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.
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Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 15th floor
320 Queen Street
Ottawa ON K1A 0L5
Attention: XXXXX XXXXX
Case Number: 120666
August 4, 2010
Dear XXXXX:
Subject:
GST/HST INTERPRETATION
Eligibility to claim input tax credits
Thank you for your letter of XXXXX, concerning the eligibility of a GST/HST registered non-share capital corporation (Corporation W) to claim input tax credits (ITCs). You suggest that there is an agency relationship between Corporation W and XXXXX thus allowing Corporation W to claim ITCs in respect of the tax paid by XXXXX.
HST applies at the rate of 15% in Nova Scotia, 13% in New Brunswick, Newfoundland and Labrador, and Ontario, and 12% in British Columbia. GST applies at the rate of 5% in the remaining provinces and territories.
All legislative references are to the Excise Tax Act (ETA) unless otherwise specified.
The following information was provided in your letter to us:
• XXXXX;
• Corporation W's members are XXXXX including XXXXX which is a non-share capital corporation that is not registered for the GST/HST;
• XXXXX;
• XXXXX has entered into a funding agreement with a Crown Corporation in order to partially fund the costs associated with a specific project;
• XXXXX is responsible for arranging and administering the project financing;
• the Crown Corporation stipulates that XXXXX "will use some or all of the contribution to pay capital asset purchase and installation costs incurred by:" Corporation W;
• Corporation W "will own the capital assets so purchased and installed";
• Corporation W must sign an acknowledgment and agreement that they will hold the project assets for a minimum of XXXXX years and will not sell, relocate or otherwise dispose of the assets except with the prior written consent of the Crown Corporation and XXXXX;
• Corporation W must also sign and agree, that should they intend to discontinue the service that is the subject matter of the project, they will donate and transfer the project assets to XXXXX or to a third party designated by XXXXX and the Crown Corporation;
• XXXXX is in the process of purchasing the project assets and is paying the GST/HST on such purchases;
• XXXXX;
• Corporation W is taking possession of the assets directly and the only involvement of XXXXX is receiving the funds from the Crown Corporation, ordering the assets that Corporation W needs and paying for the said assets.
Interpretation Requested
You would like to know if there is an agency relationship between Corporation W and XXXXX, and if Corporation W is entitled to claim ITCs in respect of the GST/HST paid by XXXXX on the purchase of the assets.
Interpretation Given
The following information is provided to assist you in determining whether or not Corporation W is entitled to claim ITCs in respect of the GST/HST paid or payable by XXXXX.
Pursuant to subsection 169(1), where a registrant acquires or imports property or a service for consumption, use or supply in the course of its commercial activities, the person is entitled to an ITC for the tax paid or payable by the person as a registrant in respect of the supply or importation.
Pursuant to section 165, every recipient of a taxable supply (other than a zero-rated supply) made in Canada is required to pay the applicable GST/HST on the supply. Generally, the "recipient" of a supply is defined under subsection 123(1) to include,
"(a) where consideration for the supply is payable under an agreement for the supply, the person who is liable under the agreement to pay that consideration,
(b) where paragraph (a) does not apply and consideration is payable for the supply, the person who is liable to pay that consideration, and ..."
In determining who the recipient of a supply is, and who may therefore be entitled to an ITC for any tax payable on the supply, it is necessary to determine whether the supply is acquired by a person on its own behalf or as an agent on behalf of another person (a "principal").
As stated in GST/HST Policy Statement P-182R, Agency, (P-182R) whether a person is an agent with respect to a particular transaction is based on a determination of fact and an application of principles of law, certain of which are described in P-182R. Also, pursuant to P-182R, the Canada Revenue Agency (CRA) will give its views on whether an agency relationship exists, upon request and where all the parties consent, only when all of the relevant documentation is provided in support of the request. As you have neither provided any evidence that
Corporation W and XXXXX have consented to your request, nor any documentation in support of the request, we cannot provide any comments on whether an agency relationship exists between Corporation W and XXXXX. We have enclosed a copy of P-182R for your reference.
Generally, P-182R sets out the three essential qualities of an agency relationship, discusses its fiduciary nature, and lists a number of indicators and questions to consider in determining whether a particular relationship is one of agency.
In an agency relationship it should be evident that a person acting in the capacity of agent has been given the authority to affect the principal's legal position. The most common example of the ability to affect a principal's legal position is where the agent is authorized to enter into contracts with third parties on behalf of the principal.
Also, in an agency relationship, it should be clear that the principal has a degree of control over the actions of the agent; the agent would be acting as an extension of the principal and, therefore, would be under the principal's general direction and control. This is sometimes evidenced by requiring the principal's approval for certain expenditures.
In any situation, where a person acts as agent on behalf of another person (principal) in acquiring or importing property or services, it is the principal who is liable to pay the consideration in respect of the supply, and, therefore, is the recipient of the supply. As a result, if an expense is incurred as an agent on behalf of a principal and the agent pays the consideration and tax on behalf of the principal, it is the principal who is considered to be the recipient and to have incurred the expense and may be may be entitled to claim an ITC in respect of the tax payable. Therefore, the agent is not entitled to an ITC for the tax on the expense.
Therefore, if XXXXX is acting as agent of Corporation W, then Corporation W is the recipient of the supply and would be entitled to claim ITCs in respect of the tax paid or payable by XXXXX. However, if XXXXX is not acting as agent of Corporation W, then Corporation W is not the recipient of the supply and would not be entitled to claim ITCs in respect of the tax paid or payable by XXXXX.
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 CRA with respect to a particular situation. Future changes to the ETA, regulations, or our interpretative policy could affect this interpretation.
For your convenience, find enclosed a copy of GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service.
If you require clarification with respect to any of the issues discussed in this letter, please call 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,
XXXXX
UNCLASSIFIED
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