basis that there had been no such reduction in the consideration, Webb JA stated (at para. 13):
When the suppliers received the funds from the Province, the liability of the appellant was then reduced since such amount was accepted by the suppliers as partial payment of the amount that the appellant otherwise had to pay under its agreements with the suppliers. However, this was after the date of the invoices and after the liability arose to pay the GST. Therefore, the liability of the appellant for GST under the Act was correctly calculated as 7% of the amount payable for the supply of natural gas and electricity before the credit for the amount that the suppliers would subsequently receive from the Province is taken into account.
Des Chênes (Commission Scholaire) v. The Queen, [2002] GSTC 11, 2001 FCA 264
The appellant school boards paid GST charges of independent bus companies for their busing services, and were compensated with a Quebec government subsidy (which was not subject to GST due to provincial government immunity).
In finding that the school boards were making taxable supplies to the Quebec government, so that they were entitled to full input tax credits, Noël J.A. stated (at paras. 19, 28):
[I]n order for a payment to constitute consideration, it must have been made pursuant to a legal obligation (contractual or otherwise) and must be closely enough linked to a supply that it may be regarded as having been made "for" that supply… . That is why a direct link is required.
… It is therefore apparent that the purpose of the subsidy is unequivocal and that the link with the supply in question is equally unequivocal; the service must be provided, failing which the subsidy may be cancelled. Given that this situation is outside the realm of contracts, it is difficult to imagine a more direct link between the payment and the supply of the student transportation service.
See Also
Invesco Canada Ltd. v. The Queen, 2014 TCC 375
The appellant, which was the manager (and also trustee) for various mutual fund trusts, charged reduced management fees to the trusts to reflect the reduced management fees agreed with the larger investors (with a corresponding reduction in the GST collected). However, the Funds made special "Management Fee Distributions" to the large investors equal to the difference between the ‘gross" management fees they otherwise would have borne and the reduced management fee amounts. Before finding that the trust obligations to pay the Management Fee Distributions to the large investors was not part of the consideration that the Funds provided in exchange for the appellant's management services, Campbell J stated (at para. 35):
Pursuant to Commission Scolaire des Chênes and the common law definition of consideration, all that would be required for the Management Fee Distributions to constitute consideration for the taxable supply of management services would be a contractual obligation.
See detailed summary under ETA – s. 153(1).
Commission Scolaire des Découvreurs v. The Queen, 2003 TCC 295
The City of Quebec City paid a subsidy to a school board of $880,000 to enable the school board to renovate a school and expand its gymnasium. In return, the school board was required to make the new facility available to the City for free for 30 years. In finding that the school board was making a taxable supply, Lamarre Proulx J stated (at paras. 55-6):
[W]hat is involved is not a definition of the term "consideration" but a clarification in the case of a non-contractual situation. In such a situation, this term must be given its normal legal meaning. … If we refer to the definition of that term in this same reference work, we read:
Consideration provided by the person who receives a benefit in the synallagmatic contract; reciprocal benefit (perceived as equal) charged to a party to a contract, for example, wages in consideration for work, or the price in consideration for the article sold.
In the two agreements at issue, the benefit provided by the appellant was to construct and to provide the premises. What should the benefit provided by the city for the supply of the real estate have been? … We see from reading the agreements.. that the common intention of the parties is that, if the premises are destroyed, disposed of or expropriated, the full amount of the grant, that is, $880,660, shall be reimbursed, prorated according to the number of years remaining. I am therefore obliged to find that this amount is the consideration for the supply by way of lease.. .
Administrative Policy
Technical Information Bulletin B-067, "Goods and Services Tax Treatment of Grants and Subsidies," 24 August 1992
There is a direct link between a transfer payment and a supply if the payment is directly related to the provision of a supply to the grantor, or to a third party, by the recipient of the transfer payment. If a direct link exists, the payment is consideration... .
CRA also stated that if the grantor of a transfer payment (incluidng acontribution, subsidy, or similar payment) does not receive any property or service in return, then
the payment is not consideration for a supply since there is no activity involved that can be considered to be a supply"
Debt Security
See Also
Casa Blanca Homes Ltd. v. The Queen, 2013 TCC 338
The appellant bought and resold the right and obligation to acquire lots from a land developer. Hogan J found that the "non-refundable" deposits collected thereon were each a "debt security" under s. 123(1), given that the collection of a sum under a contract as a "deposit" implies an obligation to return the deposit if the collector does not perform the contract - in this case, if the land developer were unable to complete the lots on time (para. 24). In the alternative, the purchaser's assignment of the deposits to third parties was not a supply at all, because money is neither property not a service (para. 22, adopting Barnett 2011).
Administrative Policy
CBAO National Commodity Tax, Customs and Trade Section – 2014 GST/HST Questions for Revenue Canada, Q. 18
In 112274, CRA concluded that the assignment of an instalment contract did not constitute a financial service. Has CRA changed its view from TIB-105? CRA responded:
[Where] assignments of those contracts…provide a financing vehicle… CRA may consider a conditional sales contract to be a "debt security" and a "financial instrument" as it represents a right to be paid money. When a conditional sales contract is assigned to a third-party and the purpose of the assignment is to transfer to the third- party the right to receive a stream of payments, the assignment of the conditional sales contract may be a financial service.
Any fee or commission received by the assignor from the assignee would generally form part of the consideration received for the assignment of the conditional sales contract, and therefore would not be subject to GST/HST where the assignment of the conditional sales contract is exempt.
GST Memorandum (New Series), 17.1, para. 8
"'Debt Security' does not include a contingent right."
April 1999 GST Memorandum (New Series), 17.1
A "debt security" does not include an amount whose payment is conditional upon the occurrence or non-occurrence of some future event that may never happen.
5 December 2003 Interpretation 44874
Lessor enters into equipment leases (the "Asset Leases") with users of the equipment (the "Asset Lessees"), who also have options to purchase the equipment. The Lessor then assigns each Asset Lease to a securitization trust (the "Lessee"), giving rise to a "Concurrent Lease" that commences on the lease date set out in the Asset Lease and ends XX months after the termination of the Asset Lease. The Lessee appoints the Lessor as the servicer. The Concurrent Lease also gives the Lessee the option to prepay rent under the Concurrent Lease for XX% of the net present value of the Asset Lease. The Concurrent Lessee is registered for GST and satisfies its obligations relating to GST on Prepaid Rent and Deferred Rent by providing the Lessor with a promissory note.
In connection with an interpretation that the Concurrent Leases would constitute an arrangement similar to a lease for purposes of s. 136(1) and the definition of "debt security" in s. 123(1), CRA stated "the form of the lease agreement should be respected where the Lessor has title to the underlying property," and that "the option to purchase granted by the Lessor does not necessarily result in a change in the characterization of the Concurrent Lease."
3 September 1997 Ruling HQR0000579
"A swap transaction falls under the definition of 'debt security' since the definition of debt security... includes 'a right to be paid money'."
P-170 "Debt Security and Contingent Amounts"
A debt security does not include a contingent right.
Exclusive
See Also
Reluxicorp Inc. v. R., [2011] GSTC 138, 2011 TCC 336
The registrant was a hotel company that paid franchise fees to a hotel franchise ("Marriott") in the United States. Marriott's fees were based on gross room revenues. Lamarre J. found that, because 30% of the registrant's revenue was from exempt stays (i.e. exceeding one month), 30% of the franchise fees were not incurred in respect of a "commercial activity" as defined in s. 123(1). Accordingly, she affirmed the Minister's assessment, which was made on the basis that the provision by Marriott of franchise rights was an "imported taxable supply" under s. 217, for which the registrant was liable to pay GST on the consideration paid on the basis that 30% of the franchise fees was not eligible for an input tax credit. One of the registrant's arguments was that the 30% franchise fees were not paid in respect of the long-term stays because 95% of its long-term bookings were not connected in any way with the franchise brand, and were booked through its internal management office. The court found that these numbers were closer to 75%, so it could not be said that the fees paid for the Marriott "banner" related exclusively to the short-term bookings. After noting that the meaning of "all or substantially all" must be left to the discretion of the trier of fact, Lamarre J. stated (at para. 29):
In my opinion, there is a limit to be observed. Parliament used the expression "all or substantially all," which means, in my view, that the figure must be closer to the totality than half-way between the majority and the totality.
Nelson v. R., 2011 TCC 223,
The registrant acquired a passenger vehicle for $50,000, whose capital cost to the registrant for GST purposes was limited to $30,000, pursuant to s. 201. Woods J. disallowed ITCs on the vehicle, on the basis that the vehicle's commercial use was not "exclusive" as defined in s. 123(1). The registrant's business usage was only 54%, which was clearly not " all or substantially all" of the use of the vehicle. The registrant's argument, that the deemed cost was reduced to 60% of actual cost, and that 54% usage was 90% of this reduced amount, was irrelevant to the question of whether there was exclusive commercial use.
Financial Instrument
Administrative Policy
CBAO National Commodity Tax, Customs and Trade Section – 2014 GST/HST Questions for Revenue Canada, Q. 31
Is an emission allowance (e.g., a carbon offset) a commodity for GST/HST purposes? How is the trading of futures or options contracts on emissions allowances that are settled only in cash (or that may also be settled by delivery of the underlying emission allowance) treated? CRA responded:
An emission allowance is a right and…is considered intangible personal property. Thus, an option or contract [thereon]…would not be considered an option or a contract for the future supply of a commodity… .
…Where the option or contract can only be settled in money it may be considered a financial instrument.
20 March 2013 Interpretation Case No. 100956
In finding that broker fees and other fees relating to commodity trades were consideration for taxable supplies, CRA stated:
It does not appear that the Brokers who make trades in the over the counter…markets are trading on a recognized exchange. Furthermore, in some instances, where the agreements provide for the delivery of an actual physical commodity, the supply is not a financial instrument….Therefore, the Brokers providing the services in respect of these contracts to USCO and CANCO would not be considered to be "arranging for" financial services and consequently, the supplies provided by the Brokers would not be financial services.
P-170 "Debt Security and Contingent Amounts"
The purchase of a right to receive investment management fees to be earned by the assignor did not qualify as the purchase of a debt security because "a 'right to be paid money' does not include a contingent right". GST Memorandum (New Series), 17.1, dated April 1999 "Definition of 'Financial Instrument'"
Financial Service
Cases
Global Cash Access (Canada) Inc. v. Canada, 2013 FCA 269
The appellant ("Global") enabled casino patrons to use their credit cards to purchase payment instruments similar to cheques (the "cheques") from Global which they could negotiate for cash. To this end, the patron first used his or her credit card at a kiosk on the casino premises (or at a cashier cage) to get the cheque-purchase transaction approved by the credit card issuer. The casino cashier then issued, on Global's behalf, the cheque made out by Global to the casino operator, which the casino operator then negotiated for cash provided to the patron. At issue was the taxability of fees paid by Global to the casino operator. The trial judge found that the Casinos made three supplies to Global: allowing the kiosks on the premises, providing support services at the cashier cages, and cashing Global's cheques; and that only the third supply was of a financial service.
In finding that there was a single supply of a financial service described in para. (g) of the definition, Sharlow JA stated (at paras. 25, 28, 30):
[T]here is no evidence that Global would have been prepared to pay consideration to the Casinos for any of the three elements on its own. Since the three elements are integrally connected and there is a single consideration, there is a single supply. ... On any reasonable view of the evidence, the commercial efficacy of the arrangement depends critically on access to the Casinos' cash. ... Unless the Casinos were willing and able to supply the cash, there would have been no point in Global setting up its equipment on the Casinos' premises or specifying the documentation required to complete the transactions. [T]he heart of each transaction is an advance of money... .
Sharlow JA went on to find that the supply also qualified as a financial service under para. (i): in order to be reimbursed by the credit card issuers, Global required the casinos to complete the cheques on its behalf, which related to amounts for which credit card vouchers were issued. The carve-outs from the definition of financial service in para. (r.4)(respecting the information-gathering and clerical aspects of the Casinos' services) and in para. (r.5) (respecting the Casinos' giving Global access to terminals and kiosks) did not apply given the finding above that the predominant element of the supply was the provision of cash.
The Queen v. Costco Wholesale Canada Ltd., 2012 FCA 160,
The appellant ("Costco") entered into a conventional "Merchant Agreement" with the Amex Bank of Canada ("Amex") pursuant to which it agreed to pay the discount fees of Amex, and at the same time entered into a "Co-Branding Agreement" under which it agreed to accept only Amex credit cards and Amex agreed to make payments to it equal to Y% of the discount fees earned by it.
After noting (at para. 4) that "‘consideration' should be understood to include anything that would be consideration under the law of contract," Sharlow JA rejected the primary position of Costco that the amounts received by it from Amex were rebates of the merchant discount fees earned by Amex, noting that it was more consistent with the wording of the Co-Branding Agreement to consider such amounts as consideration for Costco entering into the Co-Branding Agreement or, more specifically, for the exclusivity provision. However, she affirmed the Tax Court finding that Costco provided services as an intermediary between Amex and its potential customers by supporting Amex in its business of supplying credit and that such service fell within paragraph (l) of the definition of financial service. Furthermore, in the absence of submissions by the Crown with respect to any factual basis to support the Crown's argument that paragraphs (r.3), (r.4) and (r.5) should apply retroactively, the Tax Court's finding that the supply by the taxpayer fell within para. (l) was upheld.
The Queen v. Canadian Medical Protective Association, [2009] G.S.T.C. 65, 2008 FCA 115
iscretionary investment management services provided by investment managers to a not-for-profit corporation that provided professional liability protection to licensed medical practitioners in Canada qualified as financial services under paragraphs (d) and (l) (namely, "arranging for ... the ... transfer of ownership ... of a financial instrument"): as to the meaning of "arranging for," the "word 'give instructions', 'make preparation for', 'prendre les dispositions pour' are all acceptable and are as wide and as elastic as one wishes them to be (para. 61); "the final order is an essential characteristic of the management of the funds by the investment manager" (para. 63); and the services provided by the investment managers could not be divided. Furthermore, the investment managers did "not provide advice, since there is no one to provide advice to except themselves" (para. 64).
See Also
FP Newspapers Inc. v. The Queen, 2013 TCC 44
The registrant, which was the corporate successor to an income fund, acquired, as essentially its only asset, a 49% limited partnership interest in a partnership that carried on a newspaper business. In denying the registrant's ITC claims for GST on various of its costs including fees paid in connection with the income fund conversion and in connection with news releases regarding its dividends, Pizzitelli J. found that the receipt by the registrant of substantial partnership drawings ($3,865,500 for a six-month period) for distribution by it to shareholders represented financial services.
Mac's Convenience Stores Inc. v. The Queen, 2012 TCC 393
The registrant agreed with a bank (CIBC) that automatic banking services would be provided through ABM machines in the registrant's stores. Non-CIBC clients could use the machines for a $1.50 service charge, and CIBC paid a share of this revenue to the registrant. Hogan J., in dismissing the registrant's appeal, rejected its submission that it was making an exempt supply to CIBC of the service of arranging for financial services (the automatic banking services). An example of "arranging for" a financial service could be found in President's Choice Bank. Here, in contrast (para. 36):
The appellant did not help, assist and become directly involved in the provision of financial services by CIBC to ABM customers. Its role in the provision of such services was considerably more passive. The core element of its supply to CIBC was the provision of space in its stores.
Global Cash Access (Canada) Inc. v. The Queen, 2012 TCC 173, rev'd in part 2013 FCA 269
The appellant ("Global") enabled casino patrons to use their credit cards to receive cash advances or, more precisely, to purchase cheques from Global which they could negotiate for cash. To this end, the patron first used his or her credit card at a kiosk on the casino premises (or at a cashier cage) to get the cheque-purchase transaction approved by the credit card issuer. The casino cashier then issued, on Global's behalf, a cheque made out by Global to the casino operator, which the casino operator then negotiated for cash (or gaming chips) provided to the patron. At issue was the taxability of the fees paid by Global to the casino operator.
Turning first to the activities of the casino operator in allowing kiosks on its premises and providing support services at the cashier cages, Woods J noted (at para. 70) that "the term ‘arrange for'…has been broadly interpreted," quoted from CRA Policy P-239 (since repealed), and then found (at para. 72) that these activities qualified as arranging for a financial service:
The Casinos are directly involved in the issuance of cheques and are actively engaged in doing so, since they allow kiosks on the premises and provide services such as transaction procedures and initiating transactions on behalf of patrons.
However, allowing kiosks on the casino premises was an excluded provision of property under para. (r.5) (para. 81); and the cashier support services were excluded under para. (r.4), as services provided in conjunction with the issuance of the cheques (a financial service) and consisting primarily of the collecting and providing of information, and document preparation and processing (para. 82). The casino operator's role of cashing the cheques (which was similar to that of a disbursing agent), was encompassed within the broad language of paras. (a) and (d) (para. 76). The above supplies (kiosk provision, cashier services and cheque cashing) were "not so interdependent that they should be considered a single supply" (para. 94), and "none of these elements are a minor part of the supply so as to be incidental" for purposes of s. 138 (para. 96). It was appropriate to allocate 25% of the fees paid to the casino operator as consideration for the exempt cheque-cashing service, and to treat the balance as taxable.
President's Choice Bank v. The Queen, 2009 TCC 170
The registrant ("PC Bank"), a subsidiary of Loblaws, had agreed with a bank (CIBC) for CIBC to provide retail banking services under Loblaws' President's Choice trademark. Lamarre J. found that the related fees paid by PC Bank to CIBC were consideration for arranging for financial services and, therefore, consideration for an exempt supply. Unlike in Royal Bank, the registrant was not merely being paid for "the issuing of points or for granting CIBC exclusive use of PC's trademark"; on the contrary, the evidence showed that the registrant played a "major role in selling attractive financial products to its [customers]" (para. 34). For example, the fees were determined based on the number of new accounts opened under the arrangement, and on the total value of the accounts under the arrangement. The registrant used its leverage to ensure that services under its brand were more attractive than comparable CIBC offerings - for example, offering lower transaction fees. The registrant maintained between 10 and 15 employees to work with CIBC and determine terms to be offered on its financial products.
Aim Funds Management Inc. v. Aim Trimark Corporate Class Inc., [2009] O.J. No. 4798, [2009] GSTC 170, 64 DLR (4th) 261, 2009 CanLII 29491 (Ont. Sup. Ct. J.)
