REASONS
FOR JUDGMENT
V.A. Miller J.
I. OVERVIEW
[1]
This consolidated appeal involves retail mutual
funds offered under the Invesco, Aim, Trimark and Powershares brands (the “Funds”).
The manager of the Funds changed from Aim Funds Management Inc. in 2002 to
Invesco Trimark Ltd. on August 11, 2008 to Invesco Canada Ltd. on July 29, 2011
(the “Manager”).
[2]
The Appellants in this appeal are the Funds and
the Manager.
[3]
The Appellants are appealing from assessments by
the Minister of National Revenue (the “Minister”) made under the Excise Tax
Act (the “Act”) for the period from December 1, 2002 to December 31,
2011. The aggregate amount of goods and services tax (“GST”) at issue is $44,709,717.16.[1]
[4]
This appeal relates to a financing transaction
between the Appellants, Canada Funding Corp I (“Funding Corp”) and Citibank,
N.A. (“Citibank”). The question under appeal is whether the Appellants received
an “imported taxable supply” as a result of the
financing transaction that occurred during the period.
[5]
I have concluded that they did.
II. FACTS
A. The Appellants
[6]
The only witness at the hearing was Mr. David
Warren, Executive Vice-President and Chief Financial Officer of Invesco Canada
Ltd. (“Invesco”). He gave his evidence in a straight forward and credible
manner.
[7]
The Funds are investment vehicles that are
pooled for the benefit of their investors who hold units in the case of trust
Funds, and shares in the case of corporate Funds. In this appeal, most of the
Funds are mutual fund trusts; two of the Funds are mutual fund corporations;
and, one Fund, Invesco Allocation Fund, is a unit trust.
[8]
The Funds are regulated under Canadian
securities law. A simplified prospectus and an Annual Information Form are
published annually. Although these documents must contain prescribed
information about the Funds, they are written in plain language with the
investor in mind.
[9]
The Manager is a corporation incorporated under
the laws of Ontario. At all relevant times, the Manager was registered for
GST/HST. As well as being the Manager of the Funds, Invesco was also the
trustee of each Fund that was a mutual fund trust and trustee of the unit
trust.
[10]
On July 1, 2010, each Fund became a selected
listed financial institution (“SLFI”) and a party to a consolidated group
filing election.
[11]
The Funds had no employees and the Manager
provided management and administrative services (the “Management Services”) to
each Fund pursuant to the terms of a management agreement (the “Management
Agreement”).
[12]
The Manager is also the principal distributor
for the Funds and as such, it ensures that the securities of each Fund are
properly issued; the amounts paid for the securities are invested; and,
redemption proceeds are paid to the investor.
[13]
Mr. Warren described the Manager’s role with
respect to the Funds as (1) managing the money; (2) distribution; and, (3)
either performing or arranging for the administration of the Funds.
[14]
In return for its Management Services, the
Manager charged fees plus the applicable GST/HST to each Fund.
B. The Funding of the DSC
Commissions
[15]
The Funds offered their investors the option of
deferring the broker/dealer commissions when purchasing certain securities. The
commissions were deferred to the investors provided they held their investment
for a specified period of time. This was referred to as the “deferred sales charge” (“DSC”) option. The Funds
offered three different DSC options. They were (i) the Standard DSC where the
commission was generally 4.9% of the purchase price of the investment and the
investor was subject to a fee if he or she redeemed within the first six years
after purchasing the security; (ii) the Lower-Load 4 (“LL4”) option where the
commission was generally 4.5% and the investor had to hold the investment for 4
years to avoid paying the commission fee; and, (iii) the Low-Load (LL) option
where the commission was 1% and the investor was subject to a redemption fee if
the investment was redeemed within the first two years.
[16]
In this appeal, the term “DSC Commissions” refers to the commissions on the
Standard DSC securities and the LL4 securities.
[17]
Although the commissions were deferred as far as
the investor was concerned, the brokers/dealers were paid their commissions at
the time or shortly after the securities were purchased.
[18]
Prior to and subsequent to the period in issue,
the Manager funded the broker/dealer commissions.
[19]
Mr. Warren testified that over the period 1998
to 2000, the Manager amalgamated and merged with other companies. The assets it
administered in the Funds grew from approximately $10 billion to about $35
billion. The Manager had to borrow from its parent company in the United States
to be able to fund the DSC Commissions and to obtain capital to meet its own
regulatory capital obligations.
[20]
The Manager, expecting its business to grow
exponentially, decided that its continued funding of the DSC Commissions was
not the best use of its capital. It looked for alternative sources to finance
the DSC Commissions.
[21]
However, there were limitations imposed by
legislation on how the commissions could be financed. Ontario securities laws
prohibited the Funds from paying broker/dealer commissions directly and from
borrowing money to pay the commissions. Also, the Manager placed its own
limitation on the financing of the commissions because it did not want the
funding to appear on its balance sheet or on the Funds’ balance sheet.
[22]
With these constraints in mind, in early 2001,
the Manager agreed with a proposal made by Citibank. Pursuant to this proposal,
the Funds and the Manager entered into a single recurring financing transaction
(the “Financing Transaction”) which was carried out daily from April 1, 2002 to
September 30, 2009 to finance the DSC Commissions. The parties who
participated in the Financing Transaction were the Funds, the Manager,
Citibank, Citicorp North America, Inc. (“Citicorp”), and Funding Corp.
[23]
A description of Citibank, Citicorp and Funding
Corp (collectively “the Citibank Entities”) follows.
[24]
Citibank is a United States (“US”) national financial
institution that provides or arranges for credit. Citibank provides financing
in the mutual fund industry through its securitization group. It had arranged a
similar financing transaction for an affiliate of the Manager in the US.
[25]
Citicorp was the “Program
Agent” and as such was the agent for both Funding Corp and Citibank in
the Financing Transaction.
[26]
Funding Corp is a US corporation that was
established by Citibank as a single purpose, bankruptcy remote securitization
entity. Its sole purpose was to participate in the funding arrangement that is
the subject of this appeal. At all relevant times, Funding Corp was a
non-resident of Canada; it dealt at arm’s length with each Fund and with the
Manager. Funding Corp had no employees. It was not registered for GST and it
performed all of its services outside Canada.
[27]
According to the contracts between the parties, Funding
Corp agreed to arrange for the funding of the DSC Commissions and, as
consideration, the Funds agreed to pay Funding Corp a fee (the “Earned Fees”)
that accrued in respect of each funded DSC security.
[28]
The Earned Fees consisted of a single
consideration which had two components: an “Earned DSC
Fee” and an “Earned Daily Fee”. The
Earned DSC Fee was an amount equal to the redemption fees payable by an
investor on early redemption of the securities. The Earned Daily Fee was equal
to a percentage of the value of the securities whose commission was financed by
the money received as a result of the Financing Transaction.
