27 February 2020 CBA Roundtable, Q.18

Where a valid s. 273 election was in place with respect to an ongoing joint venture, and a new co-venturer purchased an interest in the joint venture real property at a time when it was not a registrant, could it become retroactively registered to the date of acquisition so as to claim an ITC for the taxable supply of the real property, and to relieve the supplier from collecting tax under ss. 221(2)(b) and 228(4)?

CRA stated:

In general, retroactive registration is only available if a person was required to be registered for GST/HST purposes pursuant to subsection 240(1). It is not clear from the information provided that the co-venturer was required to be registered on the date of the acquisition of the real property.

However, if the co-venturer, subsequent to the acquisition of the real property, registered for GST/HST purposes in accordance with the requirements of subsection 240(3) and, immediately before that time, the co-venturer was a small supplier, then subsection 171(1) may apply to allow the co-venturer to claim ITCs for property it held immediately before that time.

CRA indicated that, in general, GST/HST “retroactive registration is only available if a person was required to be registered for GST/HST purposes pursuant to subsection 240(1).”

Thus, where a new co-venturer purchased an interest in an existing real estate joint venture for which an ETA s. 273 election was already in place (so that all the rental supplies of that real property were to be reported by the JV “operator” and not by it, it could not become retroactively registered to the date of acquisition so as to claim an ITC for the GST/HST payable by it on that acquisition, and to relieve the supplier from collecting tax under ss. 221(2)(b) and 228(4).

CRA indicated:

Subparagraph [167[(1.1)(a)(iii) only applies in circumstances where neither the supplier nor the recipient are GST/HST registrants.