The Minister assessed the applicant, a mutual fund manager, on the basis that a payment to it by mutual funds of deferred sale charges received by the mutual funds from redeeming investors represented consideration for taxable supplies of services made by the applicant to the mutual funds.
Perell, J. concluded, on the evidence, that the mutual fund manager and the mutual funds intended that these amounts were to be paid to the fund manager as reimbursement in whole or in part for brokerage commissions previously paid by the mutual fund manager when the investor had purchased his units in the mutual fund, and granted an order of rectification of numerous contracts to accord with the form requested by the applicant. He stated (at para. 58) that "the Applicant does not seek to rewrite a contract to rewrite contractual history; rather the Applicant is seeking to rewrite a contract that does not correctly write the contractual history".
Canadian Medical Protective Association v. The Queen, 2008 TCC 33, [2008] GSTC 88, aff'd supra
Before noting at para. 54, that it was conceded by the Crown that the appellant's principal activity was not the investing of funds (its principal activity being defending lawsuits against doctors), Bowman, C.J. found (at para. 54) that the discretionary investment management services provided to the taxpayer were not "management ... services":
The juxtaposition in paragraph (q) of the words "management" and "administrative" implies the type of managerial function associated with running a business. Management and administration fees are paid generally to individuals or corporations to handle the variety of matters necessary for the functioning of a business. I should not have thought that "managing" a portfolio of investments carried that type of connotation.
General Motors of Canada Limited v. R., [2008] GSTC 41, 2008 TCC 117, aff'd [2009] GSTC 64, 2009 FCA 114
The Appellant (a car manufacturer) was the administrator of various defined benefit pension plans for its employees. It directed the trustee of the plans to pay the fees of third party portfolio advisors out of the trust assets.
After finding that the Appellant was eligible for input tax credits for the GST that was charged on the fees, Campbell J went on to indicate that the portfolio advisory services did not qualify as financial services given that the portfolio advisors did not actually trade in the securities held by the plans.
Royal Bank of Canada v. The Queen, [2007] GSTC 122, 2007 TCC 281
The registrant had an arrangement with Canadian Airlines International Ltd. ("CAIL") under which the registrant's credit card customers would receive frequent flyer points for using one of its Visa Canadian Plus credit card (the "Affinity Card"). Hershfield J. rejected the registrant's position that the payments to CAIL were payments for financial services. Hershfield J. stated (at para. 39):
To conclude, I find that CAIL's role in arranging the credit facility was incidental to its own business of selling Points. ... Selling Points was selling travel services. The Appellant purchased travel services as a reward for use of its Affinity Card which in turn increases its revenues. All else is incidental to this synergistic arrangement. It is simply not reasonable to find on the facts of this case that CAIL played any substantive role in arranging for the granting of credit by RBC.
Canada Trustco Mortgage Co. v. The Queen, 2004 TCC 792
The appellant ("CTM") sold mortgage loans made by it to arm's length securitization trusts and serviced the sold mortgages including collecting and accounting for payments, and dealing with renewals and defaults. The consideration for a sale for the most part comprised a "Closing Payment" paid by the purchaser trust out of the proceeds of commercial paper issuances and "Deferred Amounts" representing most of the cash subsequently generated to the trust from the purchased mortgages net of all other outlays. CTM did not explicitly charge the trusts for the servicing, but recorded fees for such services in its financial statements. In finding that there was a single supply of a financial service by CTM, Bowman ACJ quoted extensively from O.A. Brown, including a statement therein that "'the fact that a separate charge is made for one constituent part of a compound supply does not alter the tax consequences'," and stated (at para. 20):
[For there to be a single supply] there must be an inextricable interdependency between the two elements so that they are integral parts of a composite whole that cannot, as a matter of commercial reality, be sensibly separated into separate supplies. … Here we have a sale of mortgages of which the servicing is not only an integral part but is requisite as a matter of commercial exigency. There is an intimate commercial relationship between CTM and the trusts in which CTM not only holds the registered title to the mortgages in trust for the trusts, but also performs the very services which are essential to the commercial viability of the trusts' investment. For someone other than CTM to service the mortgages would, as a practical matter, be commercially infeasible and would be inimical to the raison d'être of the transaction.
State Farm Mutual Auto Insurance Co. v. The Queen, [2003] GSTC 35, docket 2001-2224 (GST) G (TCC)
After finding that the U.S. head office of the appellant (an auto insurer) did not render or supply services to the Canadian regional office, Bowman A.C.J. went on to find that if such services were rendered, they were financial services. He noted that the respondent's argument "would essentially restrict financial services, in the context of the insurance business, to the issuance of an insurance policy to an insured" and that the concept of underwriting was much broader than this. Further , if any administrative or management services were attributed to the categories of insurance performed by the head office for the Canadian regional office, they were incidental to the financial services, so that s. 138 applied.
College of Applied Arts and Technological Pension Plan v. The Queen, 2003 GTC 899-62, 2003 TCC 618
After noting that "the measure of the 'principal activity' must be the importance of the activity to the achievement of the organization's goals or purposes", Bowie T.C.J. found that the "principal activity" of a pension plan was not the investing of funds (as contemplated by paragraph (q)). Given that its principal object was to provide pensions to retired employees, its principal (or most important) activities must be considered to be those that contributed most to achieving those objects and it could not accomplish its objects without the collection of the employer and employee contributions, and the computation of payment of payment benefits to retirees; whereas it could, at least in theory, have collected contributions and paid them out to retirees without ever investing its funds.
Ingle Manor Farms Inc. v. The Queen, No. 2001-862 (GST) I, docket 2001-862-GST-I (TCC)
A fee received by the taxpayer for agreeing not to bid for the assets of an insolvent corporation did not represent consideration for a financial service.
Drug Trading Co. v. R., [2001] GSTC 48, docket 1999-3262-GST-I (TCC)
The registrant was a wholesaler of products to independent retail pharmacies operating under the "I.D.A." name, and also provided franchisor-like services to them. One such service was to negotiate favourable terms with various banks for credit and debit card services. When a customer made a purchase from an IDA member, the bank would deposit the amount (which it debited to the customer's account) into the registrant's bank account, and the registrant would transfer the full amount of the funds to the member's bank account. However, as the bank charged its "discount fees" to the registrant's account, the registrant in turn debited the members for these amounts - which Bowie J found represented a reimbursement for such fees which it had incurred as the members' agent. In response to a submission of the Justice lawyer that the service which the registrant supplied to the members when it received funds from the banks for the credit and debit card transactions was an administrative rather than financial service (for which it was not a "person at risk" under the Financial Services (GST) Regulations), Bowie J found (at para. 21) that "there is no service to the members that is not a financial, and therefore exempt, service."
Skylink Voyages v. The Queen, [1999] GSTC 119, docket 96-4400-GST-G (TCC)
The registrant served retail travel agencies by booking and purchasing airline tickets for the agencies' customers, which resulted in the receipt by it of commissions from the airlines. Where the retail agencies had no agreement with the issuer of the customer's credit card, the registrant would act as the "merchant" insofar as the credit card issuer was concerned, so that the voucher amount for the ticket was advanced to it, with that amount being used by the registrant towards the cost of the ticket. In those situations, the registrant charged $15 per ticket to the retail agency to cover the charge of 2% to 3% by which the credit card issuer discounted the amounts which it paid to the registrant..
Archambault J found that the $15 fees of the registrant were consideration for supplies of services to the travel agencies, but that such supplies were exempt supplies under three aspects of the financial services definition, of which the most apt were paras. (l) and (i) (arranging for payment of a credit card voucher amount). Archambault J stated (at para. 31):
Skylink obtained payment of the amount of the credit card slip from the issuer pursuant to the obligation that the issuer had towards the credit card holder.
The amounts were not excluded by para. (n) (consideration for a taxable supply) and (t) (prescribed service). Archambault J stated (at para. 32):
In my view, paragraph (n) does not apply here since Skylink arranged not for obtaining payment of the ticket price, but rather for obtaining payment of the amount of the credit card slip by the issuer.
Regarding para. (t), Archambault J found that the collection of credit card voucher amounts was "solely the ... taking of the receipt ... of other amounts" under s. 4(2) of the Financial Services (GST) Regulations: "I do not see here any other kind of service" (para. 38). S. 4(2) also did not apply because, under s. 4(3)(a), the registrant was a "person at risk" for the amounts involved. Archambault J. stated (at para. 40):
Under the terms and conditions of its agreement with the issuer, Skylink could be required to pay back to the issuer the amount of the credit card slip. For example, if a customer does not sign the slip and disputes its validity, the issuer is entitled to require Skylink to repay it the amount appearing on the slip.... [I]n some instances, as a result of bankruptcy or for some other reason, the retail agency may be unable to reimburse Skylink.
C.I. Mutual Funds Inc. v. Canada, [1997] GSTC 84 (TCC), aff'd [1999] GSTC 12 (FCA)
The managment fees received by mutual fund managers, which also were the trustees of the mutual fund trusts which they managed, were taxable even under the pre-1997 version of para. (q). Rip J stated (at para. 75):
...one can interpret "on behalf of" as meaning "for the benefit of" if the context commands such an interepretation....I also agree with the respondent that any other interpretation would effectively deprive the provision of any meaning and effect.
On-Guard Self-Storage Ltd. v. The Queen, [1996] GSTC 9 (TCC)
The taxpayer provided storage lockers pursuant to rental contracts that provided for a monthly rental fee with a "prompt payment discount" for paying by the due date.
McArthur TCJ. found that the commercial reality or true nature of the transactions was that the reduced amount payable in the event of prompt payment was the true monthly rent, and that the additional amount paid by a defaulting tenant was a late payment fee. However, such fee was an exempt financial service on the basis that the services provided by the registrant to the defaulting tenant were part of the operation of an overdue account. McArthur TCJ. stated (at p. 9-5) that "the term 'other account' is wide enough ... to include the subject late fees owing in respect of the breach of the Agreement".
Locator of Missing Heirs Inc. v. The Queen, [1995] GSTC 63 (TCC)
The appellant who carried on a business of finding missing heirs to property in estates of deceased persons was found not to be doing any of the things described in paragraph (d) of the definition of financial service and, therefore, was making taxable supplies.
Commissioner of Inland Revenue v. Databank Systems Ltd., [1990] BTC 5108 (PC)
The respondent provided five clearing banks with computer-related services which essentially replaced many of the clerical operations of the banks relating to the payment and collection of cheques and other settlement or payment services, the posting of transactions to customer accounts, maintenance of customer accounts and other records. It was found that these services did not come within the definition of a financial service in the Goods and Services Tax 1985 (New Zealand), which included "the issue, payment, collection, or transfer of ownership of a cheque or letter of credit" and "agreeing to do, or arranging any of [such] activities". The supply of computer services to the banks to enable them, in turn, to provide financial services was not itself a financial service.
Customs and Excise Commissioners v. Diners Club Ltd., [1989] BTC 5084, [1989] 2 All E.R. 385 (C.A.)
The taxpayer argued that the credit card charges owing to it by cardholders arose as a result of an assignment of debts or other rights to it by the relevant retailers, and that the payments made by the taxpayer to the retailers accordingly represented the cash consideration for a supply by the retailers to it, rather than the consideration for the provision of a financial service by the taxpayer to the retailers (the Crown having conceded that the payment of money as the consideration for a supply of goods or services is not itself a supply).
In rejecting this submission, Woolf L.J. found that even though the agreements between the taxpayer and the retailers indicated that the taxpayer was purchasing the accounts from the retailer, when a cardholder signed the sales voucher she was unconditionally discharged from her liability to pay the retailer, and a fresh debt arose between her and the taxpayer. In any event, having regard to the reality created by the terms of the three-party arrangements, there was a supply of a financial service by the taxpayer to the retailers, namely, the service of assuring payment of the retailers in consideration for the earning of a discount from the face amount of the accounts by the taxpayer.
Administrative Policy
CBAO National Commodity Tax, Customs and Trade Section – 2014 GST/HST Questions for Revenue Canada, Q. 14
Corporation A, which provides management services to a partnership whose principal business is the investing of funds, also charges the partnership a fee for making an advance, granting credit or lending money (i.e., for services that would be financial services in the absence of (q).) Is the fee taxable? CRA responded:
A prescribed service includes "the issuance of a financial instrument by or the transfer of ownership of a financial instrument from" Corporation A to the partnership as well as "the operation or maintenance of a savings, chequing, deposit, loan, charge or other account" the partnership has with Corporation A. …[I] f the other service provided by Corporation A to the partnership is not included in the list of prescribed services described above, this service would not be a financial service.
4 February 2014 Interpretation 106288
The non-resident Service Provider agreed to provide advice and assistance in finding a purchaser for the Company's financial services operation, which occurred as an asset sale. In finding that there was a single supply of taxable advisory services, CRA stated that "the predominant element of the Service Provider's supply would be taxable advisory services" and that although it is a financial intermediary "the Service Provider is not ‘arranging for' the Transaction…[given] that the Service Provider is not "effecting" the Transaction as it does not exercise decision-making authority…[and] responsibility for negotiating the terms of the final agreement and closing the Transaction rests with the Company and the Purchaser." The services also would be excluded under the customer assistance and document preparation branches of s. (r.4).
CBAO National Commodity Tax, Customs and Trade Section – 2013 GST/HST Questions for Revenue Canada, Q. 9 ("Financial Services and Exclusion in Paragraph (q)")
Where a mutual fund salesperson provides its services to an investment plan rather than to the dealer, does para. (q) apply? CRA stated:
[U]nlike Example 4 in [TIB] B-105…the services of the mutual fund salesperson are paid for by an investment plan… . Accordingly, paragraph (q) could apply to exclude the service from the definition of financial service depending, in part, on the nature of the supply and the activities of the supplier. If the salesperson is a person who provides management or administrative services to the investment plan, then its supplies to the investment plan, whether they are management or administrative services, or any other services, other than prescribed services, including the distribution of mutual fund units, would be excluded from the definition of financial service under paragraph (q). In the Royal Bank decision, the Tax Court held that the Royal Bank was making a single supply to Royal Mutual Funds Inc. of distributing or arranging for the distribution of units, which was not an administrative service… . In this case, in order to determine whether the mutual fund salesperson is making a single supply or multiple supplies, the predominant element of each supply and whether paragraph (q) applies, it would be necessary to examine agreements and other documentation etc.
20 July 2012 Ruling Case No.137528 [taxable rebate fees from credit card issuer received by retailer]
The Company is offering a credit card program to its customers as part of its overall services and a bank issues co-branded credit cards to the Company's customers. The Company receives a rebate from the bank based on the volume of credit card purchases. Ruling that the rebate is consideration for a taxable supply. CRA stated:
[T]he Company's activities when considered as a whole are predominantly promoting and marketing the [credit card] program….Moreover, the services performed by the Company do not meet the factors that are used to determine whether a supply is arranging for a financial service under paragraph (l), such as the degree of direct involvement with the consumers or the time expended by the Company in the provision of a financial service referred to in any of paragraphs (a) to (i). Also the Company is not in the business of providing supplies of financial services or considered a financial intermediary….[Furthermore]… the supply… is excluded from the definition of financial service by paragraphs (r.3) and (r.4)….
29 June 2012 Interpretation Case No. 104941
After indicating that commissions paid by a mutual fund manager to a representative who sold mutual funds likely would qualify as being exempt as being for the arranging for a financial service, CRA stated:
Although you did not request information on future compensation programs (e.g. trailer fees), please note that a renewal commission payable in future years may not be consideration for the arranging for the supply of financial service. Whether compensation paid on an ongoing basis is for a financial service is a question of fact and it is necessary to look at the activities performed by the person in return for the renewal commission.
5 June 2012 Interpretation Case No. 127795
An independent sales organization (ISO) enters into agreements with merchants under which the merchants acquire point-of-sale terminals of a vendor (which offers Interac direct payment services and, therefore, is referred to in the Interpretation as an Acquirer). Fees charged to the merchants by the ISO include debit transaction fees and communication fees per attempted or completed credit or debit transaction. The ISO pays debit surcharges generated by the operation of the POS terminals to the merchants, net of fees owing to the Acquirer. In suggesting that the fees received by the Acquirer may be for financial services, CRA states:
Since the ISO is not considered an Acquirer and is therefore prohibited from performing the Payment Processing Service for the Merchant, a second agreement was entered into with the Acquirer. As the Acquirer's service essentially ensures that the transactions initiated through the POS Terminal result in the correct debiting and crediting of accounts via the Interac network, its service may be considered under paragraph (l) of the definition of financial service [as] the agreeing to provide or arranging for a financial service referred to in paragraphs (a), (g) or (i). Moreover, paragraph (t) may not apply to exclude the Acquirer's Payment Processing Service from the definition of a financial service if the Acquirer is considered a person at risk with respect to the issuance of an instrument (i.e., where the Acquirer is financially at risk of any loss until the transactions have gone through the settlement process). If this is the case, then the Acquirer would not charge GST/HST on its Payment Processing Service.
Respecting the ISO, CRA stated:
Even though the ISO's service provided to the Merchant under the Agreement may also be considered the agreeing to provide or arranging for a financial service under paragraph (l), paragraph (t) may apply to exclude the service as a financial service if the ISO's service, when considered as a whole, is predominantly the transfer, collection or processing of information and/or an administrative service performed by a person who is not at risk (i.e., where the ISO is not financially at risk when it provides these services to the Merchant).
5 June 2012 Interpretation Case No. 81635
An "Investor" purchases point-of-sale terminals from the Supplier, who also supplies systems and services to connect the terminals , which will be used by retailers, to the credit card and Interac networks. A Third Party provides connection services. The revenues generated by the terminals are received by the the Supplier, with the Investor then being paid a percentage of those amounts. In stating that it appeared that the Investor was not providing a financial service, CRA stated
...the Investor's business seems to be limited to the ownership of the POS terminals, choosing suitable placements for the terminals, and engaging the Third Party to deliver the processing services required to connect the terminals to the networks.
4 June 2012 Interpretation Case No. 131194
The fees earned by a loan broker from car dealers
would generally be considered predominantly administration services of obtaining credit information from purchaser, completing the loan application, explaining loan terms to purchaser, preparing contracts for the dealer, submitting the completed contracts to lending institutions, and would not be a financial service under paragraph (l) of the definition of financial service. Even if the supply would be included in paragraph (l) it would generally be excluded from the definition of financial service by paragraph (r.4) of the definition.