[29]
The Financing Transaction replaced the financing
that had been provided by the Manager for all DSC options except for the
commissions on the LL securities. The Manager continued to finance these
commissions.
C. The Financing Transaction
[30]
The Financing Transaction resulted from an integrated
group of commercial agreements. The key agreements were: the Fee Payment
Agreement, the Purchase and Sale Agreement, the Servicing Agreement, and the
Funding Percentage Letter Agreement (collectively, referred to as the “Financing Agreements”). The Financing Agreements were
structured to provide for a financing program that was unlike a loan or
debtor/creditor arrangement. Each of the agreements was dated as of March 26,
2006.
[31]
The Financing Transaction provided the money
needed to pay the DSC Commissions (the “Funding Amounts”) on a daily basis. In
return, Citibank received the Earned Fees.
[32]
A description of the Financing Agreements
follows:
(1) The
Fee Payment Agreement
[33]
The Fee Payment Agreement was made between
Funding Corp, Citicorp, the Funds, and the Manager. In this agreement, Funding
Corp agreed to arrange for the payment of daily Funding Amounts, by wire
transfer, into the applicable Fund Accounts (the “Dealer Commission Trust
Accounts”). The Manager, on behalf of the Funds, agreed to provide Funding Corp
and Citicorp with a notice containing the amount required for the daily Funding
Amount (a “Funding Notice”). The Manager faxed the Funding Notice to Funding
Corp, Citicorp and the Collection Agent[2]
prior to 9:00AM (New York City time) and the Funding Amount was deposited into
the applicable Dealer Commission Trust Account on or prior to 5:00PM (New York
City time) that same day.
[34]
As consideration for agreeing to arrange for the
payment of the Funding Amounts, the Funds agreed to pay Funding Corp the Earned
Fees accruing in respect of each of their funded DSC securities outstanding
from time to time.
[35]
Paragraph 2.03 of the Fee Payment Agreement
dealt with the Funds obligations and Funding Corp’s rights under the agreement.
The preamble to the paragraph read:
“In order to
induce Funding Corp to accept the obligation of each Fund to pay the Earned
Fees as consideration for Funding Corp’s undertakings hereunder, each Fund
agrees as follows:”
[36]
Paragraph 2.03(a) specified that Funding Corp’s
right to the Earned Fees was enforceable against each Fund and its property
directly but not against the Manager in its individual capacity.
[37]
Paragraph 2.03(d) stated that “the Earned Fees are fees paid for services to the Fund
rendered by Funding Corp in the Unites States in arranging for the funding of
the Funding Amounts…”.
[38]
The obligation to pay the Earned Fees was an
absolute and unconditional obligation of the Funds regardless if it was later
found that the Manager was unable to compute the amount due or was unable, for any
reason, including any requirement of Applicable Law[3], to perform the actions
required to effect the payment.
[39]
The Manager’s agreements with Funding Corp were
provided in section 2.04 of the Fee Payment Agreement. The Manager relinquished
its rights to the Earned Fees and agreed that its management fee would
automatically be reduced by the amount of the Earned Daily Fee payable by the
Fund to Funding Corp. The Manager also agreed that “the
Earned Fees are fees paid by the Funds for services to the Fund rendered by
Funding Corp in the United States in arranging for the funding of the Funding
Amounts…”.
[40]
In section 5.05, one of the covenants made by
the Manager was that it would not change the investment objectives of the Funds
unless it had written consent of Citicorp, the program agent for Funding Corp.
The Funds made a similar covenant in section 5.06 of the Fee Payment Agreement.
[41]
Funding Corp covenanted that as long as any
amount remained payable under the agreement, (a) it would not maintain an
office in Canada; (b) it would execute and deliver this agreement in the US;
(c) it would arrange for the payment of the Funding Amount by entering into a
Purchase Agreement[4]
in the US; and, (d) it would not perform any services in Canada. It was
understood for the purposes of this covenant that the activity described in
clause (c) was not deemed to be the performance of services in Canada. (Section
5.08 of the Fee Payment Agreement)
[42]
Mr. Warren testified that the Manager agreed to
become a party to the Fee Payment Agreement for two reasons: first, Citibank
insisted that it do so; and second, the Manager wanted to offload the “responsibility for funding sales commissions” and it
was in the Manager’s best interest to sign the agreement.
(2) The Purchase and Sale
Agreement
[43]
The Purchase and Sale Agreement was made between
Funding Corp, Citibank, and Citicorp. Pursuant to this agreement, Funding Corp
sold its rights to the Earned Fees to Citibank. The Purchase and Sale Agreement
provided that, on each date that Funding Corp was required to arrange for
payment into the Dealer Commission Trust Account, it sold its rights to the
Earned Fees to Citibank for a purchase price equal to the Funding Amount for
the relevant day. Citibank agreed to pay the Funding Amount by wiring the money
directly to the relevant Dealer Commission Trust Account.
[44]
The Dealer Commission Trust Accounts were held
in the Manager’s name.
[45]
Section 2.02 of the Purchase and Sale Agreement
stated that “With respect to the Earned Fees to be
purchased on any Funding Date, immediately upon its receipt of a Funding
Notice, Funding Corp shall transmit or shall cause to be transmitted to the
Purchaser (with a copy to the Collection Agent) on such proposed Funding Date
by facsimile transmission, a copy of such Funding Notice.” The Purchaser
was Citibank. However, Mr. Warren testified that it was actually the Manager
who sent the Funding Notices, on behalf of Funding Corp, to Citibank and the
Collection Agent.
[46]
This sale by Funding Corp to Citibank was an
integral part of the Financing Transaction and was included in both the
recitals and section 5.08 of the Fee Payment Agreement.
(3) The Servicing Agreement
[47]
The Servicing Agreement was made between
Citibank, Citicorp, and the Manager. Pursuant to this agreement, the Manager
agreed to provide numerous services to the Citibank Entities. Those services
included ensuring that the Funds paid the Earned Fees into Citibank’s account
with Bankers Trust Company in New York; calculating and reporting on the Earned
Fees from the Funds to Citibank; furnishing monthly reports and statements
relating to the Earned Fees as required by the Servicing Agreement and the
other Financing Agreements. The Manager, on behalf of the Funds, collected the
Earned Fees out of the assets of the Funds and remitted them on behalf of the
Funds as required by the Fee Payment Agreement.
[48]
Citibank paid the Manager a monthly fee for its
services under the Servicing Agreement.
