19 January 2019 Interpretation 165888

CRA allowed a rebate claim of ACo (a SLFI) for amounts of federal tax paid in error. No provincial HST was refunded based on the understanding that the s. 263.01 restriction applied. Should the entire rebate amount be included in s. (iii) of G2 of s. 46(a) of the Selected Listed Financial Institution Attribution Method (GST/HST) Regulations (SLFI Regulations) in determining Element G of ACo’s special attribution method (SAM) formula calculation under s. 225(2)?

In responding “no,” CRA first noted that the s. 123(1) definition of tax “is interpreted by the CRA to include only amounts of tax that are actually payable under Part IX, such as tax under subsections 165(1) and (2),” so that “an amount paid in error as or on account of tax is not tax for GST/HST purposes.” CRA then stated:

Given the use of the phrase “amount is in respect of tax” in subparagraph (iii) of G2 of paragraph 46(a) of the SLFI Regulations, the amount rebated to [ACo] in [yyyy] for amounts paid in error as or on account of tax was not an amount in respect of tax under subsection 165(1) or sections 212, 218 or 218.01 and therefore the amount of the rebate cannot be included in subparagraph (iii) of G2 of paragraph 46(a) of the SLFI Regulations in determining Element G of [ACo]’s SAM formula calculation for its [yyyy] fiscal year, or any other fiscal year.

CRA allowed a rebate claim of ACo (a SLFI) for amounts of federal tax paid in error. No provincial HST was refunded based on the understanding that the s. 263.01 restriction applied.

Headquarters indicated that the s. 123(1) definition of tax “is interpreted by it to include only amounts of tax that are actually payable under Part IX, such as tax under subsections 165(1) and (2),” so that “an amount paid in error as or on account of tax is not tax for GST/HST purposes. After finding on this basis that the rebate amount should not be included in s. (iii) of G2 of s. 46(a) of the Selected Listed Financial Institution Attribution Method (GST/HST) Regulations (SLFI Regulations) in determining Element G of ACo’s special attribution method (SAM) formula calculation, Headquarters went on to find that s. 263.01(1) was inapplicable in this situation, stating:

Given the definition of the word tax in subsection 123(1) and the use of the phrase “an amount is in respect of tax” in subsection 263.01(1), the restriction in that subsection would not apply to the rebate of an amount paid in error as or on account of tax by a person that was an SLFI at the time the amount was paid.

CRA indicated that the s. 123(1) definition of tax “is interpreted by it to include only amounts of tax that are actually payable under Part IX, such as tax under subsections 165(1) and (2),” so that “an amount paid in error as or on account of tax is not tax for GST/HST purposes.” Thus, in its view, such tax paid in error does not go into elements A and F of the formula, nor is a refund of the tax paid in error deducted under G of the formula as a refund of “tax under” e.g. ETA s. 165(1). For example, respecting element A:

As an amount paid in error as or on account of tax is not tax, the amount should not be included in Element A of the SAM formula which includes all tax … that became payable under any of subsection 165(1) and sections 212, 218 and 218.01 by the financial institution during the particular reporting period or that was paid by the financial institution during the particular reporting period without having become payable. …

CRA concluded:

Consequently, if an SLFI has included an amount in Element A and Element F of the SAM formula in a particular reporting period and subsequently it is determined that the amount was paid in error by the SLFI as or on account of tax, as the amount is not tax payable under subsections 165(1), 165(2) or sections 212, 212.1, 218 or 218.01, the SLFI’s SAM formula calculation should be corrected to remove the amount from Element A and Element F for the reporting period in which that amount was included.

CRA indicated that the s. 123(1) definition of tax “is interpreted by it to include only amounts of tax that are actually payable under Part IX, such as tax under subsections 165(1) and (2),” so that “an amount paid in error as or on account of tax is not tax for GST/HST purposes.” Thus, in its view, such tax paid in error does not go into elements A and F of the special attribution method formula in s. 225.2(2), nor is a refund of the tax paid in error deducted under G of the formula as a refund of “tax under” e.g. ETA s. 165(1).