17 May 2012 Interpretation File 97556
The Supplier, which purchases point-of-sale terminals from CanCo and sells them to merchants, also markets processing services to the merchants, whom it refers to CanCo, in consideration for fees paid by CanCo. The processing services are "various technical and administrative services designed to support customer transactions initiated on the Merchant's POS Terminal. Since CanCo and [its parent] USCo are not Interac Association Members, the Processing Services are contracted to a third party, […], an Interac Member and Acquirer." In finding that the Supplier's services made to CanCo were not exempt financial services, CRA stated that the Supplier
is providing a taxable service consisting predominantly of marketing, promoting and referring potential Merchants for the purpose of providing Processing Services.
17 May 2012 Ruling 62492
An "Acquirer" is a connection service provider (i.e., it provides connection to the Interac network for the purpose of processing Interac direct payment transactions) and a settlement agent (i.e., the Acquirer uses the services of a bank to provide funds). An "Independent Sales Organization" ("ISO") sells or leases point-of-sale terminals to merchants and uses the services of the Acquirer in order to provide continuous processing services to the merchants and related reporting. In addition to purchasing or leasing the terminal, the merchant agrees with the ISO to pay (out of user fees charged by it to customers) per-transaction fees to the ISO as well as transaction and processing fees to the Acquirer. Before concluding that that the services of the ISO (which were a single supply including payent processing services) were excluded under para. (t) of the financial services definition (and s. 4(2) of the Financial Services (GST/HST) Regulations), CRA stated:
Since the Acquirer's processing service is essential to any debit card or credit card transaction, the service is considered under paragraph (l) of the definition of financial service [as] the agreeing to provide or the arranging for a financial service referred to in paragraphs (a), (g) or (i) in that the Acquirer effects the Interac Direct Payment transactions initiated through the POS Terminal by correctly debiting the cardholder's account and crediting the Merchant's accounts via the Interac payment network. Moreover, paragraph (t) does not apply to exclude the Acquirer's processing service from the definition of a financial service since the Acquirer is a person at risk with respect to the issuance of an instrument, i.e., the Acquirer is financially at risk of any loss in settling the debit or credit card transactions.
In a variation of these transactions, the ISO engages an independent sales representative to handle the promotion, installation and servicing of the POS terminals. Commissions payable to this sales representative are taxable.
15 March 2012 Ruling Case No. 132880-2 [trailer fees exempt if no servicing]
Dealers, who arrange for the initial sale of shares in an Investment Fund which is managed by an Investment Manager, receive a service fee (the "Dealer's Fee") from the Investment Manager based on the number of shares held in their account - both at the time of initial sale and on an on-going basis. The on-going fees are additional consideration for arranging the sale of the shares and "the Dealer does not at any time after the initial sale of the...Shares perform any other service for the Client or the Client's account." Ruling that
the Dealer's Fee received by the Dealer either as a lump-sum payment or as periodic payments for facilitating the initial sale of the […] Shares to the Client, is consideration for an exempt supply of arranging for a financial service under paragraph (l) of the definition of financial service in subsection 123(1). However, if at any time after the initial sale, the Dealer "services" the Client's account in order to earn the Dealer's Fee, or if the fee is paid to a Dealer who did not facilitate the initial sale of the […] Shares, the supply of the services for which the Dealer's Fee is paid may be considered the provision of a taxable supply.
The Explanation further states:
Based on the information provided, since there is a direct and clear connection between the Dealer's Fee and the services performed by that Dealer to facilitate the initial sale of the […] Shares, the Dealer's services are predominantly "arranging for" a financial service as provided under paragraph (l) of the definition of financial service and would not be excluded from the definition by any of paragraphs (n) through (t) including paragraphs (p), (q), (q.1) and (r.4). However, if the Dealer's services performed after the initial sale are predominantly to "service" the Client's account in order to receive the ongoing Dealer's Fee, then those services are considered in the nature of taxable management, administration, marketing or promotional activities as they are not themselves financial services....
[T]o "service" a Client's account includes, but is not limited to:
- regularly contacting the Client after the initial sale to review the status of the account and the appropriateness of the […] Shares held in the account in light of the Client's financial needs and investment objectives (e.g., holding the Client invested in those Shares, performing research and analysis);
- offer advice by recommending any appropriate change in the account; and
- provide assistance to the Client by answering any questions the Client may have regarding the […] Shares and on exercising any right or privilege connected to those Shares or to the account
9 January 2012 Ruling Case Number 112274 [taxable processing of credit applications]
Prior to a sale of equipment by the vendor to a customer, Company A "as part of its wide range of financing services" processes the customer's credit application. If the application is approved, the vendor enters into the Contract to sell the equipment to the customer, and then assigns both the equipment and the Contract to Company A, which retains ownership of the equipment until the customer has made all periodic instalment payments under the Contract.
In finding that fees charged by Company A to the customers for processing their credit applications were taxable, CRA stated:
[T]he supply of the equipment and the assignment of the Contract by the vendor to [Company A] is not a supply of a financial service but rather is a taxable supply of the equipment….A service that is in the nature of a…credit application… service (i.e., the Service) is intended to be taxable as it is not itself a financial service. Moreover, [Company A] did not enter into any agreement with the customer whereby [Company A] agreed to lend money directly to the customer. [Furthermore] the Service is excluded from the definition by paragraph (r.4) since…the Service is predominantly collecting information, and preparing and processing the Application on behalf of the customer….
31 October 2011 Interpretation Case No. 132880
This is the previously interpretation respecting the fee arrangement dealt with in 132880-2, two Rulings above. CRA stated:
The Dealer's Fee paid to the Dealer may be consideration for a supply of an exempt service of arranging for a financial service under paragraph (l) depending on all of the facts and circumstances. This may be the case where the original Dealer (the person who facilitated the initial sale of the shares) provides services that are predominantly services of arranging for the sale. In such a case, there must be a direct and clear connection between the payment made to the Dealer (lump-sum or periodic) and the services provided in relation to the initial sale of the […] Shares to the Client. However, if the Dealer's services are predominantly to "service" the Client's account, the Dealer's Fee received for such services would generally be consideration for a taxable supply. In such circumstances, even if the Dealer provided services that included services described under paragraph (l), those services would generally be excluded from the definition of financial service.
5 January 2012 Ruling Case No. 98811 [broker charge for securing health plan employer]
A commission charged by a broker to the administrator of a private health services plan in consideration for bringing the administrator and employer together and designing the plan was consideration for a taxable supply. Even if it could be argued that the broker's service (which was a single supply) was otherwise included under para. (l), it would be excluded by para. (r.4).
10 November 2011 Case No. 125071
Given that mortgage brokers often receive a higher rate of commission from a particular lender if they generate higher volumes of loans, many brokers operate under "franchise agreements" under which they effectively pool with the work done by other brokers in order to generate higher commission rates. The granting by the "Franchisor," "which is one such franchise banner," to the "franchisee" of a non-exclusive licence to operate the "Franchise" at a specific location was a taxable supply, so that the franchise fee received by it in consideration for the grant of the franchise was subject to GST/HST.
19 May 2011 Interpretation Case No. 131970
X Co. provide lenders (through two internet portals) with an electronic loan application system for the processing and approval of credit applications between the lenders and dealers (sellers of taxable property) in order to provide point-of-sale financing for the dealers' consumer customers ("Purchasers"). The related software is used solely by X Co. to operate the portals. When a Purchaser requires financing, the dealer will then use a portal to select a lender to whom it wishes to submit a loan application on behalf of the Purchaser, with the Purchaser and dealer then submitting a loan application to the lender via that portal. CRA stated:
while some of X Co's activities, such as processing on-line the Purchasers' applications for financing, and facilitating the electronic preparation of the Lenders' specified legal documentation, assist the Lenders in providing a financial service of granting credit to Purchasers, X Co.'s activities when considered as a whole are predominantly managing and administering on behalf of the Lenders an electronic loan application system for the Program. Accordingly, the Look-See Fee and Completion Fee charged by X Co. to the Lenders are in respect of a single taxable supply....
6 September 2011 Ruling Case No. 77006 [on-line administration of credit card portfolio]
A non-resident company (Service Provider) provides services to FinanceCo consisting of on-going processing services respecting FinanceCo's credit card portfolio (e.g., on-line applications and processing, financial adjustments, posting and storing account information such as balances and authorizations, and rendering billing statements), in addition to additional optional services and services necessary to convert FinanceCo's systems so as to accommodate Service Provider's platform. After ruling that Service Provider was making a single taxable supply of services to FinanceCo, CRA stated:
Based on the Agreement, FinanceCo is making a supply of a financial service pursuant to paragraphs (b), (d) and (g) of the definition of financial service. Although involved in the issuance process of credit cards by FinanceCo, the Service Provider does not issue credit cards....… [W]hile some of the activities, such as processing credit applications, assist FinanceCo in providing a financial service of issuing a credit card and operating and maintaining cardholder accounts, when considered as a whole [the services] are predominantly administrative in nature including storage of account information, card production services, services related to cardholder data and contact centre services. As a result, the supply is not a financial service….Even if the supply was to be included in paragraphs (a) to (m) of the definition of financial service in subsection 123(1) it would be excluded by paragraphs (r.3) to (r.5) and (t) of that same definition.
29 July 2011 Headquarters Letter 95868
A credit card loyalty program is proposed in which participating organizations (Organizations C) assist in the marketing of credit cards of a particular credit card company (FinanceCo). By using the credit card, members of Organizations C accumulate various member rewards which they may use to purchase rewards from Organizations C. Amounts paid by FinanceCo to Organizations C fund the cost of these rewards. After ruling that the amounts received by Organizations C from FinanceCo are consideration for a single taxable supply, CRA states:
[Organizations C] activities when considered as a whole are predominantly in respect of the promotion and marketing of the Loyalty Program. Moreover, the services performed by [Organizations C] do not meet the factors that are used to determine whether a supply is arranging for a financial service under paragraph (l), such as the degree of direct involvement with the consumers or the time expended in the provision of a financial service referred to in any of paragraphs (a) to (i).
See also 3 August 2011 Headquarters Letter 137201 in respect of the same loyalty program.
29 July 2011 Headquarters Letter Case No. 82567
Pursuant to related agreements between ABC Corporation, Lenders, the Vendors or products, Dealers for the Vendors and the Customers of the Vendors, ABC provides a web-based system pursuant to which the Dealers apply on behalf of the Customers through ABC's website for loans to fund Customers' purchases of products, and ABC applies a largely automated system to assess the credit-worthiness of the Customer loan applications, generate loan agreements to be entered into between the Lenders and Customers and advances the funds on behalf of the Lenders to the Customers. Although various of ABC's services assist the Lenders in providing credit to the Customers and thus may otherwise be included in para. (l) ("arranging for"), the transaction fees received by ABC from the Lenders are consideration for a service that consists predominantly of credit management services (obtaining Customer credit reports, and checking and authorizing the loans) and services that are preparatory to the provision of financial services (promotion of the program, preparation and processing of loan information, and Lender assistance). Therefore, the services provided by ABC to the Lenders are excluded under paras. (r.3) and (r.4). The services performed by ABC for the Vendors (to whom it also pays fees) also are preparatory to the provision of a financial services under para. (r.4) (i.e., facilitation of the Vendors' promotions, liaising regarding loan terms, and provision of various reports) and also are excluded from financial services.
19 July 2011 Headquarters Letter 127619
The registrant enters into marketing agreements with various merchants to promote their businesses by selling vouchers on its website on their behalf which are redeemable for goods or services offered by the merchants, and by promoting such goods and services on the website and through other channels. CRA rules that the commissions paid by the merchants are not consideration for financial services.
19 July 2011 Headquarters Letter Case No. 111922
Corporation X administers insurance policies for large health plan providers (Providers) and independent employers (Employers) including employee benefit plans and extended health and dental plans. Given that "services in the nature of management, administration, marketing and promotion are intended to be taxable" and given that the services of Corporation X assisted the Providers and Employers in administering these plans, its services were predominantly taxable services and, under single supply doctrines, were all taxable. Furthermore, even if some elements came within the para. (l) ("arranging for") and para. (f.1) (claims collections), they were excluded under para. (r.4) (preparatory customer assistance, collection and provision of information, and document preparation and processing) and under para. (t) (administration services including in relati0n to the payment of claims by a person not at risk).
19 July 2011 Headquarters Letter Case No. 125864
In connection with a credit card program launched by a bank, it agrees with an insurer that it will use commercially reasonable efforts to arrange for the issuance of insurance by the insurer to cardholders (including contacting them by telephone) and collect the monthly insurance premiums from the insured cardholders. After ruling that the bank is providing a (single) supply of a taxable service to the insurer in consideration for payments to it by the insurer, CRA stated:
...the activities undertaken by the Bank are the promotion of the insurance policy offered to Cardholders...as well as forwarding the applications for Certificates under the Group Policy for issuance by the Insurer. The Bank has limited involvement with respect to the provision of a financial service by the Insurer....[V]iewed as a whole the activities undertaken by the Bank are predominantly promotional services. Promotional services are excluded from the definition of financial service under paragraph (r.4).
14 July 2011 Headquarters Letter Case No. 132388
A mortgage broker presents the programs of different mortgage lenders to prospective borrowers, selects programs that meet the borrower's needs and identifies mortgage lenders that would likely accept the borrowers. In contracts with the lenders, the mortgage broker indicates that it will assist the borrowers in completing the mortgage application, verify that the borrower meets the mortgage lender's credit critieria, verify the completeness and accuracy of the information provided by the borrower and participate in the closing. After ruling that the fees received by the mortgage broker from the mortgage lender are consideration for financial services under para. (l) of the financial services definition, CRA states that:
The term "arranging for" is generally intended to include intermediation activities that are normally performed by financial intermediaries described in subparagraph 149(1)(a)(i), such as agents, brokers and dealers in financial instruments or money.
CRA also rules that fees received by the mortgage broker from borrowers where private lenders are involved are exempt under para. (l), but declines to rule that commissions paid by the mortgage broker to the agents through which it acts are exempt as the agreement provided to CRA did not contain a description of their services. CRA further states
Although you did not request information on future compensation programs (e.g. trailer fees), please note that a renewal commission payable in future years may not be consideration for the arranging for the supply of a mortgage loan.
15 June 2011 Headquarters Letter Case No. 108590
Corporation A agrees to promote a credit card to be issued by a bank by soliciting prospects to open up accounts with the bank pursuant to a marketing program developed jointly with the bank (with the bank assuming sole responsibility for credit approval and administering the accounts including collections). After ruling that the compensation received by Corporation A from the bank is consideration for a single taxable supply, CRA stated:
[Corporation A's] activities ...are predominantly promoting and marketing the Program....Also [Corporation A] is not in the business of providing supplies of financial services or considered a financial intermediary as described under subparagraph 149(1)(a)(iii).
27 May 2011 Headquarters Letter Case No. 129882
A mortgage broker qualifies borrowers (including assessing the impact of their credit reports), obtains commitments from mortgage lenders and discloses the terms and conditions to the borrower. In providing a general interpretation that the mortgage brokers are providing a financial service of arranging for the mortgage loans, CRA stated:
...it appears that the mortgage broker has a high degree of direct involvement and effort in the supply of a mortgage loan, is relied on by the borrower and the lender and has the intention to effect a supply of the mortgage loan. Although the mortgage broker may create or maintain records for the lender relating to a grant...of credit...the services provided by the mortgage broker are not limited to credit management services. Similarly, while the mortgage broker may provide information , document preparation or processing, or customer assistance that would be preparatory to the provision of a financial service, the services would generally be financial services described in paragraph (l) of arranging for a service referred to in paragraph (d) and would not be excluded from that definition by reason of paragraphs (r.3) or (r.4).
No rulings were provided as no copies of the relevant agreements were provided.
17 May 2011 Headquarters Letter Case No. 129875
an insurer has an arrangement with a managing general agent ("MGA") to promote and effect sales of its insurance policies, and the MGA has an agreement, in turn, with broker/agents (the "Advisors") to promote and effect sales of such policies. The commissions paid by the insurer to the MGA would not be exempt (under para. (l) - "arranging for") because of the lack of direct involvement of the MGA with the clients. Furthermore, the activities of the MGA could be considered to be also excluded on the basis that they are predominantly preparatory activities. Where Advisor A sells an insurance brokerage business to Advisor B, with Advisor B being assigned the entitlement to future streams of commissions including renewal commissions generated as a result of sales to clients previously made by Advisor A, such commissions would not be exempt consideration in the hands of Advisor B as Advisor B had no direct involvement with the clients in arranging for the supply to them of the insurance policies.
B-105 February 2011 "Changes to the Definition of Financial Service"
Examples include:
- Example 4 (fees paid by a mutual fund manager to mutual fund salespersons for the sale of mutual fund units are exempt including potentially trailer fees if there is a single supply);
- Example 16 (services provided in order to find purchaser for shares of a subsidiary were taxable under (r.4) given their predominant customer assistance character and that the firm was not an investment dealer as described in s. 149(1)(a)(iii));
- Example 17 (commission received by FinderCo as a percentage of the preferred share subscriptions received by CorpA from investors identified by FinderCo as FinderCo is not directly involved in the sale ([i.e., the closing of the sale?] of the shares).
GST/HST Notice 250, "Proposed Changes to the Definition of Financial Service", June 2010.
26 July 2007 Ruling 63048 ["fees" of vendor for servicing of sold mortgages part of consideration for single exempt supply]
Seller and Investor. The Seller (a registrant which is resident in Canada) sells mortgages (the "Mortgage Loans"), which have already been fully advanced, to the Investor, which is a non-resident of Canada, has no permanent establishment in Canada and is not registered.
Sale on fully-serviced basis.
The Investor agrees to purchase the Mortgage Loans on a fully-serviced basis pursuant to the Agreement. The Seller is required under XX of the Agreement to perform various duties respecting the sold Mortgage Loans including provision of a detailed funded mortgages report, giving necessary notices respecting amounts due or overdue, maintaining proper records and accounts showing all receipts, payments and disbursement in respect of the Mortgage Loan, notifying the Investor of any alteration or modification in the terms of the Mortgage Loans under certain conditions, enforcing performance of the obligations of the mortgagor under the Mortgage Loans and realizing upon the mortgage and other security, at the cost and expense of the Investor.