(4) The Funding Percentage
Letter Agreement
[49]
The Funding Percentage Letter Agreement was
between Citicorp, the program agent, and the Manager. The Funding Percentage
was applied to the securities in all Funds involved in the Financing
Transaction to determine the Funding Amounts. Although the actual commission
rates for the Funds ranged from 4.25% to 4.9%, it was agreed by the parties
that the Funding Percentage would be 4.9%, the standard rate preferred by
Citibank. As a result, the Funding Amounts sometimes exceeded the actual
commissions paid. This excess was paid to the Manager and reported by it as fee
income for accounting purposes.
(5) The Management Agreement
[50]
Prior to the relevant period, each Fund had a
separate Management Agreement but it was intended that the terms of each
Management Agreement were to be identical.
[51]
The Manager’s duties in the Management Agreement
dated January 5, 1995 (amended and restated October 20, 2000) between
the Manager and the corporate Funds included the following:
3. The
Manager shall, during the term of this Agreement:
a) provide,
or arrange for the provision of, portfolio advisory and investment management
services with respect to the investment portfolio of each Class and make
decisions as to the purchase and sale of portfolio securities, other dealings
with the assets in the portfolio and execution of all portfolio transactions,
including selection of market, dealer or broker and the negotiation, where
applicable, of commissions, subject always to the direction of the Fund and the
Board of Directors and the provisions of the Articles of Incorporation;
b) supervise
any investment or portfolio advisors appointed in respect of the Classes;
…
d) calculate,
or cause to be calculated, as often as may be required by the Fund, the net
asset value of the Fund, the net asset value of each Class and the series net
asset value per share of each series offered by each Class;
…
f) provide,
or cause to be provided, services in respect of any or all of the Fund’s daily
operations, including the processing of subscriptions for shares, the
collection, and remission to the custodian of the Fund, of the moneys received
by virtue of such subscriptions, the processing of requests for redemptions of
shares and the processing of requests for the change of shares of any series if
permitted under the eligibility criteria set out in the prospectus;
…
h) provide,
or cause to be provided, to the Fund all other administrative and other
services and facilities required by the Fund in relation to its shareholders,
including the preparation for and holding of meetings of shareholders of the
Fund, of a Class or of a series of a Class, the maintenance of records
regarding transactions of shareholders, registry and transfer agency services,
services pertaining to distribution of income and gains to shareholders and
other services for the provision of tax reporting and other information to
shareholders;
…
l) provide,
or cause to be provided, to the Fund all other services necessary or desirable
to conduct and operate the Fund’s business in an efficient manner.
[52]
The Manager was able to delegate its
responsibilities according to paragraph 4 of this Management Agreement as
follows:
In connection
with the duties of the Manager herein specified, the Manager may, subject to
the provisions of the Act and the Articles of Incorporation, engage or employ
any persons as agents, representatives, employees or independent contractors,
including, without limitation, lawyers, bankers, portfolio advisers, notaries,
registrars, underwriters, accountants, brokers or dealers in one or more
capacities and any other advisers or other professionals which the Manager
deems advisable and may delegate any of the powers and duties of the Manager
hereunder to any agents, representatives, officers, employee, independent
contractors or other persons. The Fund acknowledges that the Manager proposes
to retain State Street Trust Company Canada or another qualified financial
institution act as custodian for the assets of the Fund in relation to each
Class. The Fund further acknowledges that the Manager proposes to retain
various investment management firms from time to time which it will select to
act as portfolio advisors for each Class.
[53]
The Master Management Agreement between the
Manager and the trust Funds contained the same paragraphs as above.
[54]
The Master Management Agreement (“Amended
Management Agreement”) was amended as of March 27, 2002 and amended and
restated to August 9, 2002 and to October 4, 2002 so that it referred to the
Financing Transaction. According to this Amended Management Agreement, the
Manager became the principal Distributor for the Funds.
[55]
The Manager was appointed pursuant to the
Amended Management Agreement “with full authority and
responsibility to provide or cause to be provided to the Fund the management
and administrative services and facilities hereinafter set forth”. The “Duties of the Manager” included the following:
(g) make,
or cause to be made, arrangements as may be necessary or desirable for the
distribution and sale of units by duly qualified investment dealers, brokers,
mutual fund dealers, life insurance agents and others (collectively, “sales
agents”) on such terms as the Manager may determine, subject to the terms
hereof, the Declaration of Trust and the prospectus, provided that each of
the Funds may make arrangements relating to funding or payment of sales commission
or other compensation to such sales agents; (emphasis added)
…
(o) provide,
or cause to be provided, to each Fund all other services necessary or desirable
to conduct and operate the Fund’s business in an efficient manner.
[56]
Paragraph 8 of the Amended Management Agreement
addressed the Fees paid to the Manager and the Financing Transaction. It reads:
8. In
consideration of the duties performed by the Manager pursuant to the terms of
this Agreement, the Manager shall receive from each Fund fees in respect of any
series A units, series F units, series SC units or series DSC units offered by
the Fund as set forth in Schedule “A” hereto. No fees shall be payable to the
Manager by any Fund in respect of any series I units offered by the Fund.
The
Funds may make arrangements to fund the payment of commissions to registered
dealers in connection with the distribution of units of the Funds. The parties
hereto agree that the Funds may pay an amount directly to a third party with
respect to those units subject to funding arrangements, in which circumstances
the management fee payable to the Manager shall be reduced by the amounts paid
to such third parties. Neither the Manager, nor any affiliate of the Manager,
nor any person claiming through any thereof, including any liquidating trustee
or court with jurisdiction over any bankruptcy, insolvency, reorganization or
similar proceeding in respect of any thereof, will have any right, title or
interest in such amount.
[57]
Over the period from April 1, 2002 to September
30, 2009, the Funds received Funding Amounts which totaled $640 million and the
Earned Fees paid by the Funds for this same period totaled more than $717
million. By the conclusion of the trial for this appeal, the amount of Earned
Fees paid by the Funds was over $800 million.
D. Filing and Assessing History
[58]
There were three distinct periods with respect
to the filing and assessing history of the Appellants.
(a) December 1, 2002 to June 30,
2010
[59]
Prior to July 1, 2010, none of the Funds had a
GST/HST registration number.
[60]
During the period April 1, 2002 to June 30,
2010, the Manager self-assessed Division IV tax on the Earned Daily Fees on
behalf of the various Funds and included the tax in its own GST returns. The
Earned Daily Fees were treated as consideration for an imported taxable supply.
The Minister processed the returns as filed.
[61]
The Manager filed rebate applications for GST
that it said was “paid in error”. The rebate
applications were filed under the Manager’s business number and the total
rebates claimed for the period April 1, 2002 to June 30, 2010 were $29,890,510.15.
[62]
The Minister denied the rebate applications by
notices of assessment dated February 18, 2014.
