|
XXXXX
|
Sch V/VI/28 - S. 123
|
Dear XXXXX
This refers to your letter dated January 7, 1997, in which you requested our assistance in applying the GST to the proposed restructuring of XXXXX from XXXXX (the "City") to a separate corporation XXXXX
I. Statement of Facts
1) The City is a municipality as defined in paragraph (a) of the definition of municipality in subsection 123(1) of the Act.
2) The City will cause XXXXX to be incorporated under XXXXX[.]
3) The City will hold XXXXX of the shares of XXXXX[.]
4) The City will transfer transit employees to XXXXX[.]
5) The City will enter into a service agreement with XXXXX and provide the equipment and facilities to XXXXX and XXXXX will operate the City's transit system.
6) The City will set bus routes and schedules and XXXXX will collect the fares on behalf of the City.
7) The transit fares will remain the revenue of the City.
I[I]. Rulings Requested
1) Confirmation that XXXXX will be eligible to obtain a municipal determination pursuant to paragraph (b) of the definition of municipality in subsection 123(1) of the Excise Tax Act ( the "Act" ).
2) Confirmation that XXXXX will be a "para-municipal organization" of the City pursuant to the definition of para-municipal organization in section 1 of Part VI of Schedule V to the Act.
3) Confirmation that supplies between XXXXX and the City will be GST exempt pursuant to section 28 of Part VI of Schedule V to the Act.
I[II]. Rulings Provided
1) Pursuant to the definition of municipality in subsection 123(1) of the Act, the Minister of National Revenue may, upon application, determine local authorities to be municipalities for purposes of the GST provided they meet the eligiblitiy criteria established by the Department for such a determination.
In order to qualify for municipal determination as a para-municipal organization pursuant to subsection 123(1) of the Act, an organization must be created by a municipality or by a province on behalf of a municipality and it must be owned or controlled by the municipality. For purposes of this determination, a municipality will be considered to own an organization if it owns 90 per cent or more of the shares or capital of the organization or it holds title to the assets of the organization or controls their disposition, such that in the event of wind-up or liquidation, these assets are vested in the municipality. A municipality will be considered to control an organization for purposes of determination if it appoints more than 50 per cent of the members of the governing body of the organization and the organization must submit to the municipality its operating and, where applicable, capital budget for review and approval. In accordance with the above, if XXXXX is created by the City and the City owns XXXXX of the shares of XXXXX it will be eligible to apply to be determined a municipality pursuant to paragraph (b) of the defintion of municipality in subsection 123(1) of the Act.
2) If XXXXX is determined to be a municipality pursuant to subsection 123(1) of the Act on the basis it is created and owned by the City as outlined above, it will qualify as a para-municipal organization pursuant to the definiton of that term in section 1 of Part VI of Schedule V to the Act.
3) Pursuant to section 28 of Part VI of Schedule V to the Act, supplies between a municipality and its para-municipal organization are exempt except for the supply of electricity, gas, steam or telecommunication services. Therefore, if XXXXX is determined to be a municipality as a para-municipal organization of the City on the basis it is created and owned by the City, then supplies between the City and XXXXX will be exempt except supplies of any of the aforementioned goods and services.
This ruling is subject to the general limitations and qualifications outlined in GST Memorandum Series Section 1.4. We are bound by this ruling provided that none of the above issues are presently under audit, objection or appeal, there are no relevant changes in the future to the Excise Tax Act and provided you have fully described all the necessary facts and transactions for which you requested a ruling.
Yours truly,
N. Minken
Policy Officer
Municipalities
GST Rulings and Interpretations
Email this Content