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.
Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 11th floor
320 Queen Street
Ottawa ON K1A 0L5
[Addressee]
Case Number: 201569a
Dear [Client]:
Subject: GST/HST INTERPRETATION
Supplies made by amateur athletes and amateur athlete trusts
Thank you for your letter of [mm/dd/yyyy], concerning the application of the goods and services tax/harmonized sales tax (GST/HST) to supplies made by amateur athletes or amateur athlete trusts.
[…]
The HST applies in the participating provinces at the following rates: 13% in Ontario; and 15% in New Brunswick, Newfoundland and Labrador, Nova Scotia and Prince Edward Island. The GST applies in the rest of Canada at the rate of 5%.
All legislative references are to the Excise Tax Act (ETA) unless otherwise specified.
We understand the facts as follows:
1. The amateur athlete is a Canadian national team member who is eligible to compete in international sporting events.
2. The national sports organization is a registered Canadian amateur athletic association under the Income Tax Act. The amateur athlete is a member of the national sports organization in Canada.
3. The athlete may receive money from the following sources:
- cash prizes received from competitive events
- sponsorships
- speaking engagements
- donations, including goods-in-kind
- federal and provincial government athlete assistance funds
4. Cash prizes received from competitive events: The athlete may receive a monetary award in addition to the medal or trophy they won.
5. Sponsorships: A company (sponsor) may pay the athlete money in exchange for the athlete promoting the company’s products or services. This may include allowing the sponsor to use the athlete’s likeness in advertising or the athlete wearing the sponsor’s branded clothing during public appearances. The athlete may be required to make a certain number of public appearances or may be required to post a certain number of messages on social media. The sponsor is usually a resident of Canada.
6. Speaking engagements: The athlete may be hired to deliver a speech to the employees of the business on topics like leadership, motivation, overcoming obstacles, achieving goals, and teamwork. In return, the athlete is paid a fee. The person that hired the athlete usually absorbs the costs of the athlete’s attendance. These speaking engagements are typically held in Canada. There is a possibility that the athlete may be hired to give a speech outside of Canada.
7. Donations, including goods-in-kind: The athlete may receive donations without any conditions or obligations attached.
8. Federal and provincial government athlete assistance program funds: The athlete may apply for federal government and provincial government grants to offset living, training, and competition costs. The athlete must maintain certain performance standards in order to receive government assistance. The athlete provides no property or services in exchange for the grant received from the government.
9. The rules in the Income Tax Act in section 143.1 for amateur athlete trusts apply to an amateur athlete who is, in a tax year, a member of a registered Canadian amateur athletic association and eligible to compete in international sporting events. The athlete can place in a amateur athlete trust their income for a year gained from endorsements, prizes, and other remuneration related to their athletic endeavours. Income earned in a qualifying account will be tax-deferred in the same way as the income the athlete contributes to the qualifying account. Such income will be taxed under the Income Tax Act generally only when it is distributed to the athlete or eight years after the last year in which the athlete was eligible to compete as a Canadian national team member, whichever is earlier.
10. Per subsection 143.1(1.1) of the Income Tax Act, the trustee of an amateur athlete trust can be the national sports organization or a third party dealing at arm’s length with the athlete. When the national sports organization administers the trust, cheques from persons who hire the athlete are made in the name of “[national sports organization] in trust for [amateur athlete]”.
11. You noted during a telephone conversation with one of our agents that the athlete’s intent is that the money received exceeds their expenses. There is generally a reasonable expectation of profit.
INTERPRETATION REQUESTED
You would like to know:
1. Which types of income earned by the athlete are taxable for GST/HST?
2. If the amateur athlete is required to register for GST/HST?
3. If the amateur athlete trust is required to register for GST/HST?
4. If the small supplier threshold is based on income reported for income tax purposes?
INTERPRETATION GIVEN
Supplies and the tax status of the supplies
Cash prizes received from competitive events
An athlete may receive a monetary award in addition to a medal or trophy.
Subsection 188(2) removes prizes of competitive events from the scope of the GST/HST. The giving of the prize is deemed not to be a supply to the competitor and the prize is deemed not to be consideration for a supply by the competitor to the person. Subsection 188(2) only applies to prizes won in a competitive event, and not other prizes that may be awarded post-competition (for example, a prize received from the Athlete Excellence Fund of the Canadian Olympic Committee).
There would be no supply by the athlete in the case of these monetary awards. Therefore, the monetary awards are not subject to GST/HST.
An athlete may be sponsored by a person in exchange for a supply of promotional services or intangible personal property, which may include wearing the sponsor’s logo or allowing their likeness to be used for promotion.
Supplies of this nature are generally taxable where the supplier is not a public sector body. If the athlete is the supplier of a promotional service or intangible personal property under a sponsorship agreement, the supply would be taxable as no exempting provision would apply. If the trust is the supplier, the supply would be taxable as no exempting provision would apply.
Speaking engagements
An athlete may receive compensation for speaking to a person’s employees or in another similar setting.
Speaking engagements are the supply of a service, namely a public speaking service. If the athlete is the supplier of a service under a public speaking agreement, the supply would be taxable as no exempting provision would apply. If the trust is the supplier, the supply would be taxable as no exempting provision would apply.
Donations, including goods-in-kind
An athlete may receive donations, including monetary donations and goods-in-kind. The athlete does not provide anything in return.