Security and registration.
All Mortgages shall be registered in the name of the Seller. The Seller shall execute registrable assignments of the Mortgages and all related security documents and deliver those to the Custodian as part of a bulk assignment not less frequently than once every month. The Investor has the right to require the Seller to purchase back a Mortgage Loan as a result of an unsatisfactory change, within seven days and by giving written notice.
Ruling.
The fees described in XX of the Agreement, payable by the Investor to the Seller, are consideration for a supply of a financial service.
December 2006 GST/HST Info Sheet "ABM Services"
Includes various examples, including:
Example 4
where an ISO (a person who markets ABM services) contracts with a merchant to be the card acceptor and where the merchant contracts with the ISO to provide services for the ABM that the ISO has sold or leased to the merchant. In this situation:
- the acquirer (a member of the payments network) receives an exempt interchange fee from the card issuer for agreeing to pay cash to a cardholder.
- the ISO receives an exempt payment from the acquirer, derived from the interchange fee paid by the card issuer to the acquirer, for agreeing to dispense cash to the cardholder.
- the merchant receives an exempt payment from the ISO (derived from the payment the ISO receives from the acquirer) for dispensing cash from the ABM to the cardholder.
- the merchant also receives an exempt surcharge fee from the cardholder for dispensing cash from the ABM to the cardholder.
5 April 2004 Ruling Case No. 50019
The quarterly fees received in arrears (based on the market value of the investment portfolio) by an investment manager with full discretion as to all investment decisions were consideration for taxable supplies by it given that the primary service provided by it was expertise in the selection of securities, which was characterized as the provision of investment advice.
17 December 2003 Ruling Case No. 45758
As the role of Agent B was to provide administrative services to Agent A to enable Agent A to fulfill its responsibilities for arranging for the provision of insurance by an insurer, the services provided by Agent B did not qualify as financial services.
17 December 2003 Ruling Case No. 40640
A corporation was characterized as providing a technology platform, which permitted the electronic collection of mortgage loan application and underwriting information, to mortgage brokers and was characterized as not providing any services directly to an insurance company. Accordingly, the fees generated by it were consideration for taxable services rather than being financial services under paragraph (1).
2 December 2003 Memorandum Case No. 41678
The exclusion in paragraph (q) applied to the sale of mortgages on a fully-serviced basis to a trust, based on a review of its activities set in the Declaration of Trust.
19 November 2002 Interpretation RITS 42355
An independent third party that, for a commission, engaged in the collection of overdue loans and accounts receivable due to a bank was not providing a financial service but, rather, providing an administrative service that facilitated the collection of the overdue accounts.
P-239 "Meaning of the Term 'Arranging For' as Provided in the Definition of 'Financial Service'" 30 January 2002. 31 March 2000 HQ Letter 25522
A commitment fee payable in connection with a merger transaction entailing share and note consideration represented consideration for a financial supply. A break-up fee (referred to as a "non-completion fee") did not represent consideration for a supply, nor was it governed by subsection 182(1) as the agreement to which the fee related was an agreement for the making of an exempt financial service. Accordingly, no GST was payable on the break-up fee.
Draft Policy Statement on the Meaning of the Term 'Arranging for', 18 January 2000, No. 11595-2
"The intermediary should be fully and directly involved in the process of the provision of the financial service by the supplier and will therefore, expend necessary time and effort to ensure a successful supply of the financial service."
21 December 1999 Headquarters Letter 8177/HQR0001783
Fees paid were characterized as being primarily consideration for marketing and promotional services notwithstanding that there were incidental financial services involved including arranging for the opening of a bank account and arranging for a credit facility.
21 December 1999 Ruling File 11595-2 No. HQR0001783/8177
A service of securing additional merchants to accept the credit card services provided by a financial institution was characterized as relating substantially to the provision of marketing and promotional services, rather than to financial services, with the result that the fees were not exempt.
27 October 1999 HQ Letter HQR0001895
Where a supplier had agreed to actively solicit for and negotiate with potential buyers of the assets of a company or its shares, and a share sale ultimately occurred, the fees paid to the supplier (comprising a final percentage fee which was conditional upon closing the sale, together with initial fees) would be treated as the consideration for the single supply of a financial service, with amounts initially received by the supplier treated as non-refundable deposits under s. 168(9) that did not become consideration for the supply until the sale occurred. If the sale had not been consummated, or occurred as an asset sale, the consideration (including the deposit) would be treated as consideration for a taxable supply.
25 August 1998 Ruling RITS HQR0001269 [trailer fees]
Trailer fees were exempt.
3 September 1997 Ruling HQR0000579
"Revenue Canada takes the position that the service of 'arranging for' the supply of a financial service ... generally refers to the activities of an intermediary, such as a broker, a salesperson or a dealer, of bringing together in an active manner of two parties (a supplier and a recipient of the financial service) for the supply of the financial service by one person to the other. 'Arranging for' a service does not mean the service of 'recommending', 'advertising' or 'marketing' alone. The term 'arranging for' the service should go beyond the activities of merely referring or introducing one party to the other party for the supply of a financial service. In general, the intermediary will be expected to have spent time and effort to assist both parties whenever necessary for the eventual success of the supply of the financial service by one party to the other party."
P-210 "Performance Bond Claims" dated 7 February 1997. P-192 "Supply of Precious Metals" P-119 "Trailer Commission Servicing Fees"
Trailer commissions paid by fund managers to investment dealers are exempt under paragraph (l) of the definition.
GST M 300-4-7 "Financial Services" GST M 700-2 "Definition of 'Financial Instrument'" B-032 "Registered Pension Plans and Registered Retirement Savings Plans"
B-033 "GST Treatment of Products and Services of a Deposit-Taking Financial Institution"
Paragraph (f.1)
See Also
Great-West Life Assurance Company v. The Queen, 2015 TCC 225
The appellant ("Great-West") provided prescription drug plans to the employees of various employers. The claims were processed by a third party ("Emergis") using its "Assure Card System." The plan members' claims were adjudicated electronically immediately upon being charged for filling a prescription at a participating pharmacy. Emergis would then reimburse the pharmacies for the claim amount, and submit periodic invoices to Great-West. The appellant sought a refund of GST and HST that it had paid on Emergis's fees, on the basis that Emergis was providing a financial service.
Before finding that the supply by Emergis was excluded by s. 4(2) of the Financial Services and Financial Institutions (GST/HST) Regulations as an administrative service and before noting (at para. 89) that "the taxability of a compound supply under the ETA is based on the essential character or substance of the supply and not the constituent elements of the supply," he stated (at para. 81):
[T]he essential character of the supply provided by Emergis to Great-West is the payment to the plan member of the drug benefit claimed by the plan member under a group health benefits plan. The payment of the amount is effected through the agreement of the pharmacy to forgo the collection of the full price of the drug at the point of sale.
The other services that Emergis agreed to provide, such as setting up a network, developing software standards, and maintaining a support desk, were ancillary or incidental to, or consequent upon, Emergis' agreement to pay plan members (para. 71).
See summary under Financial Services and Financial Institutions (GST/HST) Regulations, s. 4(2), s. 123(1) - financial services - para. (r.4), General Concepts - Payment and Receipt.
Paragraph (g)
Administrative Policy
29 January 2015 Ruling 93176 [commitment fee paid to loan assignor exempt]
159222 is similar
In a Term Sheet, the lender, ACo, agrees to make a secured loan to the borrower, BCo. The Term Sheet provide for the payment by BCo of a commitment fee, plus HST, upon execution of the Term Sheet. Before any advance is made under the Term Sheet, ACo, BCo and CCo enter into an Assignment Agreement pursuant to which CCo is designated as the lender under Term Sheet and for consideration of $XX paid by CCo to ACo, ACo assigns to CCo all of its right, title and interest in the Term Sheet. Is the Commitment Fee subject to HST? CRA stated:
A financial service as defined in subsection 123(1) includes in paragraph (g) the making of any advance, the granting of any credit or the lending of money. [ACo] is making a supply of a financial service to [BCo] under paragraph (g) of the definition of financial service which is exempt under section 1 of Part VII of Schedule V to the ETA. The Commitment Fee is consideration that was paid for this exempt supply. Accordingly, [ACo] was not required to collect GST/HST on the Commitment Fee.
Paragraph (r.4)
See Also
Great-West Life Assurance Company v. The Queen, 2015 TCC 225
A third party (Emergis) provided automated claims processing services to the appellant (Great-West Life), which administered or insured various client drug plans, so that the prescription drug claim of an employee would be processed at the pharmacy counter upon presenting her magnetic card.
Owen J ultimately found that the charges of Emergis to Great-West for this service were taxable under the Financial Services and Financial Institutions (GST/HST) Regulations, as they were "quintessentially administrative in nature." However, he found that in the absence of this Regulation, the service would have been exempt as being for the payment of insurance policy claims – notwithstanding that the Emergis service entailed the provision of taxable supplies described in para. (r.4) of the financial services definition. He stated (at paras. 89-90):
[T]he fact that the constituent elements of the supply may include services described in paragraph (r.4) is not a basis for excluding the supply from the definition unless the essential character or substance of the supply is described by those services.
…Here, the group of services that constitutes the compound supply does include some of the services described in paragraph (r.4). For example, Emergis does provide services to Great-West that involve collecting, collating or providing information. However, those do not represent the essential character or substance of the supply, which is paying drug benefits to plan members.
See summaries under Financial Services and Financial Institutions (GST/HST) Regulations, s. 4(2) and s. 123(1) – financial service – (f.1).
Paragraph (r.5)
See Also
Great-West Life Assurance Company v. The Queen, 2015 TCC 225
A third party (Emergis) provided automated claims processing services to the appellant (Great-West Life), which administered or insured various client drug plans, so that the prescription drug claim of an employee would be processed at the pharmacy counter upon presenting her magnetic card.
The Crown argued that the supply by Emergis was deemed to be taxable under para. (r.5) because Great-West had a right to acquire a non-exclusive licence from Emergis in the event of events such as insolvency or a winding-up of Emergis and Great-West had limited rights to use Emergis trademarks and the cards. In rejecting this submission, Owen J stated (at para. 87):
The use of the property of Emergis in this manner is not the essential character of the supply provided by Emergis to Great-West but an incidental aspect of retaining Emergis to provide the Services described in the Agreements.
See summaries under Financial Services and Financial Institutions (GST/HST) Regulations, s. 4(2) and s. 123(1) – financial service – (f.1) and (r.4).
Foreign Convention
Administrative Policy
CBAO National Commodity Tax, Customs and Trade Section – 2014 GST/HST Questions for Revenue Canada, Q. 34.
How does a taxpayer determine the number of non- resident attendees to attend a foreign convention if it has not yet occurred? CRA responded:
[T]here may be circumstances where it may not be reasonable to make the assumption that because the appropriate percentages were met for the previous year's event that they will be met for an upcoming event. The following is an example… :
A society, based in Portland, Oregon, USA, held a convention last year in Sydney, Australia, where only three attendees out of 100 were from Canada. The prior year's convention…in Seattle, Washington, USA, had forty-five attendees out of 100 who were from Canada. …[F]or this year's convention in Calgary, Alberta, it would not be reasonable to just use the attendance from the Australian conference… . A reasonable method…would likely consider more historical attendance data and an analysis of who attends or who does not attend their conventions based on the geographical proximity of the convention venue with the location of society members.
For a first year convention where the sponsor does not have the benefit of attendance data from prior conventions, the determination of the percentage of admissions that are reasonably expected to be supplied to non-residents should be based on the other information…[f]or example…the country of residence of the invited delegates, the country of residence of association members, [or] surveys of members' intentions… .
Hospital Authority
Administrative Policy
13 October 2004 Headquarter Letter RITS 54857
In order to be designated as a hospital authority, an organization must be recognized as a public hospital by the provincial government, be established and operated otherwise than for profit, be operated for the medical or surgical treatment of the sick or injured, and provide and maintain in-patient beds and services.
Import
See Also
Imperial Tobacco Division of Imasco Ltd. v. Deputy Minister of National Revenue (1986), 13 CER 13, aff'd (1988), 18 CER 10 (FCA)
Between the time that the applicant presented an import entry for the importation of tobacco at the Port of Montreal, and the time that the tobacco was taken out of the customs warehouse in keeping with the normal practice, the rate of excise taxes was increased.
In finding that the lower rate of duty applied, the Board found that the goods were imported into Canada at the time when the applicant became liable for payment of the taxes, which occurred upon the entry of the goods (the filing of the B-3 form with Customs).
Canada Sugar Refining Co. Ltd. v. The Queen, [1898] AC 735 (PC)
Given that the Customs Tariff Act, 1894 provided that duty was payable when goods were imported into Canada, it followed that it was intended that the time referred to was when the vessel in question entered the port of discharge rather than a Canadian port of call along the way to the port of discharge.
The Appellant was found to be subject to duty on the importation of sugar, which was imposed on importations that occurred after the time it did an interim reporting at the port of call (in Halifax) but before it reached the port of discharge (Montreal). In the case of goods that would not be discharged at a port of entry, it was noted that the time importation would be when they were brought within the limits of Canada.
Improvement
Cases
London Life Insurance Co. v. The Queen, [2000] GSTC 111, Docket: A-581-98 (FCA)
Under the terms of its leases, the Appellant undertook leasehold improvements to the leased premises at a cost of about $2.1 million and received tenant improvement allowances from its landlords of approximately $2.2 million.
The availability of an ITC was governed by s. 169(1)(c) rather than (b) because (under the definition of "improvement" in s. 123(1)), the cost of the improvements was not included in their adjusted cost base for purposes of the Income Tax Act because an election was made under s. 13(7.4) of the Income Tax Act to reduce the capital cost of the improvements by the amounts paid by the landlords.
Non-Profit Organization
Administrative Policy
12 March 2013 Ruling Case No. 138581
A corporation did not qualify as a non-profit organization as it was not organized solely for a purpose other than profit: it was established as a corporation with share capital and without any statement that it was organized for non-profit purposes, and there was no statutory prohibition against it either operating on a for-profit basis or allowing any part of its income to be payable or otherwise available to its shareholders. Furthermore, almost half of its income comes from fees earned for its service and income earned on the sale of its products. These sources of income have allowed it to generate substantial operational surpluses.
Office
Permanent Establishment
Administrative Policy
22 October 2004 RITS 38169
A U.S. company would not have a permanent establishment in Canada by virtue only of subcontracting with a Canadian affiliate for the Canadian affiliate to assist the U.S. company in its call centre activities by routing calls to Canada.
Person
Administrative Policy
Information for Non-Profit Organizations under "Registering for the GST"
An office or branch within an unincorporated organization will be considered a separate person if it has a significant degree of control over its own affairs.
Place of Amusement
Administrative Policy
6 December 2006 Headquarters Letter 82659
As the purpose of admissions to swimming pools or ice arenas of a City was to provide recreation, each of these recreational facilities was a place of amusement.
22 March 1999 Headquarters Letter HQR0001233
In dealing with a question as to whether seminars put on by religious institutions would be considered to be provided at a "place of amusement", CRA stated that "a minor amount of amusement/recreation is not sufficient in order to consider a venue as a place of amusement, and indeed any amusement/recreation that is secondary to another purpose will be insufficient...", and further stated:
events that focus on the arts or music or the other activities described in paragraph (b) of the definition of "place of amusement" are held in a place of amusement, whereas events that focus on educational, spiritual or religious presentations are likely not, assuming this to be the purpose of the event.
Precious Metal
See Also
Bombay Jewellers Ltd. v. The Queen, [1998] GSTC 94, docket 96-433-GST-G (TCC)
The registrant, a jeweller, purchased gold bars with 99% purity on an exempt basis, and then cut the bars (sometimes with further modeling or rolling) into smaller rectilinear pieces, which it then sold to customers without charging GST. After noting the reliance by the registrant on the ordinary dictionary meanings of "bar," "ingot" and "wafer," Margenson J found that these terms should be given their technical rather than ordinary meaning. Accordingly, the pieces were required to have a readily ascertainable value, in order that they generally were readily transferable. Because the pieces instead had been tranformed out of standard deliverable form, this requirement was not satisfied as it was obvious that no bank or gold dealer would accept them for delivery without first having them assayed and weighed. Accordingly, the pieces did not qualify as "precious metals" as defined, and their sale was taxable.
Administrative Policy
GST Memorandum (New Series), 17.1
a precious metal bar, ingot or wafer must generally be recognized and accepted for trading on Canadian financial markets, so that ordinarily they will bear markings indicating their purity level and the issuing refinery or institution (para. 28).
Policy Statement , P-192 "Supplies of Precious Metals", 11 November 1995 (obsolete)
a Government of Canada silver maple lead coin bearing markings that indicate that it has a purity of 99.99% and that it may be used as currency (but with no stamp of a refiner or any serial number) would qualify.
Real Property
Administrative Policy
GST Memorandum (New Series), 19.5 "Land and Associated Real Property
Real estate options and air rights are real property, whereas supplies of density rights are not supplies of real property.
26 July 1994 Headquarters Letter RITS 11950-1
Before indicating that a payment by a developer to a municipality in consideration for the municipality agreeing to pass a by-law allowing an increase in the height and density of the building to be located on a property represented consideration for an exempt supply under paragraph 20(c) of Part VI of Schedule V, the Directorate indicated that "Legal Services has provided their opinion that the granting of density rights does not constitute a supply of the underlying real property, but rather is a supply of a right to do something".
GST M 300-2 "Taxable Supplies" under "Supply"
The term real property includes the right under a lease or licence to use or take possession of land, and a right or option to purchase land under a contract. Definitions of tangible personal property and intangible personal property are included.
Articles
Terry G. Barnett, "The 'Dirt' on Residential Real Estate", September 2011 CICA Commodity Tax Symposium Papers
The paper includes a discussion of the assignment of a condominium purchase contract:
Equitable interest of purchaser (p.2)
Under general legal principles, once a vendor enters into an agreement for the sale of real property, the purchaser has acquired an equitable interest in the property. The purchaser is entitled to register the contract of purchase and sale against the property, and similarly, can sue the vendor for specific performance of the contract if the vendor refuses to complete the sale. ...
