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
Case Number: 111178
Attention: XXXXX
XXXXX
Business Number: XXXXX
January 27, 2010
Dear XXXXX:
Subject:
GST/HST INTERPRETATION
GST/HST Annual Information Schedule - Form GST111
Thank you for your letter of XXXXX, (including a copy of your XXXXX, letter to the XXXXX Tax Centre) concerning the completion of Form GST 111, Schedule 1 - Financial Institution GST/HST Annual Information Schedule (AIS). We apologize for the delay in responding to your enquiry.
All legislative references are to the Excise Tax Act (ETA) unless otherwise specified.
We understand that:
XXXXX.
XXXXX is registered for Goods and Services Tax (GST) / Harmonized Sales Tax (HST) purposes. Based on your letter, XXXXX provides taxable supplies of rights to attend XXXXX. In XXXXX, its revenue from the XXXXX was approximately $XXXXX which represented XXXXX% of its total revenue for the year.
Based on XXXXX, XXXXX earns a significant amount of its total annual revenue from investments. Earnings from investments are held to meet financial obligations XXXXX. XXXXX.
Interpretation Requested
You would like to know if XXXXX may be granted an exemption from filing the AIS.
Interpretation Given
On January 26, 2007, the Minister of Finance announced a new requirement for financial institutions to file the AIS. A person is required to complete and file the AIS in respect of its fiscal year if the person:
• is a registrant (a person who is registered for GST/HST purposes or who is required to be so registered);
• is a financial institution within the meaning of subsection 149(1); and
• has total annual revenue in excess of $1 million.
There is no provision in the ETA to grant a person an exemption from filing the AIS.
A person is considered to be a financial institution throughout a particular taxation year, under subsection 149(1), if the person is:
• a listed financial institution under paragraph 149(1)(a); or
• a de minimis financial institution under paragraphs 149(1)(b) or (c).
A listed financial institution includes an insurer or any other person whose principal business is providing insurance under insurance policies. XXXXX would not be an insurer if it is not licensed or otherwise authorized under the laws of Canada or a province to carry on in Canada an insurance business or under the laws of another jurisdiction to carry on in that other jurisdiction an insurance business. Even if it is found that XXXXX is not an insurer, XXXXX may still be a listed financial institution under other subparagraphs in paragraph 149(1)(a). For more information on listed financial institutions please refer to GST/HST Memorandum 17.6, Definition of "Listed Financial Institution" available on our Web site.
A de minimis financial institution is a person who earns a significant amount of income from investments or separate fees for financial services. A person is a de minimis financial institution as a result of meeting one of two de minimis or threshold tests.
Under the first test in paragraph 149(1)(b), a corporation is generally a financial institution throughout its taxation year if the corporation's financial revenue in the immediately preceding taxation year exceeds 10% of its total revenues (other than sales of capital property and some financial services) and exceeds $10 million. The term financial revenue generally includes interest, dividends or separate fees or charges for financial services that are included in computing the corporation's income for purposes of the Income Tax Act, but excludes the following: interest or dividends from a related corporation; a dividend in kind or a patronage dividend; or a separate fee or charge for certain zero-rated supplies of a precious metal.
Where a person is not a financial institution under the first test, the person may be a financial institution under the second test in paragraph 149(1)(c). Under this second test, a corporation is generally a financial institution throughout its taxation year if the corporation's income for purposes of the Income Tax Act from interest (other than interest from a related corporation) or separate fee or charge with respect to a credit or charge card issued by the corporation, or with respect to the making of an advance, the lending of money or granting of credit by the corporation, exceeded $1 million in its preceding taxation year.
Interest generated from a business's bank account should be included in both tests, provided the amount is included in computing, for the purposes of the Income Tax Act, the person's income for the relevant taxation year.
When a person receives interest with respect to short term deposits, guaranteed investment certificates (GICs) and/or bonds, either government or corporate, that have been acquired from the issuer (whether or not through an intermediary), the amount of interest should be included in both tests provided the amount is included in computing, for the purposes of the Income Tax Act, the person's income.
However, if, for example, a GIC or bond is purchased on a secondary market (i.e. from a person other than the issuer or an agent of the issuer), any interest received with respect to such a product should be included in the first test but should not be included in the second test. This is because the person purchasing a bond or GIC on a secondary market is not lending money to the issuer of the financial instrument; the person is purchasing a debt security.
Based on the financial information provided, XXXXX may be a financial institution under paragraph 149(1)(b) or (c). As such, XXXXX revenues should be reviewed to determine if it is a de minimis financial institution under either the first or second test.
As a registrant, unless it is determined that XXXXX is not a financial institution as described in subsection 149(1), XXXXX will be required to file the AIS based on its current revenue levels.
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.
Additional information - Proposed annual information return
On September 23, 2009, the Department of Finance released draft legislation, explanatory notes and a backgrounder with respect to a proposed information return for financial institutions. The information return would be used by financial institutions to meet the same information reporting requirement that is currently met by filing the AIS.
In order to provide certainty and guidance to financial institutions, proposed section 273.2 sets out who would be required to file an information return. Those persons who may be required to file the information return include listed and de minimis financial institutions under subsection 149(1), which is the same as for the AIS, as well as persons who are considered to be financial institutions under either subsection 149(2) or (3) as a result of an amalgamation or the acquisition of a business.
Proposed subsection 273.2(5) would provide the Minister of National Revenue with the authority to exempt a reporting institution or class of reporting institution from the requirement to provide any prescribed information or allow a reporting institution or class of reporting institution to provide a reasonable estimate of any actual amount that is required to be reported in an information return. No information has been proposed to be prescribed for purposes of this provision at this time.
The foregoing comments represent our general views with respect to the proposed amendment to the ETA as it relates to the subject matter of your request. Any change to the wording of this proposed amendment or any future proposed amendments to the ETA, if enacted, could have an effect on the interpretation provided herein. These comments are not rulings and, in accordance with the guidelines set out in GST/HST Memorandum 1.4, do not bind the Canada Revenue Agency with respect to a particular situation.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-952-9210 XXXXX. 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,
Dawn Weisberg
Manager, Financial Institutions Unit
Financial Institutions and Real Property Division
Excise and GST/HST Rulings Directorate
UNCLASSIFIED
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