CRA confirms that partnership draws generally are exempted as a financial service rather than under ETA s. 272.1(1)

CRA ruled that distributions made by a limited partnership, which held investments, to its general and limited partners were exempt from GST/HST pursuant to para. (f) of the financial services definition, which explicitly exempts dividends on shares but also exempts distributions on other financial instruments, evidently including partnership distributions. Like other aspects of the financial services definition, this legislative drafting is conceptually confused and backwards as it focuses on the distribution by the investee being exempt rather than on explicitly exempting this distribution viewed as consideration for the capital provided by the investor. (See BLP cf. ING.)

CRA made no mention of s. 272.1 (other than to state that its letter did not address the recent amendments to s. 272.1). This confirms that in CRA’s view s. 272.1 does not oust the application of the financial services definition, so that partnership draws generally are exempted under para. (f) of that definition rather than under s. 272.1(1) (apparently referencing services provided qua partner rather than business operator.)

Neal Armstrong. Summary of 17 September 2018 Ruling 182403 under ETA s. 123(1) – financial service – para. (f).