Disclaimer of equitable interest (p. 2)
The equitable interest that normally arises on the signing of a purchase agreement, however, is subject to the laws of contract. By contract, the vendor and purchaser may disclaim the transfer of the equitable interest that the purchaser would otherwise have in the land. Indeed, this is a common practice in many new condominium developments. An equitable interest gives a purchaser the ability to register the interest on title. In the case of a condominium building under development, financing and other commercial arrangements could be confounded by the potential registration of interests by hundreds of buyers. For this reason, in many new developments the parties contract out of the general law and disclaim any interest in real property... .If the contract contains a valid and binding disclaimer of interest in realty, what is assigned therefore is better characterized as a bundle of contractual rights, i.e. an intangible.
Recipient
Cases
Calgary v. Canada, [2012] 1 S.C.R. 689, 2012 SCC 20
The City of Calgary unsuccessfully submitted that its activities of acquiring public transit assets and making them available for use in its transit system (which it labelled the "transit facilities services") constituted a separate taxable supply made to the Province of Alberta (which provided funding therefor) rather than being part of its making of exempt municipal transit services to the public. Although the transit facilities services might have been a separate supply made to the Province if the Province had a statutory obligation to provide municipal transit services which was being relieved by the provision by the City of these services, or if the funding agreements between the City and Province required the City to provide these services rather than merely to properly account for the funds received, neither proposition applied. Accordingly, the Province was not the recipient of the transit facilities services, viewed as if they were a supply separate from the municipal transit services made to the Calgary public.
After stating (at para. 62) that "Nothing in the ETA requires a supply to have only one recipient," Rothstein J dealt with the argument (at para. 63) "that because the Province contributed grant funding to the City, the Province was a recipient of the supply of municipal transit services." Rothstein J. noted (at para. 65) that this would not assist the City as the municipal transit services (the exemption for which in Schedule V, Part VI, s. 24 did not require that the public be the exclusive recipient of the supply) would continue to be exempt under this view.
The Queen v. Merchant Law Group, 2010 FCA 206
A Saskatchewan law firm failed to provide evidence establishing that its clients rather than it were liable for the costs incurred by it in respect of searches, appraisal reports, accident reports, courier costs, transcripts, investigation reports, hospital records, security reports, medical reports and searches and certificates. Accordingly, the firm was required to collect and remit GST when it made a charge in respect of such disbursements to its clients.
Des Chênes (Commission Scholaire) v. The Queen, [2002] GSTC 11, 2001 FCA 264
(Correctness questioned in City of Calgary at para. 65.)
Student busing services were found to have been provided by the Appellant school board to the Ministry of Transport rather than to the students given that it was clear that the service had to be provided by the board, failing which subsidies (which largely or completely covered the cost of the service) would not be paid to the board by the Ministry. Noël J.A. stated (at p. 11-13) that:
"A payment will be regarded as consideration if it is directly linked to the supply of a good or a service by the person who received the payment ... ."
See Also
PDM Royalties LP v. The Queen, 2013 TCC 270
The limited partnership units of the appellant were held by a sub-trust (the "Trust") of an income fund (the "Fund"). Unit subscription proceeds received by the Fund on its initial public offering ("IPO") and on a subsequent private placement of Fund units were used to acquire debt and units of the Trust, which in turn subscribed for LP units of the appellant. The appellant used those proceeds to acquire intellectual property and related rights to be used by it in a pizza franchising business. Before completion of the IPO, the Fund, Trust, appellant and its general partner entered into a "Financing Agreement" in which they agreed that all financing expense in connection with the IPO, other than the underwriters' fee, were to be incurred on behalf of the appellant; and at the same time the appellant entered into an "Administration Agreement" with the Fund in which it agreed to administer the Fund and "as agent of the Fund" to pay for all outlays and expenses incurred by it in such administration.
V. Miller J found that, as pursuant to the Administration Agreement, various expenses (principally relating to the IPO and private placement) were incurred by the appellant as agent for the Fund, the appellant was not the recipient of the related services and was not entitled to input tax credits therefor (para. 31). The Financing Agreement did not render the appellant the recipient of such supplies as the supplies were not made pursuant to that agreement (para. 26), nor could it be construed as causing there to be a re-supply of the services by the Fund to the appellant, as the services were consumed by the Fund (para. 32).
General Motors of Canada Limited v. R., [2008] GSTC 41, 2008 TCC 117, aff'd [2009] GSTC 64, 2009 FCA 114
The Appellant (a car manufacturer) was the administrator of various defined benefit pension plans for its employees. It directed the trustee of the plans to pay the fees of third party portfolio advisors out of the trust assets. As it was the Appellant who was contractually obligated to pay those fees, and as s. 267.1 did not deem the portfolio advisory services to have been acquired by the trust, the Appellant was the recipient of those services.
Corp. des Loisirs de Neufchâtel v. The Queen, [2008] GSTC 153, 2006 TCC 339
(referred to with approval in City of Calgary.)
The appellants, which were community service agencies, received funding from Quebec City to operate summer play programs for children. Revenu Quebec assessed on the basis that this was consideration for taxable supplies by the City, notwithstanding that a supply of such services to the parents would have been exempt under Sched. V, Part VI, s. 12. Lamarre Proulx TCJ noted (at para. 52) that the City:
is, in part, the recipient of the service delivered to the [parent] third parties. The third party is also a recipient of the service, whether he has to pay part of the price or nothing at all.
She found (at para. 54) that where (as here) "there is a direct link between the subsidy and the price of the service, the subsidy must be regarded as the consideration, or part of the consideration, for the service, and it is taxable if the service is taxable." However, as it was accepted that the supply was exempt under s. 12, that consideration was not taxable.
Royal Bank of Scotland PLC v. Customs & Excise Commissioners, [2002] BTC 5280 (Court in Session (Inner House))
The Appellant, which was entitled to issue its own bank notes, entered into a reciprocal agreement with other banks pursuant to which it was entitled to a flat fee per transaction when customers of the other banks were issued bank notes of the Appellant (or bank notes of the Bank of England) through ATMs of the Appellant.
The Appellant was unsuccessful in establishing that the fees received by it were eligible for zero rating under a provision that applied to "the issue by a bank of a note payable to bearer on demand". Rather than being properly so described, the reciprocity fee payable to the Appellant was received by it in consideration of its providing to the counterparty bank a supply consisting of a service to a customer of that bank in the form of a facility to withdraw cash, in whatever form it was dispensed.
Customs & Excise Commissioners v. Redrow Group plc, [1999] BTC 5062 (HL)
The Appellant, which was in the business of building new homes, offered to prospective buyers of its homes the services of real estate agents who would act in the sale of their existing homes, and had undertook to pay the agents' fees provided that the purchase of the new house from the Appellant went through. Although the estate agents were supplying a service to the prospective buyers, the fact that the Appellant instructed them and paid their fees had the consequence that the transaction between them and the Appellant constituted a supply of services by them to the Appellant.
British Airways plc. v. Customs and Excise Commissioners, [1996] BTC 5314 (Q.B.D.)
Passengers whose flights were delayed received meal vouchers from British Airways which they could present at various restaurants in the terminal. Macpherson of Cluny J. dismissed an appeal from a decision of the Commissioners that under this arrangement there was a supply of property by the restaurants to the passengers rather than to British Airways.
Stobbe Construction Ltd. v. The Queen, [1996] GSTC 41 (TCC)
The registrant was correctly assessed for failure to collect GST on charges to its commercial tenants for property taxes, utilities and insurance.
Customs and Excise Commissioners v. Reed Personnel Services Ltd., [1995] BTC 5217 (Q.B.D.)
An arrangement under which the taxpayer provided nurses and, therefore, their services, to hospitals and received from the hospitals commission payments and also reimbursement for the nurses' salaries was characterized as an "intermediary" situation (i.e., the taxpayer acted as a mere intermediary between the nurses and the hospital introducing the two so that the nurse could provide her services to the hospital) rather than a "vicarious performance" situation (in which the taxpayer was contractually obliged to provide the services of the nurses to the hospital). Accordingly, the taxpayer was not making supplies of (exempt) nursing services to the hospitals and could deduct input tax.
Harpur Group Ltd. v. Commissioners of Customs and Excise, [1995] BVC 841
Agreements that the taxpayer entered into with gas station operators (the "merchants") and also with customers of the taxpayer were drafted on the basis that employees of the customers, who were issued cards by the taxpayer, would purchase fuel as agent for the taxpayer, with the fuel then being sold by the taxpayer to the customer. In rejecting this characterization with respect to situations where the fuel initially was property only of the merchant, the Commissioners noted (at. p. 856) that property in the fuel would pass at the pump from the merchant to the cardholder, and a measurable period of time would then pass before the cardholder signed the supply voucher. Accordingly, property in the fuel did not pass to the taxpayer, with the result that the taxpayer was not making a taxable supply of fuel to the customer.
Club 63 North v. The Queen, [1995] GSTC 75 (TCC), briefly aff'd [1996] GSTC o (FCA) I
n finding that the registrant, which provided dining, recreational and social facilities to employees of the Syncrude project in northern Alberta, was making taxable supplies to Syncrude in respect of grants received by it from Syncrude, Sobier TCJ. noted (at p. 75-4):
"The recipient of the supply, for the purposes of the Act, is the person liable to pay for the supply, even if the beneficiary of the supply is in fact a third party, as long as there is a direct link between the payment and the supply. In the instant case, Syncrude agrees to provide the appellant with monthly grants and the annual grant and the appellant agrees to provide activities and events to its members, Syncrude's employees. Syncrude derives the benefit of having good communication with its employee, better morale and therefore an increased productivity from having the appellant providing activities to its members in return [for] the grants. Consequently, Syncrude is the recipient of the supply of these activities ...".
P & O (Dover) Ltd. v. Commissioners of Customs and Excise, [1992] V.A.T.T.R. 221
The appellant along with seven individual employees was charged with manslaughter in connection with the sinking of its vessel. In finding that the appellant was the recipient of legal services provided by the separate counsel for each of the individual accused, the Tribunal stated:
"The Company, the evidence shows, not only approved the choice of solicitor but it also instructed the solicitor and agreed to pay it: and the solicitor would have had no right to recover costs and fees from the individual employee were the Company to be unable to or refuse to pay for any reason. The individual employee was admittedly a client of the solicitor, but that in no way displaces the fact that the Company was a client as principal in relation to each solicitor. The solicitors' services were, therefore, provided to the Company, notwithstanding that the individual employee also received the benefit of those services."
Administrative Policy
B-109 "Application of the GST/HST to the Practice of Naturopathic Doctors" 31 July 2015
Fee sharing
[In]situations involving arrangements with contracted associate practitioners...generally one practitioner (principal) contracts for the services of one or more associate practitioners at the principal's place of business.
...[W]here the principal and associate have entered into a bona fide arrangement to share the fees from the associate's supplies of exempt naturopathic services, the payment made by the associate is treated as an apportionment of fees between parties and not as consideration paid to the principal for a supply. ...
Example 13 [dual supply: teaching and naturopathic service]
A naturopathic doctor contracts with a teaching clinic to supervise students at the clinic. Each student interacts one-on-one with a patient for the diagnosis and treatment of a disorder under the direction of the naturopathic doctor. The patient is invoiced by the naturopathic doctor for the service she receives. ...The naturopathic doctor also invoices the clinic for the teaching services he provides.
The GST/HST will not apply to the fee charged to the patient for the service she receives where it is an exempt naturopathic service. Although the naturopathic doctor oversees the services rendered to the patient and may have interaction with the patient, the naturopathic doctor is also making a supply of a teaching service to the clinic. Where no other exempting provision applies, the naturopathic doctor is required to charge and collect the GST/HST... .
26 June 2014 Ruling 157148 [double supply to and by pension plan employer]
A Co is entitled to full ITCs for the GST/HST on fees paid by it to third parties in respect of its pension plan for employees including charges for administration, actuarial and investment consulting, as being the one liable to pay the fees. However:
where expenses incurred by [A Co] have been paid from the Pension Fund, we would consider [A Co] to have made a taxable supply of services for consideration equal to the invoice amounts. [A Co] would therefore be required to account for the GST/HST calculated on these amounts under sections 221, 225 and 228.
Interpretation Revenu Québec TVQ. 16-30/R1 "Nominee Agreements" 9 December 2011
7. A nominee who fails to disclose, to the supplier of an immovable, the fact that the nominee is a mandatary is acting in the nominee's own name and becomes personally bound to the supplier to pay the considerationfor the supply (article 2157 C.C.Q.). The nominee thus becomes a recipient of the supply, within the meaning of section 1 of the AQST, along with the mandator (article 2160 C.C.Q.). 8. Where instead the nominee is a QST registrant, informs the supplier of the immovable of that fact and provides the nominee's own QST registration number to the supplier, the nominee, as recipient of the supply, is personally liable for payment of the QST in respect of the supply and for remittance of the QST to the Minister, unless the nominee discloses the mandate to Revenu Québec in the manner described in point 3 of this bulletin. ... 9. It should be noted that even where the nominee, as recipient of the supply of the immovable, is personally liable for payment of the QST, only the mandator can claim an input tax refund (ITR), under section 199 of the AQST, in respect of the acquisition of the immovable, if the mandator uses the immovable or makes a supply of it in the course of the mandator's commercial activities.
29 July 2011 Headquarters Letter Case No. 122272r
In order to finance the purchase of a new condo from a builder, an individual (the "Purchaser") enters into a "Declining Partnership Agreement," or Loan Agreement, with FinanceCo which is intended to comply with the Islamic principle of declining Musharaka. Under this arrangement, Purchaser alone obtains legal title to and possession of the condo while FinanceCo obtains an equitable interest in the condo upon contributing money to Purchaser, and agrees to sell its equitable interest in the condo to Purchaser over time on a basis that permits it to earn the 'Profit" described in the Loan Agreement. As there is no indication in the agreement of purchase and sale with the builder that FinanceCo is liable to pay the consideration for the supply by the builder of the condo, CRA rules that Purchaser is liable for the GST on the value of the consideration for that supply, and that FinanceCo is not the recipient of that supply.
31 July 2003 Ruling Case No. 41263
Services provided by investment managers were found to be supplied to pension plan trusts managed by the administrator, rather than being supplied to the administrator with an on-supply to the trusts, given that the trusts had the obligation to either pay directly for such supplies of services or, where they were paid by the administrator, to reimburse the administrator for the amount so paid, and given that the parties intended that the services be for use by the trusts.
6 December 2002 Memorandum RITS 35845
A home that received funding from Public Works and Government Services Canada ("PWGSC") for providing temporary accommodation to individuals receiving medical treatment at another location was found to be making a supply to PWGSC given that PWGSC used a standing offer (indicating that the payments were for purchase purposes) and given the view of the Directorate that PWGSC was contracting-out one of its own programs rather than financially supporting the activities of the home.
GST Memorandum (New Series) 3.1 "Liability for Tax", para. 4-8
10 April 1995 Interpretation Case No. 11945-6 [B]
Partway through an action against him, an individual determines that he will cease defending the action and pays all the fees and disbursements of the suing lawyer, who does not issue an invoice. CRA stated:
The services of the suing lawyer…are consideration for the supply of taxable services. … In this case the individual being sued is the recipient as he agreed to pay the suing lawyer… .
GST Memorandum 700-5-10 "GST Treatment of Insurance Claims"
Where counsel acts to protect the financial position of an insurer who also controls the conduct of proceedings, the legal services will be considered to have been acquired by the insurer and not the insured. Where a person performing repair services invoices the insurer, the insurer will be considered to be the recipient of the supply.
GST M 300-1 "Liability for Tax" under "Liability to Pay"
Unless no consideration is paid or is to be paid, the recipient is the person who pays or agrees to pay, rather than the person who actually receives the benefit of the supply. Where one person has agreed to pay, and another person actually pays for it, the person who was under a legal obligation to pay is the recipient.
Articles
Brent F. Murray, "Inter-Company Supplies and Expense Reimbursements", Canadian GST Monitor, No. 242, November 2008, p. 1.
Registrant
Administrative Policy
CBAO National Commodity Tax, Customs and Trade Section – 2014 GST/HST Questions for Revenue Canada, Q. 15
If an FI is not required to register for GST/HST purposes and chooses not to register voluntarily, it would not be a GST/HST registrant by virtue of an account that has been opened for the purpose of processing a self-assessment of GST/HST under Division IV.
The CRA distinguishes between RT accounts of registrants and non-registrants based on the status indicated on our system.
6 July 2012 Headquarters Letter Case No. 142921
A taxpayer which absent a s. 150 election would not have been a small supplier and had made such election on a valid basis with two financial institutions who were closely related then had its registration inadvertently cancelled. At that time, the "closely related" related definition required that it be a "registrant." Ruling that such cancellation "did not cancel the Election under section 150 since the Taxpayer would have been required to be registered, i.e., was a registrant, throughout the period in question."
Residential Complex
See Also
Witherspoon v. R., [2011] GSTC 108, 2011 TCC 343
The appellant executed a contract for the purchase of a ski condominium unit to use personally as his residence from a vendor who had never resided there and instead used it for short term rentals. The Appellant paid GST on the purchase and successfully claimed a New Housing Rebate. He subsequently submitted a general rebate application for the entire amount of GST as an amount that was paid by him in error, which was denied by the Minister. Campbell J. concurred with the Minister that the condominium was not a residential complex in the absence of evidence that the vendors used it as their personal residence.
Bruton v. London & Quadrant Housing Trust, [1999] 3 WLR 150 (HL)
A housing trust that had been granted a licence by the local authority to use a number of properties for redevelopment as temporary accommodation for homeless persons and which signed an agreement with the plaintiff for occupation of a self-contained flat in one of the properties on a temporary basis on a weekly licence was found to have thereby created a tenancy in favour of the plaintiff because the agreement with the plaintiff had all the characteristics of a tenancy, including the grant of exclusive possession. The existence of a tenancy did not depend upon the plaintiff establishing a proprietary interest binding on third parties, and the fact that the trust was a licensee of the local authority also did not preclude the grant by it of a tenancy.