(b) April 1, 2002 to June 30, 2010
[63]
During the period April 1, 2002 to June 30,
2010, the Manager did not self-assess Division IV tax on the Earned DSC Fees on
behalf of the Funds. By notices dated March 4, 2014, the Minister assessed 20
selected Funds for GST payable on the Earned DSC Fees for the period April 1,
2002 to June 30, 2010. According to the assessments, the total GST payable on
the Earned DSC Fees was $6,054,502.41.
[64]
The Funds objected to the assessment and the
Minister confirmed the assessments on May 2, 2014.
(c) July 1, 2010 to December 31,
2011
[65]
Effective July 1, 2010, the Funds were
registered for GST/HST under a single GST/HST registration number. The Funds as
a group became a “selected listed financial institution”
group (the “SLFI Group”) for GST/HST purposes and it filed its GST/HST returns
on an annual basis.
[66]
For the period July 1, 2010 to December 31,
2010, the SLFI Group self-assessed GST/HST in the amount of $1,489,488.36 on
its Earned Daily Fees.
[67]
For the period January 1, 2011 to December 31,
2011, the SLFI Group self-assessed GST/HST in the amount of $2,294,397.42 on
its Earned Daily Fees.
[68]
The returns were assessed as filed and the SLFI
Group objected to the assessments.
[69]
The SLFI Group did not self-assess GST on the
Earned DSC Fees for the period July 1, 2010 to December 31, 2011 and the
Minister assessed GST in the amount of $552,193.55 for this period.
[70]
The SLFI Group objected to the assessment.
[71]
The SLFI Group filed rebate applications for the
periods from July 1, 2010 to December 31, 2011. The rebate application for the
period July 1, 2010 to December 31, 2010 was filed on June 22, 2012 and the
rebate applications for the period January 1, 2011 to December 31, 2011 were
filed on November 16, 2012. The Minister denied these rebate applications in
full as well.
(d) PVAT Assessments – July 1,
2010 to December 31, 2011[5]
[72]
On November 9, 2011, the Minister assessed the
provincial portion of the Harmonized Sales Tax (the “PVAT”) on the Earned Daily
Fees to the Manager in the amount of $1,524,504.54 for the period July 1, 2010
to December 31, 2010.
[73]
For the period January 1, 2011 to December 31,
2011, the Minister assessed PVAT on the Earned Daily Fees to the Manager in the
total amount of $2,335, 503.79.
[74]
The Manager did not object to the PVAT
assessments on the Earned Daily Fees.
[75]
The Minister assessed PVAT in the amount of
$568,616.48 on the Earned DSC Fees to the Manager for the period July 1, 2010
to December 31, 2011. The Manager objected to the assessments and the Minister
confirmed them.
[76]
At the hearing on December 14, 2015, counsel for
the Appellants advised that the Manager was no longer seeking to vacate the
assessments made against it for the PVAT.
III. ISSUES
[77]
The issues were framed by the parties as
follows:
a)
Whether Funding Corp made a taxable supply to
the Appellants; and,
b) If the Appellants did not receive a taxable supply, whether
subsection 261(2) of the Act prevents the Appellants from receiving
rebates for the reporting periods February 1, 2007 to June 30, 2010.
[78]
According to the Appellants, there are three
distinct relief periods:
a)
The Pre-Standardized Period – 2002 to June 30,
2007;
b) Standardized Period – July 1, 2007 to June 30, 2010; and,
c)
SLFI Period – July 1, 2010 to December 31, 2011.
IV. LAW
[79]
I have included all of the relevant statutory
provisions as an Appendix to these reasons. When I discuss a particular
provision, I will include it at the beginning of the paragraph for ease of
reference.
V. POSITION
OF THE PARTIES
A. Appellants’ Position
[80]
The Appellants submitted that the Financing
Transaction was not a supply but was the payment of money. They argued in the
alternative that, if there was a supply of a service by Funding Corp, it was
the supply of an exempt “financial service” within
the definition of that term in section 123 of the Act. In particular, it
was the payment of money in accordance with paragraph (a) of that definition;
or, it was the issuance of a debt security in accordance with paragraph (d);
or, it was the arranging for the payment of money or the issuance of a debt
security in accordance with paragraph (l) of that definition.
[81]
The Appellants further submitted that the
service of arranging to have the commission fees paid was not a management or
administrative service and therefore paragraph (q) of the definition of “financial service” did not apply in the circumstances
of this appeal.
B. Respondent’s Position
[82]
It was the Respondent’s position that Funding
Corp made a supply of a service to the Funds that was not an exempt service
within the definition of “financial service” in
the Act. Alternatively, if the service was an exempt financial service,
it was excluded from that definition because Funding Corp provided other
management or administrative services in accordance with paragraph (q) of the
definition of “financial service”. The provision
of management or administrative services to the Funds is a taxable supply.
VI. ANALYSIS
[83]
The determination of whether the Appellants are
liable to pay GST as a result of the Financing Transaction requires an
interpretation and analysis of the Financing Agreements together and not just
an analysis of the Fee Payment Agreement between Funding Corp and the Appellants.
[84]
It is my view that I must consider all of the
Financing Agreements and the entire Financing Transaction. The agreements were
integral to one another. I must consider whether there were services provided
by the Citibank Entities to the Funds; and, if there were, what those services
were.
[85]
In Creston Moly Corp v Sattva Capital Corp,
2014 SCC 53, at paragraph 47, Rothstein J. described the modern approach to
contractual interpretation as one in which a contract should be read as a
whole, giving the words used their ordinary and grammatical meaning, consistent
with the surrounding circumstances known to the parties at the time the
contract was formed. At paragraph 50 of that decision, he concluded:
[50] With respect
for the contrary view, I am of the opinion that the historical approach should
be abandoned. Contractual interpretation involves issues of mixed fact and law
as it is an exercise in which the principles of contractual interpretation are
applied to the words of the written contract, considered in light of the
factual matrix.
[86]
There is a thread that connects all of
the Financing Agreements. According to Mr. Warren, they were written
contemporaneously by teams of Canadian and US lawyers working together. The
agreements were each dated March 26, 2002. They were written so that they
referenced each other and depended on each other. For example, the recitals to
the Fee Payment Agreement stated that Funding Corp had entered into the
Purchase Agreement to sell its rights to the Earned Fees to Citibank on the same
day that it contracted with the Funds to arrange for the payment of the Funding
Amounts. Each of the agreements used the same terminology and each had a “Definitions List” so that the terms used in the various
agreements had the same meaning. The Purchase and Sale Agreement referred to
the Fee Payment Agreement. The Manager’s duties in the Servicing Agreement were
with respect to its duties under the Fee Payment Agreement.
[87]
The terms and conditions contained in these
agreements were necessarily intertwined, interdependent and integral to each
other: Great-West Life Assurance Co v Canada, 2015 TCC 225 at paragraph
65.
