Please note that the following document, although correct at the time of issue, may not represent the current position of the Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence.
TO:
XXXXX
XXXXX
XXXXX
XXXXX
XXXXX
FROM:
Dawn Weisberg
Manager
Financial Institutions and Real Property Division
Excise and GST/HST Rulings
Directorate
CASE NUMBER:
103258
DATE:
May 13, 2008
SUBJECT:
_GST/HST Interpretation
Late-filed subsection 225.2(4) elections
This reply is in response to your request XXXXX concerning late-filed subsection 225.2(4) elections. We apologize for the delay in responding to your enquiry.
All legislative references are to the Excise Tax Act (ETA) and the regulations thereunder, unless otherwise specified.
You have received requests to file the following subsection 225.2(4) elections late:
• XXXXX and XXXXX.
• XXXXX and XXXXX.
• XXXXX and XXXXX.
• XXXXX and XXXXX.
Included with these requests, are the forms GST497, Election Under the Special Attribution Method for Selected Listed Financial Institutions and Notice of Revocation and reasons for late filing the elections.
As well, a GST497 form between XXXXX and XXXXX with the effective date of XXXXX was submitted without reasons for late filing the election.
The following background information is based on the information submitted with these requests:
• At all material times, XXXXX, XXXXX, XXXXX and XXXXX were selected listed financial institutions (SLFIs) within the meaning of that definition in subsection 123(1).
• XXXXX. The entity provided management services to XXXXX and XXXXX for which it charged management fees. XXXXX and XXXXX filed a section 150 election with a predecessor of XXXXX; GST was not charged by XXXXX on the management fees.
• On XXXXX a major business reorganization occurred; XXXXX.
• Due to extenuating circumstances arising from this business reorganization and the complexity of XXXXX and XXXXX affairs, subsection 225.2(4) elections were not filed by the SLFI's on or before the required due date of the XXXXX reporting periods.
• Although the subsection 225.2(4) elections were not filed, XXXXX and XXXXX computed their net tax payable in respect of the XXXXX and subsequent reporting periods as if the elections under subsection 225.2(4) had been made with XXXXX.
• On XXXXX, XXXXX made an application to the Minister of National Revenue (the Minister) for an extension of time to file the subsection 225.2(4) elections with the effective date for the elections as XXXXX. On XXXXX, XXXXX made an application to the Minister for an extension of time to file subsection 225.2(4) elections for the XXXXX year between XXXXX and XXXXX and for the XXXXX and XXXXX years between XXXXX and XXXXX. At that time there was no legislative provision to allow for late-filed subsection 225.2(4) elections, therefore the applications were denied.
Comments
As you are aware, on October 3, 2003, the Department of Finance announced an amendment to paragraph 225.2(5)(c). The proposed amendment, which received Royal Assent on June 22, 2007, gives the Minister discretion, on or after the announcement date, to consider requests for late-filed subsection 225.2(4) elections.
We have developed a policy statement that will provide guidelines on when a request to late file a subsection 225.2(4) election may be accepted and when it will not. Although it has not yet been released to the general public, we are able to provide you with the content of the policy statement as follows:
A SLFI's request to late file a subsection 225.2(4) election will be considered on a case-by case basis within the context of the following guidelines:
1. A request to late file an election may be accepted if all the following conditions are met:
If the parties to the election meet the criteria set out in subsection 225.2(4) on the day the election is to become effective and
• included in the request is the form GST497, Election Under the Special Attribution Method for Selected Listed Financial Institutions and Notice of Revocation (unless it has previously been filed), and a written explanation as to why the SLFI filed the election late;
• as of the date of the request, all the GST/HST returns that are due by the SLFI are filed; and
• as of the effective date for the election, the parties to the election have consistently operated as if the election was in effect.
The following information clarifies the phrase "the parties to the election have consistently operated as if the election was in effect":
Where a SLFI and a closely related corporation who is not a SLFI make an election under subsection 225.2(4), the amount the SLFI must add in its net tax adjustment with regard to the property or services to which the election under section 150 applies, will be equal to tax calculated on the supplier's cost excluding remuneration to the supplier's employees, the cost of financial services, and tax under Part IX.
Operating as if the election was in effect would be evidenced on the SLFI's form GST 494, Goods and Services Tax/Harmonized Sales Tax Final Return for Selected Listed Financial Institutions, where the calculation of the SLFI's net tax adjustment is consistently based upon the supplier's cost as of the election's requested effective date.
2. A request to late file an election will not be accepted under the following circumstances:
If the parties to the election do not meet the criteria set out in subsection 225.2(4) on the day the election is to become effective; or
If the parties to the election do meet the criteria set out in subsection 225.2(4) on the day the election is to become effective but
• the form GST497 has not been filed with the request (or has not previously been filed);
• as of the date of the request, not all the GST/HST returns that are due by the SLFI are filed;
• as of the effective date for the election, the parties to the election have not been consistently operating as if the election was in effect. (For example, a SLFI cannot make a request to file the election late in order to amend its net tax adjustment to reflect the supplier's costs); or
• the parties were negligent or careless in complying with the election provisions.
Based upon the background information submitted with the requests to file the subsection 225.2(4) elections late, we understand that certain SLFIs failed to file the elections on time because of business reorganizations and amalgamations.
Paragraph 271(a) provides that a new corporation formed on amalgamation will generally be treated, for GST/HST purposes, as being a separate person from each of the predecessor corporations. However, paragraph 271(b) provides, in part, that the new corporation will be considered to be the same corporation as, and a continuation of, each of the predecessor corporations for prescribed purposes. The prescribed purposes are outlined in the Amalgamations and Windings-Up Continuation (GST/HST) Regulations (the Regulations).
Section 150 is a prescribed section under the Regulations. The result is that, where a section 150 election is in place and an amalgamation occurs, the new corporation will be considered to be the same corporation as, and a continuation of, each of the predecessor corporations for purposes of section 150.
However, subsections 225.2(4) and 225.2(5) are not prescribed subsections under the Regulations. Where an amalgamation of the SLFI or the corporation occurs, the new SLFI or the new corporation will not be considered to be the same corporation as, and a continuation of, each predecessor as referred to in paragraph 271(b), for purposes of subsections 225.2(4) and 225.2(5). Therefore, as a result of the amalgamation, a new election in accordance with subsection 225.2(4), and where necessary a new request to late file the subsection 225.2(4) election in accordance with subparagraph 225.2(5)(c)(ii), are required to be filed by the new corporation.
It is important to note that section 271 does not apply where two or more corporations are merged or amalgamated to form one corporation as the result of the acquisition of property of one corporation by another corporation pursuant to the purchase of the property by the other corporation or as the result of the distribution of the property to the other corporation on the winding-up of the corporation.
The facts of each request to file a subsection 225.2(4) election late must be verified to determine whether all the criteria for filing the election are met. For example, verification that one party to the election is a SLFI and one is not a SLFI must be made, and the two parties must have an effective section 150 election in place as of the effective date for the subsection 225.2(4) election.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-952-9210.
Yours truly,
Dawn Weisberg
Manager
Financial Institutions Unit
Financial Institutions and Real Property Division
Excise and GST/HST Rulings Directorate
UNCLASSIFIED
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