Westcoast Energy – Federal Court of Appeal confirms that an employer was not entitled to ITCs for the GST/HST on reimbursed employee health care services

Westcoast reimbursed (through Manulife as its agent) employees who had incurred various health care services – including some which were GST/HST-taxable, namely, acupuncture, massage therapy, naturopathy and homeopathy services. On appeal, Westcoast submitted, contrary to the finding below, that the employees should be considered to have consumed or used the services “in relation to activities of [Westcoast]” so as to generate ITCs under s. 175(1)(c).

Stratas JA agreed with the Tax Court below that ExxonMobil, which had held under the similar wording of s. 174 that “property or services which are intended by the employer for the exclusive personal use of the employees and which lend themselves to such a use bear no relationship with the employer’s activities,” also applied here in the context of s. 175, such that if “an employer reimburses for a service or property that is for the exclusive personal use of employees, the employer will not enjoy the deeming effect of subsection 175(1).” Accordingly, no ITCs were generated to Westcoast under s. 175.

Neal Armstrong. Summaries of Westcoast Energy Inc. v. Canada, 2022 FCA 57 under ETA s. 175(1)(b) and s. 170(1)(b)(ii).