GST/HST memorandum 14.6
March 2017

This version replaces the one dated June 2014.

All legislative references in this publication are to the Excise Tax Act (the Act) unless otherwise specified. The information in this publication does not replace the law found in the Act and its regulations.

If this information does not completely address your particular situation, you may wish to refer to the Act or relevant regulation, or call GST/HST Rulings at 1-800-959-8287 for additional information. If you require certainty with respect to any particular GST/HST matter, you may request a ruling. GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service, explains how to obtain a ruling or an interpretation and lists the GST/HST rulings centres.

If you are located in Quebec and wish to request a ruling related to the GST/HST, please call Revenu Québec at 1-800-567-4692. You may also visit the Revenu Québec website at revenuquebec.ca to obtain general information.

For listed financial institutions that are selected listed financial institutions (SLFIs) for GST/HST or Quebec sales tax (QST) purposes or both, whether or not they are located in Quebec, the CRA administers the GST/HST and the QST. If you wish to make a technical GST/HST or QST enquiry related to SLFIs, please call 1-855-666-5166.

GST/HST Rates

Reference in this publication is made to supplies that are subject to the GST or the HST. The HST applies in the participating provinces at the following rates: 13% in Ontario and 15% in New Brunswick, Newfoundland and Labrador, Nova Scotia, and Prince Edward Island. The GST applies in the rest of Canada at the rate of 5%. If you are uncertain as to whether a supply is made in a participating province, see GST/HST Technical Information Bulletin B-103, Harmonized Sales Tax – Place of Supply Rules for Determining Whether a Supply is Made in a Province

Table of Contents

• Dues in respect of employment
• Payments by unions or associations
• Non-profit organizations established primarily for the benefit of organized labour

Dues in respect of employment

1. Section 189 deems an organization to have made an exempt supply and an amount paid by a person to be consideration for that supply where the amount was paid by the person to the organization as:

1. a membership due paid to:
   
   1. a trade union as defined in section 3 of the Canada Labour Code,
   2. a trade union as defined in any provincial act that provides for the investigation, conciliation, or settlement of industrial disputes, or
   3. an association of public servants whose primary object is to promote the improvement of the members’ conditions of employment or work;
2. a due that was, under a collective agreement, retained by the person from an individual’s remuneration and paid to a trade union or association referred to in paragraph (a) of which the individual was not a member; or
3. a due to a parity or advisory committee or similar body, the payment of which was required under the laws of a province in respect of an individual’s employment.

2. Under subsection 123(1), "membership" is defined to include "a right granted by a particular person that entitles another person to services that are provided by, or to the use of facilities that are operated by, the particular person and that are not available, or are not available to the same extent or for the same fee or charge, to persons to whom such a right has not been granted, and also includes such a right that is conditional on the acquisition or ownership of a share, bond, debenture or other security".

3. Section 3 of the Canada Labour Code defines "trade union" to mean "any organization of employees, or any branch or local thereof, the purposes of which include the regulation of relations between employers and employees".

4. For the purposes of section 189 of the Act, the CRA considers that:

• A "collective agreement" is an agreement in writing containing the terms or conditions of employment of employees, including provisions with reference to rates of pay and hours of work, between:
  • an employer or an employers’ organization acting on behalf of an employer, and
  • a trade union acting on behalf of the employees in collective bargaining or as a party to an agreement with the employer or employers’ organization.
• A "parity or advisory committee" is a body, usually consisting of representatives of employers and employees, set up under provincial laws to oversee collective agreements.
• A "public servant" is a public servant as defined by any provincial or federal statute.

5. Included in section 189 are membership dues paid to an association of public servants, the primary object of which is to promote the improvement of the members’ conditions of work. Activities that are indicative of this object include negotiation and collective bargaining with employers with respect to salaries, hours of work, job security, pension and other benefits, and other items normally covered by a contract of employment.

6. Whether an organization qualifies as a trade union or similar employee association as described in section 189 is a question of fact that must be determined on a case-by-case basis.

7. Dues paid to an organization referred to in section 189 are not subject to GST/HST regardless of whether they are paid directly by an individual or collected by an employer and remitted to the organization on behalf of its employees.

8. Under paragraph 189(b), dues that are retained by a person, such as an employer, from an individual’s remuneration under the provisions of a collective agreement and paid to a trade union or association of public servants referred to in paragraph 189(a) of which the individual is not a member also constitute consideration for exempt supplies and are not subject to GST/HST.

Payments by unions or associations

9. Under section 164.2, an amount paid to an employer by a trade union or association of public servants referred to in paragraph 189(a) is deemed not to be consideration for a supply where:

1. an individual, who is a member of the union or association, participates in union/association activities and is, as such, unable to perform duties, under a contract of employment, for their employer during a period during which they would otherwise be obligated to provide such services, and
2. the union or association pays an amount to the employer as compensation for expenses that the employer incurs as a consequence of the individual’s participation in those activities or for remuneration or benefits given by the employer to the individual in respect of that period.

10. The compensation paid by the union or association to the employer might cover salary, benefits, and other costs, such as travel costs, paid by the employer in respect of the time for which the employee was away from their employment duties on union or association business.

Non-profit organizations established primarily for the benefit of organized labour

11. Section 26 of Part VI of Schedule V exempts supplies made between a non-profit organization established primarily for the benefit of organized labour and:

• another non-profit organization established primarily for the benefit of organized labour; or
• any of the following that is a member of or affiliated with that non-profit organization:
  • a trade union as defined in section 3 of the Canada Labour Code;
  • a trade union as defined in any provincial act that provides for the investigation, conciliation, or settlement of industrial disputes;
  • an association of public servants whose primary object is to promote the improvement of the members’ conditions of employment or work; or
  • a parity or advisory committee or similar body.

12. A "non-profit organization" is defined under subsection 123(1) as "a person (other than an individual, an estate, a trust, a charity, a public institution, a municipality or a government) that was organized and is operated solely for a purpose other than profit, no part of the income of which is payable to, or otherwise available for the personal benefit of, any proprietor, member or shareholder thereof unless the proprietor, member or shareholder is a club, a society or an association the primary purpose and function of which is the promotion of amateur athletics in Canada".

13. An entity must meet all of the conditions set out in this definition to be considered a non-profit organization for the purposes of the Act. For more information on these conditions, refer to GST/HST Policy Statement P-215, Determination of Whether an Entity is a "Non-Profit Organization" for Purpose of the Excise Tax Act ("ETA").

14. A non-profit organization is considered to have been "established primarily for the benefit of organized labour" if it was established primarily to provide some advantage to organized labour, such as:

• a trade union as defined in section 3 of the Canada Labour Code;
• a trade union as defined in any provincial act that provides for the investigation, conciliation, or settlement of industrial disputes;
• an association of public servants whose primary object is to promote the improvement of the members’ conditions of employment or work; or
• a parity or advisory committee or similar body.

15. The purpose for which a non-profit organization was established is generally set out in the organization’s governing documents. Where these documents are not determinative, the organization’s activities may also provide evidence of the purpose for its establishment.

16. Whether a non-profit organization was established primarily for the benefit of organized labour is a question of fact that must be determined on a case-by-case basis. For information on how to request a ruling with respect to a particular organization, refer to GST/HST Memorandum 1.4.

Further information