Administrative Policy
22 July 2013 Interpretation 145125
A resort building contained multiple condominium units including the condominium unit at issue. CRA stated that "the physical space with reference to which the condominium unit's status as a hotel, motel, inn is determined is the particular condominium unit" rather than the whole building (or part thereof), and that "similarly, the physical space with reference to which the 90% ["all or substantially all" postamble] Test is calculated is the particular condominium unit." Respecting the application of the 90% Test, the correspondent's "suggested method, the number of supplies made by way of lease, licence or similar arrangement, appears to be equivalent to the "Invoice Method" in P-053, which is considered not to be an acceptable method."
CBAO National Commodity Tax, Customs and Trade Section – 2013 GST/HST Questions for Revenue Canada, Q. 27
On the sale of a retirement home containing residential condominium units (or which was a multiple unit residential complex) the residential complex would be considered to include the cafeteria, recreational centre and basement area for storage lockers if they were included in the common area of the condominium plan and were for the exclusive use of tenants. Office space included in such common area would so qualify if it was for the exclusive use of the landlord to rent units.
GST Memorandum 19.2.1 - Residential Real Property - Sales 31 March 2000 Headquarter Letter RITS 7707/HQR0001313
The 1/2 hectare presumption applied to a farm given that the partners owning the farm claimed farm losses on their income tax returns.
6 December 2002 Memorandum RITS 35845
A home at which a class of individuals was entitled to stay at temporarily while awaiting medical treatment off-site was not available to members of the public at large and, therefore, did not constitute a hotel, motel, inn, boarding house, lodging house or similar premises for purposes of the definition of residential complex.
P-099, "The Meaning of 'Hotel', 'Motel', 'Inn', 'Boarding House', 'Lodging House' and 'Other Similar Premises', as Used in the Definition of 'Residential Complex' and 'Residential Unit'." 16 December 1993
[W]hether an establishment is a hotel, motel, inn, boarding house, lodging house or other similar premise, should be based on...these guidelines [being]...generally...present throughout the year.
- the establishment normally provides temporary accommodation rather than a permanent place of residence; ...
- where required by municipal and/or provincial regulations, the establishment is licensed...;
- the establishment is available for rental to the public on a temporary [transient] basis [For this purpose, the public is considered to be either the community as a whole or a defined class of the public, such as students or senior citizens. ...]
- where appropriate, there is a common registration area; ...
- depending on the nature of the establishment, housekeeping services and other facilities are available such as restaurants, meeting rooms, stores, etc.;
Residential Trailer Park
Administrative Policy
17 May 2011 Case No. 37706-r
water to the sites at a park was shut off before the winter freeze-up and propane tanks were not refilled in the winter as there was no winter access (other than by foot). As the sites could not be considered to be accessible and serviced throughout the year, the park was not a residential trailer park.
Residential Unit
See Also
North Shore Health Region v. The Queen, 2006 TCC 585
The registrant was not a "public hospital" given that it did not provide its patients with a high degree of complex medical care but, instead, provided assisting living in varying degrees, with the availability of trained nurses to dispense medication and render relatively routine medical assistance if required, but with there being no physicians on staff and the visits of a geriatrician being infrequent. Although the registrant was designated as a "hospital" for certain provincial regulatory purposes, such designation was on the basis that it qualified as a "community care facility" rather than as a hospital in the ordinary sense of that word.
Blanche's Home Care Inc. v. The Queen, [2004] GSTC 30, 2004 TCC 192
The appellant was not eligible for the new residential rental property rebate in respect of its purchase of a property that was a "personal care home" under the Personal Care Homes Act and Personal Care Homes Regulations, 1996 (Saskatchewan) in light of evidence of the appellant that approximately $1,000 of the $1,750 monthly fee paid by residents of the home was attributable to personal care services. Baubier J. accepted the submission of the Minister that the appellant was making a single supply of services to the residents under the "Admission Agreements" with them.
Administrative Policy
29 August 2011 Ruling Case No. 62030
A trailer situated on a leased site at a trailer park has had its wheels removed, is fully skirted, and a room addition has been constructed, attached to the trailer and permanently affixed to a cement pad. There are year-round connections of hydro, water and sewer facilities, the roads to the park are ploughed, and the unit is fully furnished by the individual and used as a residence. Ruling that the rentals together with on-charges of municipal taxes are exempt under s. 7(a)(i) of Part I of Sched. V. The trailer is considered to come within "any other similar premises" in the definition in s. 123(1) of a residential unit.
4 April 2011 Headquarters Letter Case No. 92799
recreational vehicles at a recreational park did not qualify as a residential units.
4 April 2011 Headquarter Letter Case No. 122697
the lease to the individual of land located at a seasonal waterfront resort site specifes that the site shall be used for recreational use only. The individual stays in a manufactured trailer on the site for approximately 95% of the period from the beginning of May to Thanksgiving while maintaining a primary residence in the city (with the resort unit being supported on concrete blocks for permanent stability and connected in a permanent way to hydro, gas, water and septic facilities.) Given that the unit is used as the individual's place of residence (albeit not the primary place of residence) it qualifies as a place of residence and the lease is exempt under s. 7(a)(i) of Part I of Sched. V.
4 April 2011 Headquarter Letter Case No. 87088
a lease of land located at a lake resort site became exempt under s. 7(a)(i) when the individual's husband retired and began to use a park model trailer, which was installed in a permanent manner at the site (including connection to hydro, gas, water and septic facilities), as his place of residence from May to October of each year, with the individual spending her weekends and summer periods there. Although an individual may have more than one place of residence, a place of residence would not normally include an abode of a transient nature.
8 April 2003 Ruling RITS 38750
As the primary purpose for rooms in a hospital was medical treatment rather than a place to stay, a sale of the hospital was not exempt.
Policy Statement P-238, 7 November 2000
Where a medical practitioner uses the services of a second practitioner (the locum) while he is on vacation, and the locum remits 30% of patient billings to the first practitioner during the course of the locum, the payments made by the locum to the first practitioner do not represent consideration for a supply.
6 September 2000 Headquarters Letter RITS 25829
"Long-term care centres, nursing homes, long-term beds in hospitals, long-term health institutions, are also considered places of residence if most or all of the main factors listed above are indicative of being the individual's place of residence."
Articles
M. Firth, "Problems Receivable", Canadian GST Monitor, No. 123, December 29, 1998, p. 1.
Sale
Administrative Policy
31 October 2011 Ruling Case No. 136392
The granting of easements in consideration for a single lump sum payment was ruled to be a supply of real property by way of sale even though under the governing law the easements could not be granted for an unlimited term.
29 July 2011 Headquarters Letter Case No. 122272r
In order to finance the purchase of a new condo from a builder, an individual (the "Purchaser") enters into a "Declining Partnership Agreement," or Loan Agreement, with FinanceCo which is intended to comply with the Islamic principle of declining Musharaka. Under this arrangement, Purchaser alone obtains legal title to and possession of the condo while FinanceCo obtains an equitable interest in the condo upon contributing money to Purchaser, and agrees to sell its equitable interest in the condo to Purchaser over time on a basis that permits it to earn the 'Profit" described in the Loan Agreement. After noting that s. 183(1) could apply in a default scenario, CRA stated:
If subsection 183(1) does not apply, it is a question of fact whether there would be a supply of the property from the Purchaser to [FinanceCo], whether there is consideration payable for the supply, and the GST status of the supply.
3 November 2009 HQ Letter No. 109447
The surrender of a lease to the landlord qualified as a demise of real property, so that s. 221(2)(b) and 228(4) applied to the consideration therefor paid by the landlord.
18 January 1995 Headquarters Letter No. 11634-2
A lease surrender payment would constitute consideration for a sale of "real property" as defined in s. 123(1). The portion of the surrender price that, in fact, was a return of prepaid rent would not so qualify.
Policy P-111R "The Meaning of Sale with Respect to Real Property," February 1995.
Selected listed financial institution
Administrative Policy
24 June 2011 Headquarters Letter Case No. 130705
general discussion as to when a pension fund is a SLFI.
Service
See Also
Customs and Excise Commissioners v. High Street Vouchers Ltd., [1990] BTC 5092 (Q.B.D.)
The taxpayer sold vouchers to retailers at a discount of approximately 9% from their face value, and agreed with the retailers to accept the vouchers at face value from the retailers minus a discount of 10%. In the meantime, the retailers would distribute or sell the vouchers to the public, and accept the vouchers at face value from the public in exchange for goods.
The taxpayer was found to be providing a service to the retailers for which consideration was given in the form of the 10% discount from the amount which it otherwise would have been required to pay on redemption by it of the vouchers. Accordingly, on each redemption of vouchers by the retailers, VAT was payable by the taxpayer at a rate of 15% on the amount of the discount.
Administrative Policy
CBAO National Commodity Tax, Customs and Trade Section – 2013 GST/HST Questions for Revenue Canada, Q. 22. ("Assumption of ‘Under Water' Contract")
A GST-registered Vendor sells resource properties to a GST-registered Purchaser, and Purchaser agrees to assume long-term contracts ("Assumed Contracts") for the processing of the properties' production at prices greater than the current market rates. The negative value of the Assumed Contracts is netted against the purchase price payable by Purchaser. CRA stated:
The definition of "service" in [s.] 123(1)… is broad, and… encompasses the assumption of the obligations of another party in return for consideration from the other party. … In this case, the Purchaser has supplied a service to the vendor and GST/HST is collectible on the consideration payable for the supply of the service.
18 February 2004 Headquarters Letter RITS 46264
A discussion of the distinction between a supply of an admission and a supply of a service of instruction. (The issue initially was raised in the context of the exemption under s. 87 of the Indian Act, which would apply to an admission (viewed as a supply of intangible personal property) on a reserve. A service of instruction generally involves the provision of systemic instruction, monitoring and supervision of the progress of the recipient, on-going testing of progress and required completion of prerequisites before entry to the course is permitted - or with completion of the course being required before moving on to another activity, and with the activity occurring over an extended period.
Technical Information Bulletin B-090 "GST/HST and Electronic Commerce" July 2002
Discussion of distinction between supplies of services and intangible personal property.
12 July 1995 Ruling File No. 11755-20
"A Tenant inducement is interpreted as being consideration for the supply of a service which occurs at the time the lease is signed.
Substantial Renovation
See Also
Nadeau c. R., 2011 TCC 243
The registrant's renovations on a house included the digging of a basement and adding a 140 square-foot entrance hall, and increased the house's municipal evaluation from $52,900 to $114,200. Nevertheless, the renovations did not meet the definition of "substantial renovations" in the ETA because the main floor remained mostly unchanged (the only substantial replacements were some windows and bathroom fixtures).
Supply
Cases
Global Cash Access (Canada) Inc. v. Canada, 2013 FCA 269
The appellant ("Global") enabled casino patrons to use their credit cards to purchase payment instruments similar to cheques (the "cheques") from Global which they could negotiate for cash. To this end, the patron first used his or her credit card at a kiosk on the casino premises (or at a cashier cage) to get the cheque-purchase transaction approved by the credit card issuer. The casino cashier then issued, on Global's behalf, the cheque made out by Global to the casino operator, which the casino operator then negotiated for cash provided to the patron. The trial judge found that the Casinos made three supplies to Global: allowing the kiosks on the premises, providing support services at the cashier cages, and cashing Global's cheques; and that only the third supply was of a financial service. In finding that there was a single supply made by the casino (which she later found to be a financial service), Sharlow JA stated (at paras. 25-26):
[T]here is no evidence that Global would have been prepared to pay consideration to the Casinos for any of the three elements on its own. Since the three elements are integrally connected and there is a single consideration, there is a single supply. ... Based on an interpretation of the contracts between the Casinos and Global, what did the Casinos provide to Global to earn the commissions payable by Global?
Calgary v. Canada, [2012] 1 S.C.R. 689, 2012 SCC 20
The City of Calgary unsuccessfully submitted that its activities of acquiring public transit assets and making them available for use in its transit system (which it labeled the "transit facilities services") constituted a separate taxable supply made to the Province of Alberta (which provided funding therefor) rather than being part of its making of exempt municipal transit services to the public. Rothstein J. stated (at paras. 42-43):
Applying the O.A. Brown test, the question in this appeal is whether, in substance and reality, the alleged separate "transit facilities services" supply is an integral part, integrant or component of the overall supply of "public transit services". According to the jurisprudence, if one supply is work of a preparatory nature to another supply (an "input" to that supply), then the input is a part or component of the single overall supply. ...[T]he true nature of the City's "transit facilities services", a determination to be made with common sense, was work of a preparatory nature to the supply of a municipal transit service to the public....[T]he allegedly separate "transit facilities services" [were] in fact a component of the overall supply of "public transit services" to the Calgary public.
Although the transit facilities services might have been a separate supply made to the Province, rather than being merely of a preparatory nature, if the Province had a statutory obligation to provide municipal transit services which was being relieved by the provision by the City of these services, or if the funding agreements between the City and Province required the City to provide these services rather than merely to properly account for the funds received, neither proposition applied.
The Queen v. 1524994 Ontario Ltd., 2007 FCA 74
In order to comply with a requirement of the Ontario Health Insurance Plan (OHIP) that it would only pay for audiology tests performed by (or under the supervision of) a physician, the respondent company entered into an agreement with two physicians which stated that the physicians would pay the company for the use of its facilities and management services, and that they would employ the company owner (an audiologist but not a physician) to conduct hearing tests for them. The Minister assessed the company on the basis that it provided the two physicians with taxable supplies of building and equipment rentals together with management services, on which it had failed to charge and collect GST. The Tax Court found, on the basis of oral evidence that the agreement did not reflect the true legal relationship between the parties, that there was no taxable supply by the company.
In reversing this decision, Décary J.A. stated (paras. 13, 16):
Parties cannot elect to have an agreement valid for OHIP purposes and claim its invalidity for GST purposes....[T]he law will not permit a party to defend a tax claim by asserting that it made an intentional misrepresentation to another (OHIP) from which it derived a benefit (OHIP fees).
Hidden Valley Golf Resort Association v. The Queen, [2002] GSTC 42, Docket: A-524-98 (FCA)
The rental by the Appellant of cottage properties was a single supply of exempt residential accommodation notwithstanding that the leases gave the tenants the right to use a golf course, a clubhouse, an artificial lake and a tennis court, and the annual amounts that the tenants paid depended upon the costs incurred by the Appellant in providing such additional services. Sharlow J.A. stated (at p. 42-9) that:
"The Appellant's lots may have been more attractive than other lots because of the free access to nearby recreational facilities, but the root of the transaction is a long term residential lease."
See Also
Tele-Mobile Company v. The Queen, 2015 TCC 197
The appellant ("Telus") operated a wireless carrier business which entailed providing roaming airtime ("RAT") services to customers, with Canadian billing addresses, who while in the U.S. made long-distance call to Canada. These calls essentially involved two steps, which were separately identified in the Telus billings:
- The customer's phone connected with a local cellular site, and then to a mobile telephone switching office ("MTSO").
- The MTSO connected the call to the Canadian recipient.
C Miller J found that Telus was required to charge GST on the fees it collected for both steps (rather than only the second step). As both steps constituted a single supply, that supply was deemed by s. 142.1(2)(b)(ii) to be made in Canada as that telecommunication service was received in Canada. After discussing Gestion Alger, BC Ferry and Jema, and after noting (at para. 27) that although "the RAT can be used independently of long distance charges, and therefore has a commercial efficacy as a standalone supply…that is only in the context of locally made calls" in the U.S. rather than calls from the U.S. to Canada, he stated (at paras. 35-36):
[The] integration approach, I believe, remains the essence of the single versus multiple supply. …Viewing the telecommunication service offered by Telus as a service of communication for customers to talk to another person, how that service is delivered is more akin to the delivery of pizza than provision of a separate stateroom service or vaccination service. The customer is simply paying to be able to make a call from his cell phone to Canada. The RAT and long distance service are fully and seamlessly integrated into making that happen.
Commissioner of Taxation v MBI Properties Pty Ltd, [2014] HCA 49,
Before finding that leases entailed a continuous supply by the lessor including, in this case, by a subsequent lessor by virtue of the purchase of apartments already subject to the leases, the Court stated (at para. 35):
Federal Commissioner of Taxation v Qantas Airways Ltd [(2012) 247 CLR 286, [2012] HCA 41] shows that it is wrong to consider that one transaction must always involve the making of just one supply. It is similarly wrong to consider that the making of a supply must always involve the taking of some action on the part of the supplier.
See summary under s. 133.
BC Ferry Services Inc. v. The Queen, 2014 TCC 305
The appellant was denied input tax credits, in part, based on the supply by it of staterooms to passengers travelling on ferries (for which it made separate charges but did not charge GST) was part of the single supply of the ferry service. In allowing finding that there was a separate supply of the rental of the staterooms, Campbell J stated (at para. 65):
Common sense dictates that the provision of ferrying services remains a useful and valuable supply minus the rental of staterooms. Staterooms are not an essential component to the overall supply of transportation services. In fact, there are insufficient numbers of staterooms to accommodate every passenger, even if all of the passengers on any route wished to purchase a stateroom.
Cie de Gestion Alger Inc. v The Queen, 2014 TCC 53
The appellant delivered pizza through self-employed individuals acting as its agents. The costs of the pizza and delivery were separately itemized. In finding that there was a single supply, Paris J stated (at para. 37):
[T]here were two ways of obtaining the food: go to the appellant's establishment in person or place an order for delivery. In the first case, the food was made available to the customers while at the restaurant. In the second, the food was made available to the customers upon delivery. What differs is the manner in which the supply was made available to the customers. As for the interconnection and separation of elements, it is clear that it was possible to obtain the food without delivery. However, to obtain delivery without food is simply illogical. By separating the two elements, such that all that remains is the delivery, a viable and useful service or property cannot be obtained.
Caithkin Inc. v. The Queen, 2014 TCC 80, aff'd 2015 FCA 118
Before going on to find that the appellant ("Caithkin") was not making exempt supplies of foster care services to Children's Aid Societies (see summary under s. 2 of Part IV of Sched. V), Graham J found that Caithkin was making a "re-supply" to the Societies of "care, supervision and place of residence services" that it in turn "acquire[d] from the foster parents" (para. 24).
