11650-1(VM)
Dear Mr. XXXXX
This is in response to your letter of February 24, 1995, in which you request confirmation of a revised interpretation concerning receiver's fees and eligibility for input tax credits (ITCs). I apologize for the delay in my response.
As indicated to you in telephone conversations with Robert Wong of my staff, under the Excise Tax Act (ETA), it is normally the "recipient" of a taxable supply who is eligible to claim an ITC for GST paid or payable on the supply, provided the conditions of section 169 are met. It is, therefore, the person who qualifies as the "recipient" of the services of a receiver who is eligible to claim an ITC with respect to the fees charged by the receiver.
"Recipient" is defined in subsection 123(1) of the ETA and, in most cases, refers to the person who is liable to pay the consideration for the supply. In other words, the person who is liable to pay the fees of a trustee or receiver, as the case may be, would usually be the recipient of the supply of the service.
It should be noted that, under bankruptcy law, it appears that the debtor is responsible for the payment of the trustee's fees, as they are typically paid out of the realizations of the debtor's property. Consequently, the debtor is normally viewed as the recipient of the trustee's services for GST purposes.
With respect to a receiver, it is not always apparent who is liable to pay for the receiver's services. Generally, a security agreement between the debtor and the creditor will provide that, upon default by the debtor, the creditor has the power to appoint a receiver on behalf of the debtor and that the debtor will be responsible for paying the costs of the appointment. In addition, the court order or appointment letter under which the receiver is appointed will provide that the receiver's fees are to be paid out of the debtor's assets. Under such conditions, and in the absence of facts or circumstances to the contrary, the Department will accept that the debtor is the recipient of the receiver's services.
The foregoing comments do not take into account special facts or circumstances which may impact upon who is the person liable for the payment of part or all of the trustee's or receiver's fees (for example, where the debtor's assets are insufficient to fully pay the fees). In these situations, the particular facts of each case must be examined to determine who is the "recipient".
Your second question concerns ITC eligibility where a receiver's invoice is addressed to the creditors for purposes of certification. The fact that an invoice is addressed to creditors for certification will not in itself change the debtor's ITC eligibility where the debtor is the recipient of the receiver's services.
Should you wish to discuss these matters further, please contact Robert Wong, Special Cases and Projects Unit, General Applications Division, at (613) 957-9577.
Yours truly,
H.L. Jones
Director
General Applications Division
Policy and Legislation
Domus # 11646 (Reg.)
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