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.
FILE/DOSSIER
118518
DATE
December 14, 2009
FROM/DE
Joseph Mathieu
Senior Rulings Officer
General Operations Unit
Excise & GST/HST Rulings Directorate
TO/À
XXXXX
XXXXX
XXXXX
XXXXX
SUBJECT/OBJET :
_GST/HST Interpretation
Application of GST to ethics cost recovery payments
This memorandum is in response to your question as to whether the GST applies to ethics cost recovery payments.
Statement of Facts
The following facts are based on the XXXXX, and your question as to whether ethics cost recovery payments as a result of disciplinary investigation are consideration for a taxable supply and therefore subject to GST.
1. The XXXXX is a registrant for GST/HST purposes.
2. Under the XXXXX (the Bylaws), the XXXXX establishes and enforces the standards of XXXXX conduct, competence and proficiency to be maintained by XXXXX. XXXXX refer to the principles and rules established by the XXXXX. The objects and powers of the XXXXX are carried out and exercised under bylaws and resolutions passed by XXXXX.
3. XXXXX refers to disciplinary action that may be taken by the XXXXX. XXXXX.
4. You have confirmed with XXXXX from XXXXX that the ethics cost recovery payments are imposed by XXXXX on XXXXX as a result of disciplinary investigations.
5. XXXXX.
6. XXXXX will appoint an investigator of the complaint. If it is determined that the complaint refers to a clear and obvious violation of the XXXXX, the Bylaws or the XXXXX, the XXXXX may order, pursuant to XXXXX, that XXXXX pay to the XXXXX all or any part of the costs in connection with the investigation and any proceedings under these Bylaws.
Question
What is the tax status of the ethics cost recovery payments imposed by the XXXXX as a result of disciplinary investigations?
Response
Based on the facts set out above, it is our view that the ethics cost recovery payments imposed by the XXXXX as a result of disciplinary investigations are consideration for taxable supplies.
Explanation
When the XXXXX appoints an investigator, it incurs the costs related to the investigation. The XXXXX is the recipient of the supply by the investigator, as it is the person who is liable to pay the consideration for that supply.
The amount paid by the XXXXX is consideration for a supply of an investigation service. The XXXXX has acquired the service and has re-supplied it to XXXXX. In this situation, the GST applies on the amount charged to XXXXX.
Subsection 165(1) of the ETA provides that the recipient of a taxable supply is required to pay tax equal to 5% on value of the consideration for the supply. In order to be consideration, the amount must be payable for a supply. The investigation costs are consideration for a supply.
Should you have any questions, please call me at (613) 952-0419.
XXXXX
UNCLASSIFIED
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