Meaning of “principal activity”
A person’s “principal activity,” as discussed … in College of Applied Arts … depends on how important a particular activity assists the person in achieving its overall business objectives and goals when compared to its other business activities. To determine a person’s principal activity, the Canada Revenue Agency (CRA) generally considers:
- the relative profits realized by each segment of a person's business
- the total number of supplies made and the total value of the revenue received from supplies made in each business activity
- the relative value of the assets employed in each business activity
- the commercial practices of the person, including the time, attention, and efforts expended by the employees, managers, or corporate officers in each business activity, and
- the terms of any partnership agreement if the person is a partnership, or corporate objects in the case of a corporation
Addition of ILPs to SLFI world
Most Canadian resident investment limited partnerships (ILPs) will be considered to be a Selected Listed Financial Institution (SLFI), starting January 1, 2019 (i.e. the 2019 fiscal year). This will require the ILP to adjust its GST/HST and QST liabilities for the 2019 fiscal year by filing a SLFI return by June 30, 2020.
Desirability of an investment limited partnership (or other SLFI) making a s. 225.4(6) (or (7)) election so as to avoid ITC denials under s. 225.4(3)(d) for non-exclusive inputs incurred re Sched. VI, Pt. IX, s. 1 or s. 186 commercial activity
Although most ILPs do not make taxable supplies on which they collect and remit GST/HST, an ILP may undertake certain activities which allow it to claim ITCs, including making zero-rated supplies of financial services to non‑residents or, pursuant to proposed amendments to section 186 of the ETA, holding shares or debt in related corporations whose property (all or substantially all) was last acquired for use exclusively in a commercial activity. As deeming rules may preclude an ILP from claiming ITCs on expenses that are not being incurred exclusively in a commercial activity, an ILP should also consider filing certain elections under section 225.4 of the ETA.
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