Please note that the following document, although correct at the time of issue, may not represent the current position of the Canada Revenue Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence du revenu du Canada.
[Addressee]
Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 15th floor
320 Queen Street
Ottawa ON K1A 0L5
Case Number: 127879
Business Number: [...]
December 16, 2010
Dear [Client]:
Subject:
GST/HST INTERPRETATION
Transfer of Motor Vehicles - [...] [the Corporation]
Thank you for your fax of August 5, 2010, and your subsequent telephone conversations with us of September 22, October 1 and October 5, 2010, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the transfer of motor vehicles to a partnership in the context of a section 156 election (election for nil consideration).
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.
We understand that [...] [(the Corporation)] entered into an agreement to transfer beneficial ownership of a number of motor vehicles to [...], (the partnership). The [Corporation] and the partnership also entered into an election under section 156. The general partner of the partnership, [...] [General Partner], entered into a nominee agreement with the partnership pursuant to which the [General Partner] was appointed to hold legal and registered ownership of the motor vehicles as the nominee and bare trustee for and on behalf of the beneficial owner, the partnership.
You explained that this last arrangement was entered into since title to a motor vehicle cannot be registered by the provincial authorities to a partnership. Consequently, you have told us that the parties to the election (the [Corporation] and the partnership) have set up a third person in the form of a bare trust to hold title to these vehicles. The bare trustee, appointed under the terms of a nominee agreement, is to act only on the instructions of the beneficial owner of the trust property.
Interpretation Requested
Since we have not been supplied with the information concerning the eligibility of the vendor [Corporation] and the recipient partnership to make the election nor with copies of all agreements that relate to the transaction, we cannot issue a ruling. In your telephone conversation with us, you requested a general interpretation letter that addresses the application of the GST/HST to the property of a bare trust in the context of an election under section 156. Accordingly, the information that follows is offered as general information only.
Interpretation Given
Section 156 allows certain members (defined as "specified members") of a closely related group of corporations and/or partnerships resident in Canada to elect to treat certain supplies between them as having been made for no consideration if those member corporations and/or partnerships meet certain requirements.
Persons meeting the eligibility requirements for making the election complete form GST 25 - Closely Related Corporations and Canadian Partnerships - Election or Revocation of the Election to Treat Certain Taxable Supplies as having been made for Nil Consideration.
The CRA has a policy regarding bare trusts, which is set out in GST/HST Policy Statement P-015, Treatment of Bare Trusts under the Excise Tax Act. According to this policy, a "bare trust" means a trust where the trustee has legal ownership of the property but has no other duties, obligations or responsibilities with respect to the property as trustee other than to transfer, under the absolute control and instructions of the beneficiary, the title to the property. The policy also indicates that the trustee in a bare trust situation may be a nominee corporation.
Where property is supplied to a person in trust for another person in circumstances where a bare trust exists within the limits set out in GST/HST Policy Statement P-015, Treatment of Bare Trusts under the Excise Tax Act, in administering the Excise Tax Act, the CRA would consider that the liability for payment of applicable GST/HST lies with the recipient of the supply of the beneficial ownership of the trust property rather than with the trust itself. Consequently:
• where a properly constituted bare trusts exists within the limits set out in GST/HST Policy Statement P-015,
• where legal title to the property is settled on the bare trust,
• where the recipient of the supply of the beneficial ownership of the trust property is a person that meets all the eligibility requirements to be a party to a valid section 156 election (form GST 25 Election to Treat Certain Taxable Supplies as having been made for Nil Consideration), and
• where all the requirements for a section 156 election are met,
the CRA would accept that the name of the recipient of the supply of the beneficial ownership of the property is the correct name to appear on the GST 25 form since this person (the recipient of the supply of the beneficial ownership) is the person liable to pay GST/HST in respect of the supply of the trust property, notwithstanding the fact that the bare trustee has become the registered title holder of the property.
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 613-954-4394. 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,
Doris McMullan
Corporate Reorganizations Unit
Financial Institutions & Real Property Division
Excise and GST/HST Rulings Directorate
UNCLASSIFIED
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