29 June 2004 GST/HST Interpretation 49305 - Tax status of XXXXX Committee

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.

Dear XXXXX:

Thank you for your letter XXXXX concerning our interpretative position set out in a letter dated XXXXX and the eligibility of an employer to claim input tax credits (ITCs) related to certain pension plan expenses. We apologize for the delay in our response.

Background

XXXXX we issued a letter dated XXXXX related to ITCs and pension plan expenses. The letter relates to a situation where a registrant employer has set up pension plans for its employees. Under the trust agreement, the employer may direct the trust to pay various expenses out of the trust funds. The pension plans are not registered under the Excise Tax Act (ETA). The employer receives invoices from various suppliers regarding the work done related to the pension plans, then it directs the trustee to pay the invoices by sending a cheque directly to the suppliers. Two questions were posed related to the described situation, the first related to whether a re-supply was made and whether the GST should have been charged and the second related to whether the employer is eligible to claim ITCs related to "employer type pension expenses" that the plan trust has paid.

For ease of reference the second question and the related answer has been reproduced below:

Question:

Since the pension plan has paid for the "employer type pension expenses" and not invoiced XXXXX for these expenses, is XXXXX entitled to claim the ITCs?

Answer:

Since the invoices for these employer expenses are made out in XXXXX name and to the extent that these supplies are used in XXXXX commercial activities, they may claim the GST charged on these supplies as ITCs. Under section 123(1) the recipient of a supply is defined as the person liable to pay the consideration i.e., the invoice is made out in their name. Under subsection 169(1), the general rule for credits, a person who has acquired a supply for which tax is paid or payable by that person, may claim an input tax credit. The application of TIB-032R is not required in this instance.

Interpretation Requested

You have requested an interpretation of the application of section 261.01 of the ETA in light of the proposed changes that would extend the pension plan rebate contained in this section to plans with related multiple employers as sponsors. Specifically, you are requesting that we confirm our position as outlined in our letter dated XXXXX and reproduced above will not be affected by the proposed changes to section 261.01 of the ETA.

In addition, you have requested confirmation that where an employer is invoiced for "employer expenses" plus GST, but chooses to have the plan trust pay those invoices, it will continue to be able to claim ITCs for the GST to the extent that it engages in commercial activity and that the rebate under section 261.01 of the ETA will be available to the plan trust only in respect of GST both invoiced to, and paid by, the plan trust.

Interpretation Given

We confirm that our interpretative position as outlined in a letter XXXXX and reproduced above will not be affected by the proposed changes to section 261.01 of the ETA.

We also confirm that where an employer is invoiced (i.e., liable) for expenses plus GST in respect of property or services acquired by the employer and related to the employer's responsibilities with respect to the pension plan, the employer will continue to be eligible to claim ITCs to the extent that the employer is engaged in commercial activity and provided the other conditions in section 169 are met.

In order for a person to be eligible to claim an ITC, pursuant to section 169 of the ETA related GST paid or payable several conditions must be met including the condition that the tax in respect of the supply becomes payable by the person or is paid by the person without having become payable. In referring to an amount of tax that was paid without having become payable, section 169 provides for the situation where a person pays GST that is not yet payable by the

person but would have become payable at a later date had it not been paid. Pursuant to section 165 of the ETA, tax is payable by the recipient of a supply. The term "recipient" of a supply of property or a service is defined under subsection 123(1) of the ETA to mean, in part,

(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, ...

Therefore, when an employer is the recipient of a taxable supply and to the extent the supply is used in the employer's commercial activities, the employer is eligible to claim an ITC for the GST charged on the supply provided the other conditions in section 169 of the ETA are met. The fact that another person may pay the GST and consideration related to a supply does not affect the employer's eligibility to claim an ITC.

We cannot confirm that the rebate under section 261.01 of the ETA will be available to the plan trust only in respect of GST both invoiced to, and paid by, the plan trust. Subject to subsection 261.01(3) of the ETA, element B of the rebate calculation under subsection 261.01(2) of the ETA includes amounts of tax that, during that period and after 1998, became payable by the trust or was paid by the trust without having become payable, in respect of the supply, importation or bringing in of the property or service. Therefore, a plan trust is eligible to claim a rebate in respect of GST payable by the plan trust even if the amount is not yet paid by the plan trust or is paid by another person provided the other conditions of that provision are met.

The foregoing comments represent our general views with respect to the proposed amendment(s) to the Excise Tax Act as they relate to the subject matter of your letter. Any change to the wording of these proposed amendments or any future proposed amendments to the Excise Tax Act, if enacted, could have an effect on the interpretation provided herein. These comments are not rulings and, in accordance with the guidelines set out in section 1.4 of Chapter 1 of the GST/HST Memoranda Series, do not bind the Canada Customs and Revenue Agency with respect to a particular situation.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 952-3413.

Yours truly,

M. Dawn Weisberg
Financial Institutions Unit
Financial Institutions and Real Property Division
Excise and GST/HST Rulings Directorate

2004/07/12 — RITS 49606 — Self-Supply of a Long-Term Residential Facility