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Subject:
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Interpretation
Subsection 145(1) the Excise Tax Act Management Services - XXXXX
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XXXXX
This refers to your Memorandum dated October 27, 1995, addressed to Karl Marten, concerning the above mentioned subject. I apologize for the delay in responding.
In your memorandum you state that:
Subsection 145(1) of the Excise Tax Act (the Act) states that "an activity engaged in by a person as a member of a partnership shall be deemed to be an activity of the partnership and not the activity of the person". Potentially the scope of this provision could be very broad, i.e, anything done by a general partner as a member of the partnership could be the activity of the partnership.
HQ's position is that management services are excluded from this provision.
You have raised the following issues:
How should subsection 145(1) of the Act be applied?
How does one determine what constitutes "an activity engaged in by a person as a member of a partnership? "
How should subsection 145(1) of the Act be applied in relation to section 177 of the Act?
Does subsection 145(1) override the provisions of section 177?
General Comments
The Department's position as expressed in previous correspondence is that the supply of services by the general partner to the partnership may be a taxable supply of services provided the services supplied are not an exempt supply pursuant to Schedule V to the Act and not provided as a result of "... an activity engaged in by a person as a member of a partnershi p..." as is deemed by subsection 145(1) of the Act. In this particular case the services are provided separate and apart from any activities the general partner may engage in as a member of the partnership.
Reference should be made to the partnership agreement to determine what activities can be engaged in by a partner as a member of the partnership. If one of the partners is authorized or required to provide management services to the partnership, then that activity is being undertaken as a member of the partnership. In such a case, there would be no supply for GST purposes as the partnership is providing a service to itself. On the other hand, if a partner is providing management services to the partnership or to other clients in its own right, and not pursuant to the partnership agreement, then subsection 145(1) of the Act would not apply and the activity as well as the supply would be that of the individual partner.
According to the facts you previously submitted, it appears that the involvement of the general partner in respect of the limited partnership as per appendix (A) to the XXXXX, the general partner in acquiring management services from a third party would be doing so as a member of the limited partnership.
Notwithstanding the above, and based on all the information provided by the XXXXX to the Department, it was determined that the services rendered by the general partner would be zero-rated under section 7 of Part V of Schedule VI to the Act.
The amendment to the Act in Bill C-70 which received Royal Assent on March 20, 1997, repeals subsection 145 of the Act and replaces it with new subsection 272.1(1). The amendment takes effect on April 24, 1996.
With respect to the issue of the relationship between subsections 145(1) and 177(1) of the Act, we do not see any connection between them, neither does one provision override the other.
Roy McKain
Senior Tax Policy Officer
Border Issues Unit
General Operations and Border Issues Division
GST Rulings and Interpretations Directorate
Policy and Legislation Directorate
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