Dear XXXXX
We are replying to your letter of December 23, 1996, addressed to Adrien Venne, A/Director General, GST Rulings and Interpretations, concerning the possible merger of the XXXXX. We apologize for the delay in responding.
Facts
Our understanding of the facts based on your letter, our telephone conversation of February 26, 1997 and a telephone conversation of April 25, 1997 with your accountant, XXXXX, is as follows:
• XXXXX is registered for GST purposes and its Business Number (BN) is XXXXX[.]
• XXXXX is a corporation incorporated under XXXXX XXXXX is not a registrant but has been assigned BN XXXXX for GST rebate purposes.
• Both entities, XXXXX are registered charities for income tax purposes and are completely volunteer oriented with almost no paid staff, i.e., 90% or more.
• XXXXX are not engaged in commercial activities. They also receive a 50% rebate related to the GST payable on most goods and services acquired.
• XXXXX are considering combining their operations into one registered charity.
• XXXXX do not intend to amalgamate for GST purposes.
Questions
1. What is the recommended approach from a legal perspective if XXXXX XXXXX were to undertake such a merger for GST purposes?
2. Could the remaining entity continue to function with its existing GST registration number or is a new GST number required?
Comments
1. Our understanding of your question is that you are enquiring whether there will be any GST consequences following the dissolution of one of the registered charities. Your accountant, XXXXX, specified that XXXXX would probably be the registered charity dissolving into XXXXX[.] Where a statutory amalgamation occurs between two or more corporations, section 271 of the Excise Tax Act (the Act) would apply and, as a result, the transfer of any property from one corporation to the other corporation would be deemed not to be a supply of property. Conversely, if no amalgamation occurs for GST purposes, the transfer of any property from one corporation to the other corporation would be a supply of property.
The supply of equipment and furniture is considered to be a supply of personal property for GST purposes and is generally taxable. However, the supply of personal property is not taxable under paragraph 141.1(1)(b) of the Act if the property was acquired by the supplier exclusively for use in non-commercial activities and was not used in commercial activities.
Note that paragraph 141.1(1)(b) of the Act does not apply to the supply of real property and, as a result, it would normally be a taxable supply. However, supplies made by charities are generally exempt under section 1, Part V.1 of Schedule V to the Act unless excluded under paragraphs (a) to (n).
It should also be noted that rebates related to GST paid on goods and services can no longer be claimed when a person, i.e., a charity, ceases to exist. Specifically, rebates that could have been claimed by a charity (now dissolved) would not be carried forward to the charity continuing the operations.
2. For GST purposes, where a statutory amalgamation occurs between two or more predecessor corporations, the new corporation formed as a result of the amalgamation would generally be required to obtain a new BN.
However, if one corporation is dissolving rather than amalgamating and the operations continue under the auspices of the other corporation, then, the remaining corporation may continue to use its BN for GST purposes.
The foregoing comments represent our general views with respect to the subject matter of your letter. Unannounced proposed or future amendments to the legislation may result in changes to our interpretation. These comments are not rulings and, in accordance with the guidelines set out in GST Memoranda Series Section 1.4, do not bind the Department with respect to a particular situation.
If you have any questions or wish to discuss this matter further, please call me at (613) 954-4394.
J.E. Allard
Policy Officer
Corporate Reorganizations Section
Financial Institutions and Real Property Division
GST Rulings and Interpretations
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