General partner may be providing its management services to LP in its separate capacity (p. 19)
[W]here a general partner of a limited partnership provides a management or administrative service to the limited partnership, the general partner may be providing this service to the limited partnership otherwise than in the course of the limited partnership’s activities. As such, existing subsection 272.1(3) may have application. In such cases where existing paragraph 272.1(3)(b) applies, the general partner is required to account for GST/HST calculated on the FMV of the management or administrative service provided to the limited partnership at the time the supply is made (that is, when the agreement to provide the service was entered into, unless subsection 136.1(2) applies). The proposed amendments clarify this position with respect to ILPs.
Example 7, Scenario 2 respecting admin and management services provided to ILP ("LP Fund") by its GP ("Aco") (which is entitled, at the beginning of each month, to a monthly percentage of NAV, and also to an annual carry), were taxable even before s. 272.1(8) (p. 26)
As Aco did not charge, collect or remit any tax in respect of any of the prior services, proposed subsection 272.1(8) would not apply to the prior services. Nevertheless, in accordance with existing paragraph 272.1(3)(b) and subsection 136.1(2), Aco was required to make a determination, on the first day of each billing period, of the FMV of the management and administrative services rendered to LP Fund during each billing period determined as if Aco were not a member of LP Fund and were dealing at arm’s length with LP Fund. Aco is required to amend its returns for those periods to account for this tax that was collectible by Aco.
The September 1 to 7, 2017 period would be a billing period for purposes of subsection 136.1(2) and based on the application of existing paragraph 272.1(3)(b), Aco would be required to make a determination, on the first day of that billing period, of the FMV of the management and administrative services rendered to LP Fund during that billing period.