[88]
The parties to this appeal did not agree on
whether any services were provided to the Funds. The Appellants argued that the
Funds only received money and money is not a supply. The Respondent submitted
that Funding Corp supplied a service or services to the Funds under the terms
of the Fee Payment Agreement.
[89]
It is my view that the services were:
i.
Funding Corp provided a service “in arranging for the funding of the Funding Amounts”.
Both paragraphs 2.03(d) and 2.04(e) of the Fee Payment Agreement include the
following sentence:
“…the Earned Fees
are fees paid by the Funds for services to the Funds rendered by Funding
Corp in the United States in arranging for the funding of the Funding
Amounts…”(emphasis added).
ii.
On a daily basis, Funding Corp was responsible
to receive, process and transmit (or cause to be transmitted) the Funding
Notices it received from the Manager to Citibank, Citicorp and the Collection
Agent: See paragraph 2.02 of the Purchase and Sale Agreement. It effected this
service by causing the Funding Notices to be transmitted by the Manager to
Citibank, Citicorp and the Collection Agent.
iii.
On a daily basis, Citibank deposited the Funding
Amounts in the Dealer Commission Trust Accounts.
[90]
In Calgary (City) v Canada, 2012 SCC 20,
Rothstein J. discussed the decision in O.A. Brown Ltd v Canada, [1995]
GSTC 40 (TCC). He stated:
33 In O.A.
Brown, the appellant O.A. Brown Ltd. (“OAB”) bought livestock for
customers, but on its own account and at its own risk, not as agent for its
customers. Customers would contact OAB's salesman to place an order specifying
the type of cattle they required. OAB charged its customers disbursements, such
as the cost of branding and inoculations, and a clearing commission, in
addition to the cost of livestock. Livestock is a zero-rated supply for GST
purposes, which means that the vendor neither pays GST on his acquisition of
the livestock, nor collects it from his customers. The Minister assessed GST on
the commission and the other disbursements. The main issue in the appeal was
whether OAB supplied a service of acquiring livestock according to its
customers' specifications, or whether it was supplying livestock and other
supplies, in which case it should have collected and remitted GST on the other
supplies.
34 Justice
Rip found that the Value Added Tax statute in the United Kingdom
contained many provisions similar to our GST (Value Added Tax Act (UK),
1983, c. 55). In the English cases the issue had been defined as whether the
supply in question comprises a compound supply or a multiple supply. A compound
supply is a single supply with a number of constituent elements which, if
supplied separately, some would have been taxed and some not. Multiple supplies
are made and taxed separately.
35 O.A.
Brown established the following test to determine whether a particular set
of facts revealed single or multiple supplies for the purposes of the ETA:
The test to be distilled from the English authorities is whether, in substance
and reality, the alleged separate supply is an integral part, integrant or
component of the overall supply. One must examine the true nature of the
transaction to determine the tax consequences. [p. 40-6]
36 When
reaching his decision, Justice Rip made the following observation:... one
should look at the degree to which the services alleged to constitute a single
supply are interconnected, the extent of their interdependence and
intertwining, whether each is an integral part or component of a composite
whole. [p. 40-6] (Citing Mercantile Contracts Ltd. v. Customs & Excise
Commissioners, File No. ON/88/786, U.K. (unreported).)
37 Justice
Rip also noted the importance of common sense when the determination is made.
McArthur T.C.J. made a similar observation in Gin Max Enterprises Inc. v. R.,
2007 TCC 223, [227] G.S.T.C. 56 (T.C.C. [Informal Procedure]), at para. 18:
From a review of
the case law, the question of whether two elements constitute a single supply
or two or multiple supplies requires an analysis of the true nature of the
transactions and it is a question of fact determined with a generous
application of common sense...
38 Applying
the test, Justice Rip found that the disbursements and commission were not
charged for services that were “distinct supplies, independent of the whole
activity” (p. 40-8) Only if taken together did the activities of buying,
branding, inoculation, and other disbursements form a useful service. He
concluded:
In substance and reality, the alleged
separate supply, that of a buying service, is an integral part of the overall
supply, being the supply of livestock. The alleged separate supplies cannot be
realistically omitted from the overall supply and in fact are the essence of
the overall supply. The alleged separate supplies are interconnected with the
supply of livestock to such a degree that the extent of their interdependence
is an integral part of the composite whole. ... The appellant is making a
single supply of livestock and the commission and disbursements charged are
part and parcel of the consideration for that supply. They do not amount to
separate supplies. [pp. 40-8 to 40-9]
39 In O.A.
Brown, Rip J. characterized the commission, inoculation, branding and
transportation costs not as distinct services but as inputs for the cattle and
part of the cost of supplying the cattle. If this approach is followed, the
public transit facilities would not be a separate supply, but would be an input
to, or part and parcel of, the supply of the municipal transit service to the
Calgary public.
[91]
It is my view that the supplies in the present
case were not multiple supplies. Common sense dictates that these supplies were
a single compound supply: O A Brown Ltd v Canada, [1995] GSTC 40 (TCC)
at paragraph 31. Each supply is an integral part or component of the overall
supply: Calgary (City) v Canada, 2012 SCC 20 at paragraph 34 to 36. As
in Great-West Life (supra), because these services were provided as an “intertwined, interrelated and integral whole”, the
single compound service must be considered in determining whether the service
is taxable.
[92]
The Appellants submitted that if the Funds
received services, it was an exempt financial service. In Global Cash Access
(Canada) Inc v The Queen, 2013 FCA 269 at paragraph 26, the Court gave the
following test to determine whether a single supply is within the definition of
“financial services”:
26 To determine
whether that single supply falls within the statutory definition of “financial service”, the questions to be asked are
these: (1) Based on an interpretation of the contracts between the Casinos and
Global, what did the Casinos provide to Global to earn the commissions payable
by Global? (2) Does that service fall within the statutory definition of “financial service”?
[93]
Accordingly, the question I must answer is what
did the Citibank Entities provide to the Funds to earn the Earned Fees? The
first step is to determine the dominant element of the supply and then to
analyze it with respect to the definition of “financial
service”.
[94]
Considering the factual matrix surrounding the
Financing Agreements and the testimony of Mr. Warren, it is clear that the
parties to those agreements understood that the purpose of the Financing
Transaction was to ensure that the DSC Commissions were adequately and timely
funded.
[95]
The dominant element of the single supply was
the daily payment of the Funding Amounts with immediately available funds. All
other services were ancillary and simply support this purpose.
