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.
Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 15th floor
320 Queen Street
Ottawa ON K1A 0L5
XXXXX
XXXXX
XXXXX
XXXXX
Attention: XXXXX
XXXXX
Case Number: 114562
June 5, 2009
Subject:
GST/HST INTERPRETATION
The application of section 141.01 to an annual golf tournament and awards dinner
Dear XXXXX:
Thank you for your XXXXX concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to an annual golf tournament and an awards dinner which are provided for free by XXXXX to its employees.
All legislative references are to the Excise Tax Act (ETA) unless otherwise specified.
You provided the following background information:
XXXXX holds an annual golf tournament for which registration fees and sponsorship monies are collected. You are of the view that these supplies would be taxable supplies for GST purposes. However, employees of XXXXX are not required to pay the registration fees. Non-employees attending the event would be required to pay a registration fee.
XXXXX also holds an annual awards dinner for its independent agents to which its employees are invited. In this case, there is no cost to attending the event but some sponsorship monies may be collected from suppliers to XXXXX. In your view, GST would have to be collected on any of these sponsorship monies. It is unlikely that the sponsorship monies would be sufficient to cover the cost of the event.
INTERPRETATIONS REQUESTED
You would like to know whether XXXXX is entitled to claim input tax credits in light of subsection 141.01(2) in the above circumstances since subsection 141.01(2) denies any input tax credits for GST paid on the cost of properties or services that are acquired for use in a business of the person unless they are purchased for the purposes of making taxable supplies for consideration that is more than nominal.
In particular you raise the following questions:
1. In making a determination of whether the consideration for a supply is more than nominal, does the Canada Revenue Agency look at the entire consideration received for the event or each supply of an admission separately?
2. Sponsorship monies and the registration fees may be more than sufficient to cover the cost of the golf tournament; however, there is no consideration charged to employees for their admission to the golf tournament. Can XXXXX recover as input tax credits the full cost of any GST paid for the purposes of putting on the golf tournament or will XXXXX be precluded from claiming any input tax credits for GST paid for any costs for the golf tournament that relates to its employees?
3. In the case of the annual awards dinner where the sponsorship monies are insufficient to cover the cost of the event, would the CRA deny any input tax credits for the cost of the awards dinner on the basis that the consideration was nominal (i.e. did not cover the cost) or would the CRA allow full input tax credits even if the GST collected did not cover the cost provided that the consideration received from the sponsorships was more than nominal?
INTERPRETATIONS GIVEN
The following confirms the information we discussed XXXXX.
Subsection 141.01(1) provides that for purposes of section 141.01 an "endeavour" of a person is a business, an adventure or concern in the nature of trade, or the making of a supply of real property (and anything done by the person in connection with making the supply of real property) by the person.
Subsection 141.01(1.1) provides that "consideration" does not include nominal consideration in subsections 141.01(1.2), (2) and (3).
Generally, pursuant to paragraph 141.01(2)(a) a person is deemed to have acquired or imported or brought into a participating province a particular property or service for consumption or use in the course of commercial activities of the person to the extent the property or service is acquired or imported or brought into a participating province by the person for the purpose of making taxable supplies for consideration in the course of an endeavour of the person. While pursuant to paragraph 141.01(2)(b) a person is deemed to have acquired or imported or brought into a participating province a particular property or service for consumption or use otherwise than in the course of commercial activities of the person to the extent the property or service is for the purpose of making supplies that are not taxable supplies for consideration in the course of the endeavour or for a purpose other than the making of supplies in the endeavour. Generally, the effect of subsection 141.01(2) is that input tax credits may only be claimed with respect to property or services acquired or imported or brought into a participating province for the purpose of making taxable supplies for consideration in the course of an endeavour.