Casa Blanca Homes Ltd. v. The Queen, 2013 TCC 338
The appellant entered into 14 purchase agreements with a property developer to acquire lots. The appellant assigned 12 agreements to third parties for $820,865 - $634,760 for deposit recoveries (i.e., reflecting that deposits paid by the appellant to the developer would now be held by the vendor to be credited to the assignees on completion of the purchases) and $186,105 in assignment fees. The Minister applied the single-supply doctrine to treat the entire amount as consideration for an interest in real property.
Hogan J granted the taxpayer's appeal. He discussed (at paras. 13-14) the indicia in O.A. Brown, that "a factor indicative of a single supply is the degree of interconnection and interdependence of the elements" and that "conversely, a factor indicative of multiple supplies is that each alleged separate supply could be purchased individually," and referred favourably to the analysis in Barnett 2011. The assignment of the purchase agreements and of rights to the deposits were not inextricably linked, as it would be quite possible to structure a sale where there was no assignment of the deposit and the assignee gave a fresh deposit to the property developer. Accordingly, there were two supplies: of a financial instrument and of real property. Alternatively, "a deposit can be characterized as a pool of money retained until such time as it is applied in partial payment or forfeited" (para. 32), and a supply of money is not a supply of property or a service under the ETA. Either way, the consideration paid for the deposit recoveries was not taxable.
Jema International Travel Clinic Inc. v The Queen, 2011 TCC 462
The appellant provided advice to persons traveling outside of Canada respecting vaccinations that should be obtained before traveling to certain countries, and also provided those vaccines. No vaccination was given without first having a consultation, which could in fact result in no vaccination being necessary. In finding that the appellant made separate supplies of consultation and vaccination services, D'Arcy J stated (at paras. 35-36):
[A] person may attend at the clinic and the nurse may determine that he or she does not require any vaccines. The supply of the consultation has been made, but there is no supply of a vaccine. In other words, a supply of the vaccine is not required to make a supply of the consultation. …
…In addition, the supply of the consultation is a useful service even if a supply of a vaccine is not made.:
Royal Bank of Canada v. The Queen, [2007] GSTC 122, 2007 TCC 281
A Canadian airline ("CAIL") entered into an agreement with the appellant ("RBC") to promote use of RBC's credit card and to honour frequent flyer points to be awarded by it to RBC at the rate of one Point for every dollar of qualifying credit spending. In finding that such payments by RBC were the consideration for a taxable supply by CAIL of Points, Hershfield J stated (at para. 28):
Everything CAIL did from being involved in establishing the terms of the credit facility to advertising the program was to promote the use of the card by the issuance of Points and that is what it was paid for – the issuance of Points.
By contrast, in Customs and Excise Commissioners v. Civil Service Monitoring Association, [1998] BVC 21 (Eng. CA), where the participation of an automobile association in a credit card program was found to be exempt because the association was involved in the design and operation of the program, "the substantive element and real character of the supply…was to arrange favourable, special credit terms and benefits for its members from the financial institutions granting the credit facility….[and] there was no other supply, like a supply of Points" (para. 35).
Skylink Voyages v. The Queen, [1999] GSTC 119, docket 96-4400-GST-G (TCC)
The registrant served retail travel agencies by booking and purchasing airline tickets for the agencies' customers, which resulted in the receipt by it of commissions from the airlines. If the customers cancelled or revised their travel plans, the travel agencies were liable to pay an amount to the registrant, indicated as a penalty, cancellation charge, or, where appropriate, a replacement charge (collectively, the "cancellation charges").
Archambault J found that the registrant was obligated to collect GST on the cancellation charges on the basis that the fees arose from a taxable supply of services. After noting that the registrant's usual business model was to earn commissions from the airlines on ticket sales, Archambault J stated:
However, if no ticket is issued by the airline, Skylink is not entitled to a commission. And yet Skylink has provided services: it has done the necessary searches in the airlines; reservation systems and made a reservation. ... Regardless of whether that payment be charcterized as cancellation charges, penalty or replacement charges, its true nature is remuneration for services which Skylink has provided to the retail agencies.
Customs & Excise Commissioners v. Automobile Association, [1974] 1 WLR 1447 (HL)
Upon paying for membership in the Automobile Association, a member was considered to be paying not for the mere privilege of membership but for the benefits that a member received under his contract with the Automobile Association and, accordingly, the subscription price is apportionable among those services and facilities received by each member.
Beynon and Partners v. Customs and Excise Commissioners, [2005] 1 WLR 86, [2004] UKHL 53
Doctors who personally administered drugs (e.g., vaccines) or other medical devices (e.g., contraceptive devices) to a patient were found to be making a single supply of a medical service to the patient rather than a separate zero-rated supply of the drugs or devices. Lord Hoffmann noted that in considering the question of whether transactions should be regarded as a single supply or as two or more distinct supplies, it should not be necessary to go back any further than the Card Protection case ([1999] 2 AC 601), and upheld (at p. 92) the finding of the VAT Tribunal that
Applying the guidance provided by the Court of Justice in the Card Protection case ... the personal administration of drugs to the patient by a doctor was merely ancillary to his supply of exempt medical services.
Canada Trustco Mortgage Co. v. The Queen, 2004 TCC 792
The appellant ("CTM") sold mortgage loans made by it to securitization trusts and serviced the sold mortgages including collecting and accounting for payments, and dealing with renewals and defaults. It did not explicitly charge the trusts for these services, but recorded fees fo such services in its financial statements. In finding that there was a single supply of a financial service by CTM (failing which , the rule in s. 138 or 139 would have applied), Bowman ACJ stated (at para. 20):
Here we have a sale of mortgages of which the servicing is not only an integral part but is requisite as a matter of commercial exigency. … For someone other than CTM to service the mortgages would, as a practical matter, be commercially infeasible and would be inimical to the raison d'être of the transaction.
Lorrainville v. The Queen, [2004] GSTC 36, 2003 TCC 895
The sale of serviced lots by a municipality, with a separate (as to 94% of the total consideration) municipal infrastructure charge was found to entail two supplies (the sale of land, and the provision of infrastructure services) given that land could have been sold independently of the installation or repair of sewer and water systems and given that the breakdown between the two charges appeared clearly in the sale contract.
Blanche's Home Care Inc. v. The Queen, [2004] GSTC 30, 2004 TCC 192
The registrant was found to be making a single supply of institutional health care services to residents of a nursing home.
Customs & Excise Commissioners v. Plantiflor Ltd., [2002] UKHL 33, [2002] 1 WLR 2287, [2002] STC 1132', [2002] BTC 5413 (HL)
The taxpayer, which sold horticultural products by mail order, indicated in its catalogue that customers would pay an additional charge to cover the costs of postage and packing, and stated "we will then advance all postage charges to Royal Mail on your behalf." There was a separate supply consisting of the delivery of the bulbs from the taxpayer to the Royal Mail under a distinct contract between those two parties. However, under the contract between the customer and the taxpayer, arranging the delivery was ancillary to making the bulbs available; and what the customer wanted and what the taxpayer agreed to provide was bulbs delivered to the home. Accordingly, in reality, the sum paid by the customer was for one supply of delivered bulbs.
Card Protection Plan Ltd. v. Customs & Excise Commissioners, [2001] BTC 5083 (HL)
Fees which the Appellant received from credit cardholders were found to be consideration for a single supply of insurance services. After quoting the statement in Customs & Excise Commissioners v. Madgett, [1998] BTC 5440 that "a service must be regarded as ancillary to a principal service if it does not constitute for customers an aim in itself, but a means of better enjoying the principal service applied", Lloyd Slynn found (at p. 5090) that:
"If one asks what is the essential feature of the scheme or its dominant purpose, perhaps why objectively people are likely to want to join it, I have no doubt it is to obtain a provision of insurance cover against loss arising from the misuse of credit cards or other documents."
Various other services the cardholder was entitled to receive related to the administration of the scheme and were "ancillary or incidental to the main objective of the scheme, i.e., financial protection against loss".
Parker Hale Ltd. v. Customs and Excise Commissioners, [2000] BTC 5153 (QBD)
The surrender of hand guns by the taxpayer to the government and the receipt of compensation therefor constituted a supply for consideration given that there was a transfer of title to the government.
The consideration received by the Appellant bank when it engaged, as market maker, in a foreign exchange transaction, was the net spread that it earned from engaging in such transactions over a period of time given that:
"A trader cannot normally foresee, when concluding one particular transaction, at what moment and at what price he may subsequently effect one or more transactions enabling him to eliminate or fix, at a specific amount, the risk of a change in rate to which he is exposed following the first transaction" (p. 5353).
Winnipeg Livestock Sales Ltd v. The Queen, [1998] GSTC 87, docket 96-462-GST-I (TCC)
The registrant, which was a livestock marketing agency, was found to be making a taxable supply of storage services rather than a zero-rated supply of feed when it provided through-load services to transporters of cattle as contemplated by section 148 of the federal Health of Animals Regulation, which provided that cattle could not be confined in a railway car for longer than 48 hours but, rather, must be unloaded for a period of not less than five hours into a suitably covered pen provided with straw, feed and water.
Sarchuk TCJ. noted (at p. 87-5) that "a through-load customer does not have the option of acquiring any of the particular elements of the service provided by the appellant separately, rather the provision of a particular element is entirely contingent on the provision of all the other required elements". As a separate matter, the registrant would agree with auction customers to store cattle, which they had purchased, at charge of $1.50 per day per head. It was found (in light, inter alia, of evidence that the charge was $2.50 per day per head in the case of third parties who had not purchased cattle) that in substance all of this charge related to the provision of feed to the cattle and, therefore, was zero-rated.
Imperial Drywall Contracting Inc. v. The Queen, [1997] GSTC 81 (TCC),
The appellant, which was a residential drywall contractor, was found not to be making supplies to unregistered subcontractors, who performed drywalling services, when it credited charges for various materials it had purchased and made available for use by them, against the amount that they otherwise were entitled to received for their services. McArthur TCJ. accepted the appellant's submission that the subtrades did not receive legal or beneficial ownership of the materials, nor did it have the right to sell the materials or use them on a job for a customer other than the appellant's.
Virgin Atlantic Airways Ltd. v. Customs and Excise Commissioners, [1995] B.T.C 5077 (Q.B.D.)
The appellant provided limousine services at no extra charge to purchasers of first class tickets on its international flights. Before finding that the full ticket price was zero-rated as being in respect of the "transport of passengers ... from a place within to a place outside the United Kingdom or vice versa", Turner J. noted (at p. 5084) that it was permissible to consider the practical difficulties which would be thrown up" if the alternative interpretation was correct and (at p. 5085) that "while it may be fairly be said that the limousine service was physically separate from the flight it was not, without great difficulty, 'economically dissociable' from the price paid for the package offered by Virgin to its Upper Class passengers".
O.A. Brown Ltd. v. The Queen, [1995] GSTC 40 (TCC)
The appellant fed, inoculated and branded cattle it had bought, and then sold the livestock to its customers with separate charges being made for its disbursements and a "clearing commission". The Crown assessed on the basis that the appellant was selling two things, livestock and a service, with the service not being zero-rated. In finding that there was a single zero-rated supply, Rip TCJ. stated (at p. 40-8):
"The alleged separate supplies cannot be realistically omitted from the overall supply and in fact are the essence of the overall supply. The alleged separate supplies are interconnected with the supply of livestock to such a degree that the extent of their interdependence is an integral part of the composite whole ...".
Philips Exports Ltd. v. Customs and Excise Commissioners, [1990] BTC 5082 (Q.B.D.)
In considering a marketing agreement which provided that property in goods which were manufactured by the Philips group of companies for export should pass to the taxpayer (an affiliated company) either immediately before delivery to the overseas customer or immediately before title passed to the overseas customer, Roch J. disagreed with a finding of the tribunal that in order for there to be a "supply of goods" title must rest with the transferee for a measurable length of time.
Customs and Excise Commissioners v. Tarmac Roadstone Holdings Ltd., [1987] BTC 5074 (C.A.)
In finding that a parent corporation was making a taxable supply of the services of its employees to its subsidiary, Slade L.J. stated (p. 5084):
"If A agrees with B that B will perform certain services for A and that he will reimburse B for certain specified expenses which will be incurred by B in the performance of both services, the agreement to reimburse is, in my judgment, well capable of constituting sufficient consideration in law for those services. The bargain may be a bad one from B's point of view, but the courts do not enquire into the monetary adequacy of consideration."
Administrative Policy
B-109 "Application of the GST/HST to the Practice of Naturopathic Doctors" 31 July 2015
Example 8 [nutritionist's services part of naturopathic supply]
A naturopathic doctor enters into a contract with a nutritionist to provide nutritional counselling to a patient of the naturopathic doctor. The nutritional counselling is ordered and supervised by the naturopathic doctor following an assessment of the patient. ... The patient is invoiced by the naturopathic doctor for the nutritional counselling based on an hourly rate.
Although the service is performed by the nutritionist, the service forms part of the overall naturopathic service rendered by the naturopathic doctor. The patient is a patient of the naturopathic doctor and the naturopathic doctor is ultimately liable for the provision of care to his or her patients.
GST/HST Info Sheet GI-170 "Charter Flights Supplied to Third-Party Charterers" May 2015
Single v. multiple supply
A ferry flight is generally considered to be an input to a passenger transportation service. ...
[T]he fuel surcharges and the passenger/goods handling charges incurred by the carrier at airports other than its base are costs that the carrier has no choice but to incur in providing the specific air charter. When these charges are passed onto the third-party charterers, they are part of the consideration payable for the passenger transportation service.
Other costs, such as the ferry flights and the cost of accommodation, meals and ground transportation for aircraft crew, are for elements that are not supplied to the third-party charterer. Rather, these elements are inputs consumed or used by the carrier in providing the passenger transportation service. The charges for the ferry flights and crew costs would therefore form part of the consideration payable for the passenger transportation service.
However…the excess valuation charges for baggage would be viewed as a separate charge in respect of a passenger's baggage and not part of the consideration payable for the supply of the passenger transportation service.
CBAO National Commodity Tax, Customs and Trade Section – 2014 GST/HST Questions for Revenue Canada, Q. 30.
Supplier agrees to deliver 100 widgets to the Recipient at $10 per widget, but is only able to obtain 20 widgets. An action of the Recipient is settled by Recipient agreeing to release Supplier from all damages in exchange for a payment of $100 and for the provision by the Supplier of 20 widgets at no cost. CRA agreed that s. 182 would not apply, and that (under "general taxing concepts"), as the damages payment "appears to be entirely compensatory and is not linked to a supply of property or services," it would not be subject to GST/HST, regardless of it being made partly in kind (i.e., widgets valued at $200).
26 June 2014 Ruling 157148 [double supply to and by pension plan employer]
A Co is entitled to full ITCs for the GST/HST on fees paid by it to third parties in respect of its pension plan for employees including charges for administration, actuarial and investment consulting, as being the one liable to pay the fees. However:
where expenses incurred by [A Co] have been paid from the Pension Fund, we would consider [A Co] to have made a taxable supply of services for consideration equal to the invoice amounts. [A Co] would therefore be required to account for the GST/HST calculated on these amounts under sections 221, 225 and 228.
CBAO National Commodity Tax, Customs and Trade Section – 2013 GST/HST Questions for Revenue Canada, Q. 35. ("Property and Services Offer in a Senior Citizen Residence")
In its 2 May 2012 Tax News Item "Property and Services Offered in a Senior Citizens' Residence," Revenu Quebec indicated that various services would be part of a single supply of residential accommodation in the residence, including meals, monitoring, housekeeping in common areas, snow removal, cable television, weekly housekeeping, laundry, group transportation as well as transportation for medical appointments and assistance with certain activities of daily living. CRA stated that it will accept the same position:
provided such services form part of a single supply the predominant element of which is that of a residential unit made by way of lease, licence or similar arrangement. The types of additional services that may be include are discussed in …GST/HST Notice 224 under "Ancillary property and services."
Audit will exercise discretion if it encounters situation in which a registrant has been acting in accordance the Policy Statement P-202 Gift Certificates as it read before the revised policy statement was released in April 2012. Audit will consider the particular circumstances of the registrant and the steps taken by the registrant to comply with the revised policy statement.
28 November 2012 Ruling 116823
A missionary receives funding for his mission work in the field from a registered charity. It is his responsibility to find churches and individuals in Canada to make donations to the charity, and to this end he speaks at various Canadian churches, and he is required to provide a written report at the end of the year. He includes the grants received by him in computing his business income for income tax purposes. Ruling that the funding received by him is a grant and not consideration for a supply.
15 May 2012 Ruling Case No. 142436
Company A, which is the parent of Company B and C, will hire, remunerate and manage employees on its own behalf and in an agency capacity for its two subsidiaries, so that they are joint employees of the three companies. It will be responsible for all source deductions, and the employees will receive a T4 only from it. Company A and B are parties to a s. 150 election. Ruling that GST/HST will not apply to the reimbursement amounts paid by the subsidiaries to Company A for their respective shares of the remuneration. CRA stated:
Where an agent remunerates a principal's employee, the amount of money the principal pays the agent as a reimbursement for the employee's wages is not consideration for a supply and therefore is not subject to tax. Therefore, since Company A acts as an agent of Company B and Company C in remunerating the Employees, the amount of money Company B and Company C pay Company A as the reimbursement for the Employees' wages is not consideration for a supply and would not be subject to tax.
22 September 2011 Ruling Case No. 129475
A for-profit corporation (the "Corporation") provides a service for fees to the families of non-resident minor children in consideration for arranging for them to study at a Canadian school district, stay at a Canadian home and participate in eight recreational activities to be arranged by the Corporation. The students are recruited through non-resident commission agents, the Corporation contracts directly with and pays the Canadian host families and pays tuition to the school district for schooling the children pursuant to a memorandum of understanding with the school district. CRA finds that there is a single supply, and as "academic instruction is the dominant element of the supply...all the elemens included in the package have the same tax status as the dominant element," and "the Corporation is making a single supply of a service of instructing an individual in a course."
18 February 1994 TI 11,668-1
Where the trust instrument provides that the trustee only holds legal title and conveys such title on demand according to the instructions of the beneficial owner(s) and where the obligations and responsibilities are reserved to the beneficial owner(s), the Department takes the view that the trustee is not engaged in any activity in respect of the property held in trust. Each beneficial owner would be liable to collect and account for the GST on supplies of the property made through the trustee in question.
