SNF LP – Tax Court of Canada finds that nominees do not need to carry on business to issue valid invoices for ITC purposes, and that purchasers are at risk if they do not verify the registration numbers of suppliers

A Quebec LP (SNF) acquired metal scrap from 12 suppliers, who were registered for GST purposes, but who did not remit the GST which they invoiced to SNF. Each supplier named in the invoices was “a ‘prête‑nom’ and not the actual supplier” (i.e., each supplier acted on behalf of an undisclosed principal). Rip J stated:

That…suppliers may not have carried on a business or were "prête‑noms" does not, on the facts, affect the appellant's right to claim ITCs.

This may be inconsistent with an apparent CRA position that a nominee which does not carry on business cannot issue invoices in its own name which satisfy the documentary requirements for ITCs.

Rip J also found that SNF was not entitled to ITCs in the case of one of the suppliers because it did not meet the following standard:

[A] registrant purchasing supplies or services from a person must use reasonable procedures to verify that the person is a valid registrant, that the registration number actually exists and that the number is registered in the name of that person. In addition, if the registrant suspects the person's legitimacy as a supplier, then the registrant purchases supplies at its own risk. SNF suffered such risk when it dealt with Ms. Bergeron.

In a similar vein, he also stated that there can be no entitlement under ETA s. 261 to a rebate for "an error caused by the [applicant's] own inattention and carelessness." This condition is not stipulated in the section.

Neal Armstrong. Summaries of SNF L.P. v The Queen, 2016 TCC 12 under Input Tax Credit (GST/HST) Regulations – intermediary, ETA s. 169(4) and s. 261.