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.
Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 15th floor
320 Queen Street
Ottawa ON K1A 0L5
[Addressee]
Case Number: 160297
March 21, 2014
Dear [Client]:
Subject: GST/HST INTERPRETATION
GST/HST reporting for partnerships
Thank you for your letter of February 19, 2014, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to reporting for partnerships.
The HST applies in the participating provinces at the following rates: 13% in Ontario, New Brunswick and Newfoundland and Labrador, 14% in Prince Edward Island (effective April 1, 2013) and 15% in Nova Scotia. The GST applies in the rest of Canada at the rate of 5%.
Effective April 1, 2013, the 12% HST in British Columbia has been replaced by the 5% GST and a provincial sales tax.
All legislative references are to the Excise Tax Act (ETA) unless otherwise specified.
INTERPRETATION REQUESTED
In your letter you indicated that it is has been a general practice in the real estate industry that a general partner would be the person that reports the GST/HST of the partnership and claims all input tax credits on related purchases of the partnership. You understand that this is not compliant under the ETA and therefore, you are writing to ask whether the Canada Revenue Agency (CRA) will consider providing administrative tolerance for this non-compliance, in a manner similarly outlined in GST/HST Notice No. 284, Bare Trusts, Nominee Corporations and Joint Ventures.
Background
The CRA has for reporting periods ending before January 1, 2015, provided administrative tolerance in relation to joint ventures where participants in a joint venture have made an election under section 273 for a nominee corporation or bare trust to be the “operator” of the joint venture where the nominee corporation or bare trust does not have the managerial or operational control and is not considered to be a participant in accordance with GST/HST Policy Statement P-106, Administrative definition of a “participant” in a joint venture.
INTERPRETATION GIVEN
There is no provision under the ETA that provides administrative tolerance in relation to the GST/HST reporting for partnerships by a general partner of the partnership.
Under subsection 240(1), every person who makes a taxable supply (including a zero-rated supply) in Canada in the course of a commercial activity engaged in by the person in Canada is required to register for the GST/HST except in certain circumstances, for example, when the person is a small supplier. As you are aware, under subsection 221(1), every person who makes a taxable supply is generally required to collect any tax that is payable by the recipient of the supply and file a GST/HST return under subsection 238(1) with the Minister for each reporting period of the registrant and remit that tax in accordance with section 228.
The definition of a “person” under subsection 123(1) includes a partnership. Therefore, a partnership is considered to be a person separate from its partners. Subsection 272.1(1) provides that anything done by a person as a member of a partnership is deemed to have been done by the partnership in the course of the partnership's activities and not to have been done by the person. As a GST/HST registrant, the partnership is the entity that is required to file and remit the GST/HST when making taxable supplies in Canada in the course of its commercial activity.
The Compliance Programs Branch (CPB) conducts examinations, audits and investigations aimed at ensuring compliance with the ETA. CPB is not aware of any issues encountered by its auditors that have resulted in the inconsistent application of the provisions of section 272.1 of the ETA. Furthermore, the CRA does not consider that there is any need to extend administrative tolerance as requested in your letter.
If there has been an error in reporting the GST/HST, persons may correct inaccurate or incomplete information previously provided to the CRA, or disclose information they have not previously provided, under the Voluntary Disclosures Program ("VDP"). The VDP allows taxpayers, in certain circumstances, to come forward and correct inaccurate or incomplete information or disclose material they did not report during previous dealings with the CRA, without penalty or prosecution. The CRA's Circular IC00-IR3, Voluntary Disclosures Program, provides more information on making a voluntary disclosure. It is available on the CRA's website at: www.cra-arc.gc.ca/gncy/nvstgtns/vdp-eng.html.
The foregoing comments represent our general views with respect to the subject matter of your request. These comments are not rulings and, in accordance with the guidelines set out in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service, do not bind the Canada Revenue Agency with respect to a particular situation. Future changes to the ETA, regulations, or our interpretative policy could affect this interpretation.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-952-8811. Should you have additional questions on the interpretation and application of GST/HST, please contact a GST/HST Rulings officer at 1-800-959-8287.
Yours truly,
Monica Ma
Special Provisions - FI Unit
Financial Institutions and Real Property Division
Excise and GST/HST Rulings Directorate
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