4 April 2011 Headquarters Letter Case No. 92799
a purchaser of a block of shares in a co-operative corporation which is the beneficial owner of a recreational vehicle park thereby becomes entitled to be licensed a particular site in the park provided that the purchaser pays his or her portion of the "assessments" for common costs. Such purchase of the shares is characterized as a single supply of a license of real property.
31 March 2009 Ruling RITS 103912
residents of an assisted living facility paid a single Accommodation Fee for their accommodation and various services. The Accommodation Fee was consideration for a single supply of a residential unit so that it was exempt under s. 6 of Part 1 of Sched. V.
10 April 1995 Interpretation Case No. 11945-6 [B]
Lawyer B invoices his client for taxable legal services and court costs. CRA stated:
Court costs…are not subject to GST as no supply is provided.
Policy Statement P-218R "Tax Status of Damage Payments not Within Section 182 of the Excise Tax Act", August 10, 2007.
19 December 2003 Headquarters Letter Case No. 45870
Discussion as to whether electricity supply contracts under which there were separate charges for capacity and electricity would represent a multiple or single supply.
2 December 2003 Memorandum Case No. 41678
The sale of mortgages to a trust on a fully-serviced basis entailed the provision, as a separate supply, of mortgage servicing given that it was contemplated that a person other than the seller could service the mortgages.
24 October 2003 Ruling RITS 48006
The provision of a care and service package to residents of a retirement residence represented supplies that were separate from the provision to them of residential accommodation, with the result that such services were taxable supplies.
28 July 2003 Technical Interpretation Case No. 46063
"A damage settlement payment made by a freight carrier to its customer is generally not consideration for a supply even where the carrier acquires title to the damaged property that it was transporting. This is because, in most instances, the payment is made in order to compensate the customer for its loss, and the property that the carrier acquires ownership of, as a result of the payment, is of no value to the carrier."
Memorandum 300-6-9 "Time of Liability - Consignment Sales"
Generally, under a consignment there is a supply from the consignor to the consignee, and a supply from the consignee to the third party purchaser.
6 December 2002 Memorandum RITS 35845
The provision of temporary accommodation at a boarding home for individuals requiring medical treatment off-site represented the single supply of a right to stay at the home which, to the extent that the individual stayed for more that one month at the home, was exempted under s. 6(a) of Part I of Schedule V.
17 October 2002 Headquarter Letter 37298
The provision to residents of an assisted living facility of a "communications package" (including access to cable TV services) was a separate supply from the accommodation and other services provided to them given that they could easily use the accommodation and other services without the provision of the communications package, and they had the option as to whether or not to receive the communications package.
8 February 2002 Headquarters Letter 37008
The sale of mortgages on a serviced basis was characterized as a multiple supply rather than a single supply given that each reviewed agreement contemplated that in specified circumstances a replacement servicer would be appointed who would receive a separate fee for its services.
17 July 1995 Headquarter Letter File 11635-3
When a non-resident sells discs in Canada under a consignment arrangement with a Canadian distributor, the fact that there is a sale from the non-resident to the distributor simultaneous with the sale by the distributor to a Canadian consumer does not necessarily cause the initial contract to be considered to be concluded in Canada.
B-067 "Goods and Services Tax Treatment of Grants and Subsidies," 24 August 1992
In general, transfer payments made for a public purpose or for charitable purposes will not be consideration for a supply under the ETA unless there is a "direct link" between the payment and a provision of goods and services made to the grantor of the funding or a specified third party.
P-126 "Intra-Company Cost Allocations by Foreign-Based Insurance Companies" P-077R2 "Single and Multiple Supplies" 26 April 2004
Multiple supplies occur when one or more of the elements can sensibly or realistically be broken out. Conversely, two or more elements are part of a single supply when the elements are integral components; the elements are inextricably bound up with each other; the elements are so intertwined and interdependent that they must be supplied together; or one element of the transaction is so dominated by another element that the first element has lost any identity for fiscal purposes.... The provision of property and/or services by two or more suppliers generally indicates that multiple supplies are being made, even if the various supplies are provided together.... The acquisition of property and/or services by two or more recipients generally indicates that multiple supplies are being made.... If the recipient is not made aware of the specific elements, there is likely only a single supply.... If the recipient does not have the option to acquire the elements separately, then there is likely a single supply.
P-061 "Extension of Transferred Payment Policy" B-067 "Goods and Services Tax Treatment of Grants and Subsidies"
Discussion of the circumstances in which a transfer payment is considered to be the consideration for a supply.
GST M 300-7-7 "Co-Operative Advertising"
The agreement of one party to advertise or promote another party's product in some manner is the provision of a taxable supply.
Articles
Terry G. Barnett, "The 'Dirt' on Residential Real Estate", September 2011 CICA Commodity Tax Symposium Papers
The paper includes a discussion of the assignment of a condominium purchase contract:
Scenario for reimbursement of deposit (p. 3)
Where the purchase contract is assigned, the original purchaser will want his or her deposit returned. Similarly, the vendor will require that there by no gaps in its security. The common and convenient route therefore is for the vendor to retain the deposit and but agree that it is now held for the benefit of the assignee. Thus the assignee may be required to reimburse the original purchaser for an amount equal to the deposit.
Example/CRA position (pp. 3-4)
According to the CRA, the payment to the original purchaser to replace the deposit is also taxable.. With respect, this position is surprising and open to dispute. Suppose for example, that a purchaser entered into a speculative purchase contract for a high-end Vancouver condominium in late 2009 at a price of $2 million. The purchaser was required to provide a deposit of $700,000. Given the rapid rise in market values, it is expected that the property will be worth at least $3 million when the transaction closes in 2012. The purchaser has found an assignee who will pay a fee of $1 million for the assignment of the contract. The assignee will occupy the unit as a place of residence on completion. The vendor has consented to the assignment and has agreed to hold the deposit for the benefit of the assignee. The assignee pays the purchaser an assignment fee of $1 million and also replaces the purchaser's deposit of $700,000. The assignee therefore pays a total of $1.7 million to the purchaser. The question then is whether HST should be collected on the assignment fee of $1 million or on the total of the $1 million assignment fee and the $700,000 replacement deposit, i.e. 12% HST of $120,000 versus $204,000. According to the CRA the tax is on everything - i.e. on $1.7 million.
Single v. multiple supply/deposit as money (p. 4)
But the problem is that on closing, the assignee must pay HST to the vendor on the original contractual purchase price of $2 million. The purchase price is satisfied by a cheque for $1.3 million from the assignee and the release of the $700,000 deposit. The result is that the assignee is taxed twice on the deposit, once when the assignee pays the $700,000 replacement deposit to the purchaser, and a second time at closing when the vendor applies the deposit (which belongs to the assignee) as consideration for the purchase and collects the HST due on the full contract price. The assignee cannot recover the "double" tax. [T]here are reasons why the conclusion based on single v. multiple supply analysis is not appropriate here. First, there is a question as to whether the deposit and the assignment of the contract are inextricably linked. It would be entirely possible, for example, for the assignee to pay a new deposit to the vendor who would then release the original deposit to the purchaser. Thus the assignee is not destined to make a replacement deposit payment to the purchaser. The opportunity to structure the transfer of the contract in this manner suggests that the link between assignment of the contract and the transfer of the entitlement to the deposit is not inextricable. Further, the single v. multiple supply analysis rests on the assumption that two or more properties or services are being supplied together. An investigation is required because, if provided separately, the supplies would not bear the same GST/HST status. A supply, however, is defined to mean "the provision of property or a service in any manner". The definitions of property and services each exclude money. Thus the provision of money is not a supply under the ETA. Consequently, it is questionable whether the analysis has been correctly applied to result in a sum of money being merged with a supply of property to form a single supply.
B.S. (Simon) Thang, "EU VAT Cases and GST", Canadian Tax Focus, Vol. 3, No. 2, May 2013, p.7.
A number of European Court of Justice (ECJ) VAT decisions shed light on some potential limits to the meaning of "supply" for GST purposes, at least at a conceptual level (and recognizing that there are statutory differences). For example, the ECJ held in Mohr ([1996] EUECJ C-215/94) and Landboden 9[1997] EUECJ C-384/95) that government payments to farmers who undertook to reduce commodity production were not payments for supplies, notwithstanding that "supply of service" is defined in the directive to mean "any transaction which does not constitute a supply of goods" and includes "the obligation to refrain from an act or to tolerate an act or situation." The ECJ reasoned that the undertakings were not within the scope of the VAT because they did not give rise to any consumption; the farmers did not provide services to an identifiable consumer or any benefit capable of being regarded as a cost component of the activity of another person in the commercial chain. (Compare this reasoning with the CRA's approach in Technical Information Bulletin B-067, "Goods and Services Tax Treatment of Grants and Subsidies," August 24, 1992.) In Kretztechnik ([2005] EUECJ C-465/03), the ECJ held that the issuance of shares by a company was not a supply to the shareholders. Rather, the activity was properly characterized as the company acquiring capital and acknowledging the new shareholders' rights from their investment (the situation may be different with respect to the transfer of existing shares; see BLP Group plc ([1995] EUECJ C-4/94). Interestingly, the CRA reached the opposite conclusion in GST Policy Statement P-108, "Raising of Capital" (January 26, 1994).
Brent F. Murray, "Characterizing a Supply", Canadian GST Monitor, No. 267, December 2010, p.1.
W. Jack Millar, Brent F. Murray, "Potential Input Tax Credit Claim or Trap for the Unwary?", Sales and Use Tax, Vol. VI, No. 3, 2002 p. 326.
P.Z., W. Jack Millar, "GST and Mixed Supplies of Services and Intangibles", Sales and Use Tax, Vol. IV, No. 2, 1998, p. 199.
Taxable Supply
See Also
Aubrett Holdings Ltd. v. The Queen, [1998] GSTC 17, docket 97-710-GST-I (TCC)
The sale of the assets of an insurance agency business did not represent a taxable supply because it was not made in the course of a business of the vendor.
Administrative Policy
13 April 2012 Interpretation Case No. 111790
The Corporation facilitated the placement of financing of Product A under conditional sales contracts which would be assigned by the vendor to the fianancial institution and under which title to Product A would not pass to the buyer until all instalments had been made. In response to a question as to whether "the Corporation would have a GST/HST obligation with respect to the sale of [Product A] since the Corporation, in its capacity as an intermediary, would be listed as the Seller on the Contract," CRA stated
Based on the fact that the Lenders would require the Corporation be identified as the Seller on the Contract suggests that the Lenders may presume that the Corporation would hold all the rights and title to [Product A] prior to their acquisition by the Lenders. If this is the case, the Corporation as the supplier of [Product A] would be considered to have made taxable supplies of [Product A] and therefore would have an obligation to charge, collect and remit GST/HST in respect of those supplies.
18 October 2004 Ruling RITS 36388
GST does not apply to reimbursements made by a principal to its agent for amounts paid by the agent on the principal's behalf.
28 May 2004 Ruling RITS 47263
Operating subsidies provided by the Ontario Ministry of Health and Long-Term Care to the operator of a nursing home constituted a grant and not consideration for a supply.
27 March 2000 HQ Letter RITS No. 7940
Where an individual who sells the shares of a company to an unrelated third party also receives consideration for a non-compete covenant, the non-compete payment would be considered to be consideration for a supply made by the individual, but would not qualify as a taxable supply because the individual would not be engaged in commercial activity.
3 November 2000 Headquarter Letter 32023
A registered charity (the parent) that operates hospitals and nursing homes and its subsidiary, which owns and manages nursing homes and retirement homes, form a joint venture to establish and operate an interim-care nursing home. Priority distributions received by the subsidiary in recognition of its services rendered in managing the facility, and reimbursements of its payroll expense in administering and managing the joint venture, are subject to GST to the extent of the interest of the parent in the joint venture.
University
See Also
Alexander College Corp. v. The Queen, 2015 TCC 238
The appellant was a private, for-profit college which offered a two-year program leading to an associate of arts degree. Its business depended on its students' ability to transfer their credits to public universities in B.C., which, unlike it, offered baccalaureate degrees. It was not authorized under the Degree Authorization Act (B.C.) (the "DAA") to refer to itself as a university, but was authorized under that Act to grant associate degrees.
In finding that the appellant was not a "university" as defined in s. 123(1), so that its fee income was not exempted under Sched. V, Part III, s. 7, Lyons J stated (at paras. 68-70, 74):
[after citing Klassen and Zailo]...I find that an Associate Degree is insufficient and that a "degree" for the purposes of subsection 123(1)...must equate to a baccalaureate degree or higher.
...[T]he fact that the appellant has not sought, nor received, ...consent to call itself a "university" under section 4 of the DAA is a factor that undermines the appellant's position that it is recognized as an institution by the provincial government.
[C]onstruing the legislation...[literally] render[s] the phrase "organization that operates a college affiliated with" a university redundant if a degree-granting institution is interpreted as a "college" in subsection 123(1). Also, incorporating and construing the word "college" in the definition of "university" makes the definition of "public college" redundant in section 7.
[T]he appellant...is a college, not an institution.
Administrative Policy
29 September 2011, Ruling Case No. 132884
CRA stated:
It is the Canada Revenue Agency's position that a "recognized degree granting institution" means an institution that grants degrees and meets the accreditation requirements for degree granting institutions in the country where it is based. Please note that the ability to grant degrees is insufficient to satisfy the definition in subsection 123(1) of the ETA. Rather, the institution must currently be offering programs for which degrees are granted upon completion of the program. As [the Corporation] does not currently grant degrees to its students and it is not an organization that operates a college affiliated with, or a research body of, a recognized degree-granting institution, it does not meet the definition of "university" in subsection 123(1) and therefore would not be eligible to claim PSB rebates using the PSB rebate factors for a university.
Subsection 123(2)
Administrative Policy
P-152R "Meaning of "Canada" For Purposes of Division II Tax" 20 May 1998
The effect of subsection 123(2) is that the jurisdiction for Division II tax extends beyond the territorial sea (i.e., 12-mile nautical limit) to 200 nautical miles, but only for the specific resource related purposes set out in the subsection, that is, activities related to mineral exploration and exploitation, and not other activities, such as fishing or fish processing.
Articles
Steven K. D'Arcy, "What is 'Canada'?", Canadian GST Monitor, August 2001 Number 155, p.1
CCRA... states in Policy Statement P-152R that "Canada" includes its land territory, its internal waters and a belt of sea adjacent to its coast, described as the territorial sea. The territorial sea extends 12 nautical miles from Canada's land territory, subject to international boundaries (e.g., Canada and the United States, and Canada and the islands of St. Pierre and Miquelon). Canada also includes the air space above its land territory and over its internal waters, and the air space over the territorial sea as well as the bed and subsoil of the territorial sea. This would appear to be the correct interpretation of the word since it is generally accepted that under international law, the territory of a state is three-dimensional: it consists of the surface, subsurface and a column of air to an as yet undetermined altitude, coinciding with that state's land and sea boundaries. In addition, Article 1 of the Chicago Convention on International Civil Aviation ((1944), 15 U.N.T.S. 295; Canada was and continues to be a party to the convention) provides that "the contracting States recognize that every State has complete and exclusive sovereignty over the airspace above its territory". The effect of the above is that any taxable supplies made in mines below the surface of Canada are taxable. In addition, the sale of a soft drink on a flight from Calgary to Halifax would be taxable. (Administratively, the CCRA does not tax the supply of property on international flights between two non-Canadian cities that happen to occur when the flight is over Canada.)
Subsection 123(3) - Idem [Definitions]
Articles
Steven K. D'Arcy, "What is 'Canada'?", Canadian GST Monitor, August 2001 Number 155, p.1
[P]ursuant to the Customs and Excise Offshore Application Act, the bringing of goods within the limits of the continental shelf of Canada for use as "designated goods" is considered, for purposes of Canadian customs laws, to be importation into Canada. Designated goods include such things as drilling rigs, drilling ships and production platforms.
Subsection 123.4(1)
Administrative Policy
6 September 2000 HQ Letter RITS 25829
Discussion of meaning of "place of residence" and of "underprivileged individuals".
Articles
Jesse S. Brodlieb, "Should I Be Taking it Personally?", CCH Tax Topics, No. 2071, 17 November 2011
Re elimination of rate reduction for personal services business income.
Section 128
Subsection 128(1) - Closely Related Corporation
Administrative Policy
5 July 2012 Interpretation Case No. 119159
Incorporated societies which had the same board members and, therefore, were controlled by the same group of persons did not qualify as closely related (so that the s. 156 election was unavailable) becasue they did not have share capital.
Subsection 128(2)
Administrative Policy
19 June 2015 Interpretation 167422
Holdco, a non-resident corporation, holds two stacks of wholly-owned Canadian and US corporations: US 2 holding US4, holding C 1, holding C 3; and US 3 holding US 5, holding C 2, holding C 4. Which of the Canadian corporations are closely related? CRA responded:
…Hold Co., US2, US4 and C1 are closely related…under either subparagraph 128(1)(a)(i) or (ii) and the same can be determined on the right side… . C1 and C2 are closely related under subsection 128(2) as both are closely related under subsection 128(1) to common parent Hold Co.
…C1 and C2 are closely related to Hold Co. under subparagraph 128(1)(a)(ii) since 100% of the required shares of each (i.e., C1 and C2) are owned by a qualifying subsidiary…of Hold Co.
C1 and C4 are closely related under subsection 128(2) since, based on the definition of qualifying subsidiary in subsection 123(1) and subsection 128(1), both are closely related to common corporation US3… . C1 is closely related to US3 under subparagraph 128(1)(a)(iv) as 100% of the required shares of C1 are owned by (a qualifying subsidiary of) a qualifying subsidiary of Hold Co. of which US3 is a qualifying subsidiary. C4 is closely related to US3, based on the same definition and subparagraph 128(1)(a)(ii), since 100% of the required shares of C4 are owned by (a qualifying subsidiary of) a qualifying subsidiary of US3.
A similar analysis on the opposite side of the ownership structure establishes that C2 and C3 are closely related under subsection 128(2)… .
However C3 and C4 are not closely related to each other since they are both closely related to common parent Hold Co. under subsection 128(2) rather than under subsection 128(1).
[Therefore] the following entities are closely related and eligible to make an election under section 156:
- C1 with C2
- C1 with C4
- C2 with C3