[96]
In accordance with the definitions of “property”, “supply”,
and “service” in subsection 123(1) of the Act,
money is not a supply. Those definitions are:
property means any property, whether real or personal, movable or
immovable, tangible or intangible, corporeal or incorporeal, and includes a
right or interest of any kind, a share and a chose in action, but does not
include money;
supply means, subject to sections 133 and 134, the provision of
property or a service in any manner, including sale, transfer, barter, exchange,
licence, rental, lease, gift or disposition;
service means anything other than
• (a)
property,
• (b)
money, and
•
(c) anything that is supplied to an employer by
a person who is or agrees to become an employee of the employer in the course
of or in relation to the office or employment of that person; (emphasis
added)
[97]
However, the drafters of the Act included
the payment of money in the definition for “financial
services”. The definition is contained in subsection 123(1) of the Act
and a “financial service” is an exempt supply
under section 1 of Part VII of Schedule V. The sections of the definition
relied on by the parties are as follows:
financial
service means
• (a) the exchange, payment, issue, receipt
or transfer of money, whether effected by the exchange of currency, by
crediting or debiting accounts or otherwise,
• (d) the issue, granting, allotment,
acceptance, endorsement, renewal, processing, variation, transfer of ownership
or repayment of a financial instrument,
• (l)
the agreeing to provide, or the arranging for, a service that is
(i) referred to in any of paragraphs (a) to (i), and
(ii) not referred to in any of paragraphs (n) to (t), or
but does not
include
• (n) the payment or receipt of money as
consideration for the supply of property other than a financial instrument or
of a service other than a financial service,
• (q) the provision, to an investment plan
(as defined in subsection 149(5)) or any corporation, partnership or trust
whose principal activity is the investing of funds, of
(i) a management or administrative service, or
(ii) any other service (other than a prescribed service),
if the supplier is a person who provides management or
administrative services to the investment plan, corporation, partnership or
trust,
[98]
In order to determine whether the supply is
included in the definition of “financial service”,
I must only consider whether the dominant element of the supply fits within the
inclusions and exclusions of that definition: The Great-West Life Assurance
Company v The Queen, 2016 FCA 316 at paragraph 48.
A. “the payment …of money”
[99]
Services which have been included in paragraph
(a) of the definition of “financial service”
include cashing cheques, converting currency, exchanging money and the simple
debiting and crediting of accounts: Banque Canadienne Imperiale de Commerce
v Canada, 2006 TCC 336 at paragraph 17. The use of automated banking
machines is also a financial service in accordance with paragraph (a) of the
definition: Mac’s Convenience Stores Inc v R, 2012 TCC 393 at paragraph
22.
[100]
“Payment” is defined
in Black’s Law Dictionary as “The performance of a duty, promise,
or obligation, or discharge of a debt or liability, by the delivery of money”.
[101] Clearly, the dominant element of the single supply is included in
paragraph (a) of the definition for “financial service”.
The Funding Amounts were paid into the Dealer Commission Trust Accounts in
accordance with the Finance Agreements. The dominant element is an
exempt financial service unless it is excepted by any of paragraphs (n) to
(r.5) of the definition of “financial service”.
[102] It is the Respondent’s position that the service provided to the
Funds was a management or administrative service and it is excepted under
paragraph (q).
• (q)
the provision, to an investment plan (as defined in subsection 149(5)) or any
corporation, partnership or trust whose principal activity is the investing of
funds, of
(i) a management or administrative service, or
(ii) any other service (other than a prescribed service),
if the supplier
is a person who provides management or administrative services to the
investment plan, corporation, partnership or trust
[103] The Appellants agreed that the Funds are investment plans. This
satisfies the opening sentence in paragraph (q) above.
[104] The Manager arranged for the funding of DSC Commissions both before
and after the period in issue. The Manager had the duty to manage all aspects
of the Fund’s business and undertakings. The Funds had no employees. In this
regard, Mr. Warren stated:
Q. And what does
it mean to be the manager?
A. Well, the
manager -- I mean, mutual funds do not have employees, so ultimately the job of
the manager is really to provide all of the services or arrange to get the
services necessary for the funds to operate their businesses.
[105] According to Mr. Warren, the Funds could not borrow money to pay the
DSC Commissions and they could not pay them out of their own assets. The Funds
could only pay the Earned Fees because they were allowed to pay management
fees. These management fees were used to pay the funding costs.[6]
[106] In her Written Submissions, counsel for the Respondent wrote:
73. The
management fee was consideration payable by the Funds to the Manager for the
service of funding the deferred sales charge commissions, in addition to the
various other management and administrative services provided by the Manager to
the Funds under the Management Agreement.
[107] During the period in issue, the Manager reduced the amount of
management fees it received from the Funds so that the Earned Daily Fees could
be paid to Funding Corp.
[108] The following is written in the Simplified Prospectus dated August
12, 2005 for the Aim and Trimark Funds: “The manager is
responsible for the day-to-day business and operations of the Funds and for
appointing any sub-advisors. We may hire third parties to perform some
of our services.” (emphasis added)
[109] The “arranging for the payment” of
commissions and the payment of commissions was integral to the day-to-day
business and operations of the Funds. This was a Management duty. That the Manager
may have hired third parties to perform some of its duties did not alter the
fact that the duties performed continued to be a management service.
[110] It is my view that the dominant service provided by the Citibank
Entities was a management duty and delegating that duty to Citibank Entities
did not change the nature of the duty. Paragraph 123(q) applies and the
transaction is excepted from being a “financial service”.
CONCLUSION
[111] The appeal with respect to the PVAT assessments on the Earned Daily
Fees is quashed as the Appellants did not file a notice of objection to the
assessments.
[112] The Financing Transaction was an imported taxable supply. The appeal
is dismissed with costs to the Respondent.
Signed at Ottawa, Canada, this 25th day of May 2017.
“V.A. Miller”
Appendix
Subsection
123(1) – Division I – Interpretation – Definitions
Definitions
123 (1) In section 121, this Part and Schedules V
to X,
…
commercial activity of a person means
(a)
a business carried on by the person (other than a business carried on without a
reasonable expectation of profit by an individual, a personal trust or a
partnership, all of the members of which are individuals), except to the extent
to which the business involves the making of exempt supplies by the person,
(b)
an adventure or concern of the person in the nature of trade (other than an
adventure or concern engaged in without a reasonable expectation of profit by
an individual, a personal trust or a partnership, all of the members of which
are individuals), except to the extent to which the adventure or concern
involves the making of exempt supplies by the person, and
(c)
the making of a supply (other than an exempt supply) by the person of real
property of the person, including anything done by the person in the course of
or in connection with the making of the supply;
…
debt security means a right to be paid money and
includes a deposit of money, but does not include a lease, licence or similar
arrangement for the use of, or the right to use, property other than a
financial instrument;
...