The athlete is the person receiving the donation. That is, the athlete is the recipient and not the supplier. Therefore, the donations are not subject to GST/HST.
Federal and provincial government athlete assistance programs
Consistent with the guidelines set out in Technical Information Bulletin TIB-067, Good and Services Tax Treatment of Grants and Subsidies, determining whether a transfer payment is consideration for a supply for purposes of the ETA requires determining whether a direct link exists between the transfer payment provided by a grantor and a supply made by a grantee. A direct link will be established where the grantee makes a supply to the grantor or to a specified third party in return for the payment.
In this case, it must be determined whether the payments from the federal or provincial government to the amateur athlete result in a supply being made by the amateur athlete to the federal or provincial government or to a specified third party. If there is no direct link between the payment and a supply made by the amateur athlete, the GST/HST would not apply to the payment. On the other hand, if the amateur athlete makes a supply in exchange for the payment, that supply would generally be taxable.
Requirement to register and small suppliers
The ETA defines “business” in subsection 123(1) to include a profession, calling, trade, manufacture, or undertaking of any kind whatever, with or without regard to an expectation of profit. The term “commercial activity” is defined to include “a business carried on by the person (other than a business carried on without a reasonable expectation of profit by an individual…)”. It was noted that the amateur athlete has a reasonable expectation of profit.
Every person who makes a taxable supply in Canada in the course of a commercial activity engaged in by the person in Canada is required to be registered for GST/HST purposes, unless that person is a small supplier.
In general, an individual or an amateur athlete trust is a “small supplier” if the total amount of revenues from their worldwide taxable supplies and any associates is $30,000 or less in any single calendar quarter and in the last four consecutive calendar quarters. In determining the total amount of revenues from taxable supplies (including zero-rated supplies) of property and services made inside and outside Canada, revenues from supplies of financial services, sales of capital property, and goodwill from the sale of a business are not included. The amateur athlete and the trust would be associates for purposes of the small supplier threshold.
A person must make a determination at the end of each calendar quarter as to whether they continue to qualify as a small supplier. A person who no longer qualifies as a small supplier is required to register and must apply for registration before the thirtieth day after the day the person first makes a taxable supply in the course of the commercial activity in Canada otherwise than as a small supplier.
A GST/HST registrant (that is, a person who is registered or required to be registered for GST/HST purposes) is responsible for collecting the GST/HST on all taxable supplies (other than zero-rated supplies) of property and services made in Canada.
For general information on the rights and obligations of GST/HST registrants, please refer to Guide RC4022, General Information for GST/HST Registrants.
Distributions by the trust to the athlete
Whether distributions by the amateur athletic trust to the amateur athlete are included in the small supplier threshold calculation for the trust or the athlete depends on what is distributed. For purposes of the GST/HST, the term “property” is defined in subsection 123(1) to exclude money.
Money distributed by the trust would not be included in the small supplier threshold calculation of the amateur athlete as it is not consideration for a taxable supply made by the athlete or an associate of the athlete.
Section 269 deems a supply to exist where a trust distributes property. If property is distributed, the beneficiary receives “a supply of the property […] at the place at which the property is delivered or made available […] for consideration equal to the amount determined under the Income Tax Act to be the proceeds of disposition of the property.”
If the amateur athlete trust distributes property to the athlete, the trust is considered to have made a supply. If the supply is taxable, the amateur athlete trust must include the proceeds of disposition of the property as determined under the Income Tax Act in the small supplier threshold calculation for the trust. As the athlete and trust are associated, the athlete must also include these proceeds in their small supplier threshold calculation.
Small supplier threshold calculation
The small supplier threshold is calculated based on the consideration that became due for taxable supplies made inside or outside Canada in a particular calendar quarter or four consecutive calendar quarters. Consideration is defined in subsection 123(1) to include “any amount that is payable by operation of law.”
Income, for income tax purposes, is “the total of all amounts each of which is the taxpayer’s income for the year (other than a taxable capital gain from the disposition of a property) from a source inside or outside Canada, including, without restricting the generality of the foregoing, the taxpayer’s income for the year from each office, employment, business and property” (paragraph 3(1)(a) of the Income Tax Act). The definition of “business” in the Income Tax Act and the ETA are similar.
The amounts included in the small supplier threshold calculation for an individual are also included in business income for income tax purposes. However, these amounts would not correspond because the amateur athlete trust allows an amateur athlete to defer income. Also, some amounts that are included in income under the Income Tax Act may not be in respect of taxable supplies for GST/HST purposes. The calculation for the small supplier threshold is not connected to when the income is taxed under the Income Tax Act.
The consideration for taxable supplies made by the amateur athlete is included in the small supplier threshold calculation in the quarter that it became due even if the consideration is paid directly into the amateur athlete trust. Consideration would generally be due, and included in a particular quarter, on the earliest of the date of an invoice issued for a supply or the day the recipient is required to pay the consideration under an agreement in writing.
In accordance with the qualifications and guidelines set out in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service, the interpretation(s) given in this letter, including any additional information, is not a ruling and does not bind the Canada Revenue Agency (CRA) with respect to a particular situation. Future changes to the ETA, regulations, or the CRA’s interpretative policy could affect the interpretation(s) or the additional information provided herein.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 343-573-0977. 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,
Desneiges Arbour
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate
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