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.
XXXXX
XXXXX
XXXXX
XXXXX
Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 15th floor
320 Queen Street
Ottawa ON K1A 0L5
Case Number: 124915
Attention: XXXXX XXXXX
August 6, 2010
Dear XXXXX:
Subject:
GST/HST RULING
Recapture of Input Tax Credits and Para-municipal Organizations
Thank you for your letter of XXXXX, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to para-municipal organizations.
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.
Ruling Requested
You would like to know if a para-municipal organization, such as XXXXX is deemed to be a public service body and therefore excluded from the definition of large business for purposes of the recapture of input tax credits (RITC) requirement in British Columbia and Ontario.
Ruling Given
We rule that there is no provision in the ETA that 'deems' a para-municipal organization to be a public service body for GST/HST purposes in general or for purposes of the definition of "large business" found in subsection 236.01(1).
This ruling is subject to the qualifications in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service. We are bound by this ruling provided that none of the above issues are currently under audit, objection, or appeal, that no future changes to the ETA, regulations or our interpretative policy affect its validity, and all relevant facts and transactions have been fully disclosed.
Explanation
Effective July 1, 2010, with the introduction of the HST in Ontario and British Columbia, a person that is a large business is required to repay or 'recapture' the portion of any available input tax credits that is attributable to the provincial part of the HST in respect of a specified property or service that is acquired, or brought into one of these provinces, by the large business for consumption or use by that business in those provinces.
For purposes of the RITC requirement, a "large business" is defined in subsection 236.01(1) to mean a prescribed person or a person of a prescribed class.
In general terms, the New Harmonized Value-Added Tax System Regulations No. 2 (Regulations) provide that, for purposes of the definition of large business in subsection 236.01(1), a person is a prescribed person for a recapture period if the person is a GST/HST registrant and:
• the person's 'recapture input tax credit threshold amount', determined in accordance with subsection 27(3) of the Regulations, exceeds $10 million; or
• the person is one of the following financial institutions iFootnote 1, or a person that is related to one of the following financial institutions: a bank; a corporation that is licensed or otherwise authorized under the laws of Canada or a province to carry on in Canada the business of offering to the public its services as a trustee; a credit union; an insurer or any other person whose principal business is providing insurance under insurance policies; a segregated fund of an insurer; an investment plan or the Canada Deposit Insurance Corporation.
However, pursuant to subsection 27(13) of the Regulations, a person is not a prescribed person for purposes of the definition of "large business" in subsection 236.01(1) at any time if, at that time, the person is a public service body. In other words, a public service body is not considered to be a large business for purposes of the RITC requirement.
The term "public service body" is defined in subsection 123(1) to mean "a non-profit organization, a charity, a municipality, a school authority, a hospital authority, a public college or a university".
The definition of public service body in subsection 123(1) does not list a para-municipal organization; therefore, in order for a para-municipal organization to be a public service body, the organization must be a "non-profit organization", a "charity", a "municipality", a "school authority", a "hospital authority", a "public college" or a "university", as each of these terms are defined in subsection 123(1). This is notwithstanding the fact that "para-municipal organization" is separately defined in section 1 of Part VI of Schedule V for purposes of Part VI of Schedule V.
Subsection 123(1) defines a "municipality" to mean:
(a) an incorporated city, town, village, metropolitan authority, township, district, county or rural municipality or other incorporated municipal body however designated, and
(b) such other local authority as the Minister may determine to be a municipality for the purposes of this Part;
Generally, a para-municipal organization must be determined to be a municipality by the Minister of National Revenue under paragraph (b) of the definition of "municipality" in subsection 123(1) in order to be a municipality and therefore a public service body. A para-municipal organization may also be a public service body if it is a charity or a non-profit organization.
It should also be noted that a person designated by the Minister of National Revenue to be a municipality in respect of activities specified in the designation is a municipality only for purposes of section 259 or, in certain circumstances, a specific exempting provision in Part VI of Schedule V. In such cases, the person is not a "municipality" as defined in subsection 123(1) and therefore is not a municipality for purposes of the definition of "public service body" in subsection 123(1). Accordingly, a person that is designated by the Minister of National Revenue to be a municipality in respect of activities specified in the designation is not a public service body, unless that person is otherwise included in the definition of "public service body" in subsection 123(1).
There is no provision in the ETA that 'deems' a para-municipal organization to be a public service body for purposes of the GST/HST in general or for purposes of the definition of "large business" in subsection 236.01(1). Therefore, a para-municipal organization, such as XXXXX, that does not otherwise meet the definition of "public service body" in subsection 123(1), can be a large business for purposes of the RITC requirement in British Columbia and Ontario.
Additional information concerning the application of the RITC requirement can be found in GST/HST Technical Information Bulletin B-104 Harmonized Sales Tax - Temporary Recapture of Input Tax Credits in Ontario and British Columbia (available on the CRA website).
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at (613) 954-4289. 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,
Brian Olsen, CGA
Municipalities and Health Care Services Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate
i 1. We note that, in accordance with subsection 27(13) of the Regulations, a "selected listed financial institution" is not a prescribed person for purposes of the definition of "large business" in subsection 236.01(1).
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