exempt supply means a supply included in Schedule V;
…
financial instrument means
(a)
a debt security,
(b)
an equity security,
(c)
an insurance policy,
(d)
an interest in a partnership, a trust or the estate of a deceased individual,
or any right in respect of such an interest,
(e)
a precious metal,
(f)
an option or a contract for the future supply of a commodity, where the option
or contract is traded on a recognized commodity exchange,
(g)
a prescribed instrument,
(h)
a guarantee, an acceptance or an indemnity in respect of anything described in
paragraph (a), (b), (d), (e) or (g), or
(i)
an option or a contract for the future supply of money or anything described in
any of paragraphs (a) to (h);
…
financial service means
(a)
the exchange, payment, issue, receipt or transfer of money, whether effected by
the exchange of currency, by crediting or debiting accounts or otherwise,
(b)
the operation or maintenance of a savings, chequing, deposit, loan, charge or
other account,
(c)
the lending or borrowing of a financial instrument,
(d)
the issue, granting, allotment, acceptance, endorsement, renewal, processing,
variation, transfer of ownership or repayment of a financial instrument,
(e)
the provision, variation, release or receipt of a guarantee, an acceptance or
an indemnity in respect of a financial instrument,
(f)
the payment or receipt of money as dividends (other than patronage dividends),
interest, principal, benefits or any similar payment or receipt of money in
respect of a financial instrument,
(f.1)
the payment or receipt of an amount in full or partial satisfaction of a claim
arising under an insurance policy,
(g)
the making of any advance, the granting of any credit or the lending of money,
(h)
the underwriting of a financial instrument,
(i)
any service provided pursuant to the terms and conditions of any agreement
relating to payments of amounts for which a credit card voucher or charge card
voucher has been issued,
(j)
the service of investigating and recommending the compensation in satisfaction
of a claim where
(i)
the claim is made under a marine insurance policy, or
(ii)
the claim is made under an insurance policy that is not in the nature of
accident and sickness or life insurance and
(A)
the service is supplied by an insurer or by a person who is licensed under the
laws of a province to provide such a service, or
(B)
the service is supplied to an insurer or a group of insurers by a person who
would be required to be so licensed but for the fact that the person is relieved
from that requirement under the laws of a province,
(j.1)
the service of providing an insurer or a person who supplies a service referred
to in paragraph (j) with an appraisal of the damage caused to property, or in
the case of a loss of property, the value of the property, where the supplier
of the appraisal inspects the property, or in the case of a loss of the
property, the last-known place where the property was situated before the loss,
(k)
any supply deemed by subsection 150(1) or section 158 to be a supply of a
financial service,
(l)
the agreeing to provide, or the arranging for, a service that is
(i)
referred to in any of paragraphs (a) to (i), and
(ii)
not referred to in any of paragraphs (n) to (t), or
(m)
a prescribed service,
but does not include
(n)
the payment or receipt of money as consideration for the supply of property
other than a financial instrument or of a service other than a financial
service,
(o)
the payment or receipt of money in settlement of a claim (other than a claim
under an insurance policy) under a warranty, guarantee or similar arrangement
in respect of property other than a financial instrument or a service other
than a financial service,
(p)
the service of providing advice, other than a service included in this definition
because of paragraph (j) or (j.1),
(q)
the provision, to an investment plan (as defined in subsection 149(5)) or any
corporation, partnership or trust whose principal activity is the investing of
funds, of
(i)
a management or administrative service, or
(ii)
any other service (other than a prescribed service),
if the supplier is a person who provides
management or administrative services to the investment plan, corporation,
partnership or trust,
(q.1)
an asset management service,
(r)
a professional service provided by an accountant, actuary, lawyer or notary in
the course of a professional practice,
(r.1)
the arranging for the transfer of ownership of shares of a cooperative housing
corporation,
(r.2)
a debt collection service, rendered under an agreement between a person
agreeing to provide, or arranging for, the service and a particular person
other than the debtor, in respect of all or part of a debt, including a service
of attempting to collect, arranging for the collection of, negotiating the
payment of, or realizing or attempting to realize on any security given for,
the debt, but does not include a service that consists solely of accepting from
a person (other than the particular person) a payment of all or part of an
account unless
(i)
under the terms of the agreement the person rendering the service may attempt
to collect all or part of the account or may realize or attempt to realize on
any security given for the account, or
(ii)
the principal business of the person rendering the service is the collection of
debt,
(r.3)
a service (other than a prescribed service) of managing credit that is in
respect of credit cards, charge cards, credit accounts, charge accounts, loan
accounts or accounts in respect of any advance and is provided to a person
granting, or potentially granting, credit in respect of those cards or
accounts, including a service provided to the person of
(i)
checking, evaluating or authorizing credit,
(ii)
making decisions on behalf of the person in relation to a grant, or an
application for a grant, of credit,
(iii)
creating or maintaining records for the person in relation to a grant, or an
application for a grant, of credit or in relation to the cards or accounts, or
(iv)
monitoring another person’s payment record or dealing with payments made, or to
be made, by the other person,
(r.4)
a service (other than a prescribed service) that is preparatory to the
provision or the potential provision of a service referred to in any of
paragraphs (a) to (i) and (l), or that is provided in conjunction with a
service referred to in any of those paragraphs, and that is
(i)
a service of collecting, collating or providing information, or
(ii)
a market research, product design, document preparation, document processing,
customer assistance, promotional or advertising service or a similar service,
(r.5)
property (other than a financial instrument or prescribed property) that is
delivered or made available to a person in conjunction with the rendering by
the person of a service referred to in any of paragraphs (a) to (i) and (l),
(s)
any service the supply of which is deemed under this Part to be a taxable
supply, or
(t)
a prescribed service;
…
management or administrative service includes an asset management service;
…
money includes any currency, cheque, promissory note, letter of credit,
draft, traveller’s cheque, bill of exchange, postal note, money order, postal
remittance and other similar instrument, whether Canadian or foreign, but does
not include currency the fair market value of which exceeds its stated value as
legal tender in the country of issuance or currency that is supplied or held
for its numismatic value;
…
property means any property, whether real or personal, movable
or immovable, tangible or intangible, corporeal or incorporeal, and includes a
right or interest of any kind, a share and a chose in action, but does not
include money;
…
service means anything other than
(a)
property,
(b)
money, and
(c)
anything that is supplied to an employer by a person who is or agrees to become
an employee of the employer in the course of or in relation to the office or
employment of that person;
…
supply means, subject to sections 133 and 134, the provision
of property or a service in any manner, including sale, transfer, barter,
exchange, licence, rental, lease, gift or disposition;
…
taxable supply means a supply that is made in the course of a
commercial activity;
Section 217 – Division IV – Tax on Imported Taxable Supplies –
Definitions
Definitions
217 The following
definitions apply in this Division.