Subsection 141.01(4) contains special rules to address situations where taxable supplies are made for nil or nominal consideration (a "free supply"). Subsection 141.01(4) applies where a free supply of property or a service is made in the course of the supplier's endeavour and it can reasonably be regarded that among the purposes for making the free supply is the purpose of facilitating, furthering or promoting the acquisition, consumption or use of other property or services by any other person or an endeavour of any person. Pursuant to subsection 141.01(4) property and services acquired or imported to be given away as a free supply or consumed or used to make the free supply are deemed for the purposes of subsections 141.01(2) and (3) to have been acquired or imported, consumed or used, for the purpose of facilitating, furthering or promoting either the endeavour of any person or the acquisition, consumption or use of another property or service by any other person and not for the purpose of making the free supply. Generally, the effect of subsection 141.01(4) is that an input tax credit may be claimed with respect to property or services acquired for the purpose of making a free supply where it is reasonable to regard the purpose of the making of the free supply as facilitating, furthering or promoting a commercial activity of any person.
With respect to the situation you presented, the sponsorship revenues are not consideration for the supply of the right to play golf or for the awards dinner and are consideration for the supply of promotion and/or advertising. Each supply made by XXXXX is a separate and distinct supply and the consideration is determined with respect to each supply.
Any sponsorship revenues received will be subject to GST/HST where indeed the money is consideration for the supply of promotional rights or advertising (as opposed to being a donation - a gift of money not given in exchange for anything), as such a supply is a taxable supply made by XXXXX to the sponsor. In accordance with subsection 141.01(2), XXXXX XXXXX may claim input tax credits with respect to property or services it acquires to the extent they are acquired for the purpose of making the taxable supply of promotion/advertising and the consideration is not nil or nominal. However, it is a question of fact whether a particular property or service is acquired for the purpose of making such a taxable supply or rather for the purpose of making the free supplies of the right to play golf or the awards dinners as the case may be, and thus be for the purpose of furthering XXXXX business which consists of the making of exempt supplies XXXXX. Further, an appropriate allocation is required by XXXXX for purposes of claiming any input tax credit with respect to a particular property or service acquired for consumption or use in the course of making a taxable supply for consideration and for other purposes, pursuant to sections 169 and 141.01.
XXXXX is not entitled to input tax credits with respect to property or services acquired for the purpose of providing the right to play golf or the awards dinner to its employees or anyone else for free or for nominal consideration pursuant to subsections 141.01(4) and 141.01(2). Such an activity, that is the making of the free supplies, is an input to its business, specifically for the purpose of furthering the endeavour of XXXXX which consists of making exempt supplies XXXXX. Any inputs to these free supplies would be deemed to be acquired for the purpose of making exempt supplies XXXXX in the course of XXXXX business.
In the situation you presented where XXXXX charges consideration for the supply of the right to play golf to an individual GST/HST must be collected on the consideration since such a supply is taxable. Providing the consideration is not nil, or is not nominal, an input tax credit would be available to the extent XXXXX acquired particular property or services for consumption or use in the course of making the particular taxable supply in accordance with subsection 141.01(2). However, as explained above, it is a question of fact whether a particular input is acquired for the purpose of making a taxable supply for consideration or rather for the purpose, in this case, of making free supplies of the right to play golf to its employees, and thus the promotion of XXXXX business involving the making of exempt supplies, so that input tax credits could not be claimed.
Generally, in conclusion, while any determinations in these circumstances are a question of fact, it is our view that where XXXXX provides the right to play golf for no or nominal consideration in an annual golf tournament, or dinners for free in an annual awards dinner such as you described XXXXX, all the property and services acquired with respect to these events would be for the purpose of making the free supplies. The free supplies would be for the purpose of promoting XXXXX business which consists of the making of exempt supplies XXXXX. Therefore, XXXXX would not be entitled to input tax credits with respect to property and services acquired for consumption or use in the annual events described above.
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 613-952-9213. 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,
Susan Kissner
Corporate Reorganizations Unit
Financial Institution and Real Property Division
Excise and GST/HST Rulings Directorate
UNCLASSIFIED
Email this Content