Please note that the following document, although correct at the time of issue, may not represent the current position of the Canada Revenue Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence du revenu du Canada.
TO
[Addressee]
FROM
Glenda Karamath
Senior Rulings Officer
Goods Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate
Case Number: 152996
Dear [Client]:
Subject: GST/HST INTERPRETATION
Application of GST/HST to Executor and Attorneyship Fees
This is in response to your […][questions about] the estate of […][Mr. X (the deceased)] and the estate’s eligibility for a rebate under section 261 of the Excise Tax Act (ETA). We regret the delay in our response.
The HST applies in the participating provinces at the following rates: 13% in Ontario; and 15% in New Brunswick, Newfoundland and Labrador, Nova Scotia and Prince Edward Island. The GST applies in the rest of Canada at the rate of 5%.
All legislative references are to the Excise Tax Act (ETA), unless otherwise specified.
BACKGROUND
We understand the following facts:
1. […][Executor A] became registered for the GST/HST effective […] [eight years before the death of Mr. X]. […] [Executor A’s] GST/HST account […] status […][is] currently “active”, […][Executor A’s] filing status is “non-filing”, and [Executor A’s] reporting period [is] “non-reporting”. […] [Executor A’s] business activity […][is reported] to be […].
2. For a portion of the time period in question, […][Executor B] practised as a lawyer. The activities of a law practice can include the supply of executorship services. [Executor B] was acting as an executor of the Estate at all times, not as the Estate’s solicitor. […] [Executor B]’s GST/HST account status […] […][was] “pending close” effective […][several years before the death of Mr. X]. […].
3. [Executor B] […][has not had a] licence to practise law […][since shortly after the death of Mr. X]. […], [Executor B] continued as executor of the Estate, as evidenced by the form signed by [Executor B] dated [mm/dd/yyyy], authorizing the CRA to deal with […][the Representative], the estate’s representative.
4. As evidenced by a [written] document […], the contents of the Estate’s accounts were accounted for, approved and executed for the period [mm/dd/yyyy] (date of death) to […] [a date approximately two years later]. The Estate paid an Attorneyship fee of $[…] to [Executor A] […][around that same date and] remitted an amount of $[…] as HST directly to the Receiver General, by way of a bank draft ([…]).
5. The Estate also paid Executorship fees of $[…] [around that same date and divided equally between] […] [Executor A] and [Executor B] [and] […], the Estate remitted a bank draft in the amount of $[…] to the Receiver General, as HST in respect of these fees […][paid to Executor A and Executor B].
6. The CRA deposited both of the above mentioned bank drafts on [mm/dd/yyyy], and the payments were posted to an account number […].
7. […], the CRA received a completed General Application for Rebate of GST/HST (GST189) […] requesting a rebate of tax paid in error for a total of $[…] in respect of the […][amounts] remitted by the Estate as tax in respect of [Executor A's] Attorneyship fees [and] […] Executorship fees.
8. […].
9. […].
10. […] .
11. […][Subsequently], the Estate requested that the amount of the rebate request be increased to include also the $[…] remitted directly by the Estate as HST in respect of the Executorship fees paid to [Executor B], [thereby] increasing the rebate requested to $[…].
12. The Estate would like the rebate cheque to be made payable to the Estate of [Mr. X].
ISSUES
1. Whether the GST/HST was payable by the Estate on the Attorneyship and Executorship fees.
2. Whether the Estate remitted the HST to the Receiver General in error.
3. Whether the Estate is eligible for a rebate under section 261.
RESPONSE
Question 1
Taxable (other than zero-rated) supplies made in Canada are subject to GST/HST at the applicable rate, depending on the province in which the supply is made. In accordance with subsection 221(1), every person who makes a taxable supply in Canada is required to collect, as agent of Her Majesty in right of Canada, the GST/HST payable by the recipient of the supply. For GST/HST purposes, tax is payable to the supplier by the recipient of a taxable supply, calculated on the value of the consideration for the supply. Subsection 123(1) defines a “taxable supply” to mean “a supply made in the course of a commercial activity”.
The definition of “commercial activity” in subsection 123(1) provides, in part, that commercial activity means a business carried on by a person, except to the extent it involves the making of exempt supplies. The definition of “business” in subsection 123(1) provides, in part, that “business” includes a profession, calling or trade, manufacture or undertaking of any kind whatever but does not include an office or employment. Further, pursuant to the definition of “service” in subsection 123(1), any duty performed or anything supplied by a person in the course of or in relation to an office or employment is not a “service” for GST/HST purposes. Therefore, a duty performed by a person in the course of or in relation to an office or employment is not a supply of a service made in the course of a commercial activity of the person, and compensation in respect of such activity is not subject to GST/HST.
In determining whether the amount paid is in respect of an office, subsection 123(1) provides in part that ‘office’ has the meaning assigned by subsection 248(1) of the Income Tax Act, but does not include ... (c) the position of trustee of a trust or personal representative of a deceased individual where the person who acts in that capacity is entitled to an amount for doing so that is included in computing, for the purposes of that Act, the person’s income or, where the person is an individual, the person’s income from a business;”. Where an executor’s fees are income from a business of an individual pursuant to the Income Tax Act, they are considered to be in respect of the supply of a service made in the course of a commercial activity pursuant to the ETA, and unless the person is a small supplier who is not required to be registered for GST/HST purposes, the person will be required to collect GST/HST in respect of the fees. However, where the compensation is income from an office for purposes of the Income Tax Act, and is not excluded from the definition of “office” in the ETA, the individual is considered to be performing a duty or act in the course of or in relation to an office or employment and, therefore, GST/HST does not apply to the amount paid.
Therefore, where an executor or a person with power of attorney is a person who does so in the course of carrying on a business, the consideration paid or payable for those services is subject to the GST/HST. Conversely, where an executor or a person with power of attorney does not act as an executor or exercise an attorneyship in the course of carrying on a business, the fees earned are generally not subject to GST/HST.
The performance of the offices of the attorneyship and the executorship by [Executor A] is not considered to be a taxable supply made in the course of a commercial activity and is, therefore, not subject to GST/HST.
[Executor B] began […][Executor B’s] executorship services on [mm/dd/yyyy], the day [Mr. X] died. By way of a written agreement, the amount of consideration due, for the executorship services provided, was agreed to. […] it is possible that [Executor B’s] legal practice may have supplied executorship services in its normal course of business. However, in the absence of direct evidence to support the position that this is the case we […] conclude that [Executor B] performed the executor services in relation to an office and he is not considered to have made a taxable supply in the course of commercial activities. Consequently, no GST/HST was payable by the Estate on the amount paid to [Executor B], as executor.
Question 2
Since the amounts paid to [Executor A] for [Executor A's] performance […] of attorneyship and executorship and the amount paid to [Executor B] for [Executor B’s] performance […] as executor are not consideration for a taxable supply, the amounts remitted to the Receiver General by the Estate as GST/HST in respect of the amounts, were remitted in error.
Question 3
The Estate would be entitled to a rebate under section 261of the amount remitted in error to the Receiver General where all of the conditions of the provision are met including the statutory time limit within which to apply for such a rebate. The request made by the Estate may be taken into consideration in accordance with the normal administrative practice in such cases.
If you require clarification with respect to any of the issues discussed in this letter, please call Ken Syer, Manager, Goods Unit at 613-670-9894.
Yours truly,
Glenda Karamath
Senior Rulings Officer
Goods Unit
Excise and GST/HST Rulings Directorate
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