…
imported taxable supply means
(a)
a taxable supply (other than a zero-rated or prescribed supply) of a service
made outside Canada to a person who is resident in Canada, other than a supply
of a service that is
(i)
acquired for consumption, use or supply exclusively in the course of commercial
activities of the person or activities that are engaged in exclusively outside
Canada by the person and that are not part of a business or an adventure or
concern in the nature of trade engaged in by the person in Canada,
(ii)
consumed by an individual exclusively outside Canada (other than a training
service the supply of which is made to a person who is not a consumer),
(iii)
in respect of real property situated outside Canada,
(iv)
a service (other than a custodial or nominee service in respect of securities
or precious metals of the person) in respect of tangible personal property that
is
(A)
situated outside Canada at the time the service is performed, or
(B)
exported as soon after the service is performed as is reasonable having regard
to the circumstances surrounding the exportation and is not consumed, used or
supplied in Canada after the service is performed and before the exportation of
the property,
(v)
a transportation service, or
(vi)
a service rendered in connection with criminal, civil or administrative
litigation outside Canada, other than a service rendered before the
commencement of such litigation,
(b)
a taxable supply (other than a zero-rated or prescribed supply) of tangible
personal property made by a non-resident person who is not registered under
Subdivision d of Division V to a recipient who is a registrant where
(i)
physical possession of the property is transferred to the recipient in Canada
by another registrant who
(A)
made a supply in Canada of the property by way of sale, or a supply in Canada
of a service of manufacturing or producing the property, to a non-resident
person, or
(B)
acquired physical possession of the property for the purpose of making a supply
of a commercial service in respect of the property to a non-resident person,
(ii)
the recipient gives the other registrant a certificate of the recipient
described in paragraph 179(2)(c), and
(iii)
the recipient is not acquiring the property for consumption, use or supply
exclusively in the course of commercial activities of the recipient or the
property is a passenger vehicle that the recipient is acquiring for use in
Canada as capital property in commercial activities of the recipient and that
has a capital cost to the recipient exceeding the amount deemed under paragraph
13(7)(g) or (h) of the Income Tax Act to be the capital cost of the vehicle to
the recipient for the purposes of section 13 of that Act,
(b.1)
a taxable supply (other than a zero-rated or prescribed supply) of tangible
personal property made at a particular time by a non-resident person who is not
registered under Subdivision d of Division V to a particular recipient who is
resident in Canada, where
(i)
the property is delivered or made available in Canada to the particular
recipient and the particular recipient is not a registrant who is acquiring the
property exclusively for consumption, use or supply in the course of commercial
activities of the recipient, and
(ii)
the non-resident person previously made a taxable supply of the property by way
of lease, licence or similar arrangement to a registrant who was not dealing at
arm’s length with the non-resident person or who was related to the particular
recipient, the property was delivered or made available in Canada to the
registrant, the registrant was entitled to claim an input tax credit in respect
of the property or was not required to pay tax under this Division in respect
of the supply only because the registrant acquired the property exclusively for
consumption, use or supply in the course of commercial activities of the
registrant, and that supply was the last supply of the property made before the
particular time by the non-resident person to a registrant,
(b.11)
a particular taxable supply (other than a zero-rated supply) of property by way
of lease, licence or similar arrangement that is deemed under subsection 143(1)
to be made outside Canada to a recipient (in this paragraph referred to as the
“lessee”) who is resident in Canada, if
(i)
a previous supply of the property to the lessee was made by way of lease,
licence or similar arrangement (in this paragraph referred to as the “first
lease”) that was deemed under subsection 178.8(4) to be made in Canada,
(ii)
the agreement for the particular taxable supply is an agreement (in this
subparagraph referred to as a “subsequent lease”) that results from the
assignment of, or that succeeds, upon the renewal or variation of, the first
lease or a subsequent lease, and
(iii)
the lessee is not a registrant who is acquiring the property for consumption,
use or supply exclusively in the course of commercial activities of the lessee;
(b.2)
a taxable supply of a continuous transmission commodity, if the supply is
deemed under section 143 to be made outside Canada to a registrant by a person
who was the recipient of a supply of the commodity that was a zero-rated supply
included in section 15.1 of Part V of Schedule VI or that would, but for
subparagraph (a)(v) of that section, have been included in that section, and
the registrant is not acquiring the commodity for consumption, use or supply
exclusively in the course of commercial activities of the registrant,
(b.3)
a supply, included in section 15.2 of Part V of Schedule VI, of a continuous
transmission commodity that is neither exported, as described in paragraph (a)
of that section, nor supplied, as described in paragraph (b) of that section,
by the recipient and the recipient is not acquiring the commodity for
consumption, use or supply exclusively in the course of commercial activities
of the recipient,
(c)
a taxable supply (other than a zero-rated or prescribed supply) of intangible
personal property made outside Canada to a person who is resident in Canada,
other than a supply of property that
(i)
is acquired for consumption, use or supply exclusively in the course of
commercial activities of the person or activities that are engaged in
exclusively outside Canada by the person and that are not part of a business or
an adventure or concern in the nature of trade engaged in by the person in
Canada,
(ii)
may not be used in Canada, or
(iii)
relates to real property situated outside Canada, to a service to be performed
wholly outside Canada or to tangible personal property situated outside Canada,
(c.1)
a taxable supply made in Canada of intangible personal property that is a
zero-rated supply only because it is included in section 10 or 10.1 of Part V
of Schedule VI, other than
(i)
a supply that is made to a consumer of the property, or
(ii)
a supply of intangible personal property that is acquired for consumption, use
or supply exclusively in the course of commercial activities of the recipient
of the supply or activities that are engaged in exclusively outside Canada by
the recipient of the supply and that are not part of a business or adventure or
concern in the nature of trade engaged in by that recipient in Canada,
(d)
a supply of property that is a zero-rated supply only because it is included in
section 1.1 of Part V of Schedule VI, if the recipient is not acquiring the
property for consumption, use or supply exclusively in the course of commercial
activities of the recipient and
(i)
an authorization of the recipient to use the certificate referred to in that
section is not in effect at the time the supply is made, or
(ii)
the recipient does not export the property in the circumstances described in
paragraphs 1(b) to (d) of that Part; or
(e)
a supply of property that is a zero-rated supply only because it is included in
section 1.2 of Part V of Schedule VI, if the recipient is not acquiring the
property for consumption, use or supply exclusively in the course of commercial
activities of the recipient and
(i)
an authorization of the recipient to use the certificate referred to in that
section is not in effect at the time the supply is made, or
(ii) the recipient is not acquiring the
property for use or supply as domestic inventory or as added property (as those
expressions are defined in subsection 273.1(1)).
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