CRA rules on joint employment arrangement for avoiding GST/HST on intra-group charges

If a management company is reimbursed for its payroll costs by other group companies, those reimbursement charges generally will be subject to GST or HST except in the limited circumstances where s. 150 or 156 elections are available.

A group company (Company A) was represented to CRA as employing management and IT individuals partly for its own account and partly as agent for two other group companies.  CRA ruled that payroll reimbursement payments which Company A will receive from the other two companies wil not be consideration for taxable supplies - notwithstanding that the individuals will be managed by Company A and will be treated only as its employees for source deduction and income tax reporting (T4) purposes.

Neal Armstrong.  Summary of 15 May 2012 Ruling Case No. 142436 under ETA - S. 123(1) - Business.