Please note that the following document, although correct at the time of issue, may not represent the current position of the Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence.
Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 15th floor
320 Queen Street
Ottawa ON K1A 0L5
XXXXX
XXXXX
XXXXX
Case Number: 107807
XXXXX
December 12, 2008
Dear XXXXX
Subject:
GST/HST INTERPRETATION
Interpretation of GST/HST implications on transactions between a non-profit parent corporation and a corporation wholly-owned by the parent corporation
Thank you for your letter of XXXXX concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to a hypothetical set of transactions between two entities as described below.
All legislative references are to the Excise Tax Act (ETA) unless otherwise specified.
You have requested an interpretation of a "hypothetical transaction", or series of transactions, based on the following assumptions you provided in your letter to the Canada Revenue Agency (CRA):
• Organization #1 (NFP) is a non-profit organization, incorporated without share capital that meets the definition of a Public Service Body (PSB) according to subsection 123(1) of the ETA.
• NFP meets the definition of an "Indian band" for the purposes of the ETA according to GST/HST Technical Information Bulletin B-039R - GST/HST Administrative Policy - Application of the GST/HST to Indians, (B-039R) which states: "An 'Indian band', for purposes of the GST/HST, includes both a band council and a tribal council...A tribal council is another level of Indian government. It is a grouping of bands with a common interest that have joined together to provide advisory or program services for two or more bands. Band council members compose the tribal council Board of Directors".
• NFP is not a GST/HST registrant but files a PSB rebate on an annual basis.
• Organization #2 (Opco) is an entity incorporated under the laws of the Province of Ontario with the purpose of providing construction project management activities.
• Opco does not meet the definition of a small supplier and is a GST/HST registrant.
• NFP owns all of the issued and outstanding shares of Opco.
• NFP has the ability to appoint or elect a majority of the members of the governing body of Opco (e.g., directors) and NFP reviews and approves, via an operating agreement, the budget and operating plan of Opco.
Interpretation Requested
You have requested a response to the following two questions based on the hypothetical transaction outlined above:
1. Is Opco required to charge the GST/HST on services to NFP for work performed according to the "hypothetical transaction" described above?
2. Is Opco entitled to recover the GST/HST paid in connection with work performed according to the "hypothetical transaction" described above?
• XXXXX
• The specific real property to be constructed or substantially renovated will benefit the entire population within that particular "reserve". For example, the specific real property could include a school, nursing station or water treatment facility.
• NFP contracts with Opco for the construction project management activities, which include the following:
- Opco purchases and pays for the goods used in the project;
- Opco enters into servicing contracts (e.g. with consultants or engineers);
- Opco invoices NFP as work progresses according to the terms of the contract between Opco and NFP;
- NFP files payment claim forms based upon the invoices received by Opco;
- XXXXX.
We understand that you would like us to confirm that NFP is involved in band management activities, and that by providing a certificate to that effect to Opco would mean that Opco is not required to charge GST/HST to NFP on the goods or services provided to NFP under the terms of the contract.
Interpretation Given
Please note, as explained in Chapter 1.4 of the GST/HST Memoranda Series, Excise and GST/HST Rulings and Interpretations Service the CRA will not issue a ruling where a request relates to a hypothetical situation.
You have made the assumption that NFP is an "Indian band". However, B-039R states that "corporations are considered to be separate legal persons from either an Indian or an Indian band and would not usually be eligible for relief from the GST/HST." Therefore, NFP is not an Indian band for purposes of B-039R , but it may meet either the owned or controlled requirement of the definition of a band-empowered entity contained in the bulletin. For purposes of this response it will be assumed that NFP is an incorporated band-empowered entity.
Based on the information provided with respect to the "hypothetical transaction" described above, and the assumption that NFP is a band-empowered entity, our responses to the two questions you asked are as follows:
1. The Canada Revenue Agency's administrative position found B-039R provides relief of the GST/HST on services acquired on or off a reserve by a band empowered entity where the services are for band management activities or for real property on a reserve and all other conditions described in B-039R are met. There is an exception: GST/HST must be paid on off-reserve purchases of transportation, short-term accommodation, meals and entertainment and an application for a rebate of the tax may be filed.
Therefore, Opco is not required to charge the GST/HST where the service is acquired by NFP for band management activities or for real property on a reserve and NFP provides certification to Opco attesting that the acquisition of the service is being made for band management activities or for real property on a reserve.
Band management activities are those activities carried out by a band-empowered entity that relate to their normal administration, programs, and services that are designed and/or delivered for the benefit, well-being, or assistance of band members that are not commercial activities for which the band-empowered entity would otherwise be entitled to input tax credits.
Where the services are acquired are for real property on a reserve, the services may be acquired relieved of the GST/HST. It should be noted that B-039R does not provide tax relief on services acquired by an band-empowered entity for real property off a reserve. (i.e. Services acquired to construct a building off a reserve are not relieved of tax when supplied to an Indian band or a band-empowered entity.)
2. As a registrant, Opco would be entitled to claim Input Tax Credits (ITCs) to recover the GST/HST paid on purchases of goods and services consumed, used or supplied in the course of its commercial activities where all the legislative requirements are met.
The foregoing comments represent our general views with respect to the subject matter of your request. These comments are not rulings and, in accordance with the guidelines set out in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service, do not bind the Canada Revenue Agency with respect to a particular situation. Future changes to the ETA, regulations, or our interpretative policy could affect this interpretation.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at XXXXX. Should you have additional questions on the interpretation and application of GST/HST, please contact a GST/HST Rulings officer at 1-800-959-8287.
Yours truly,
XXXXX
XXXXX
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate
UNCLASSIFIED
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