File: 11900-5
Doc: HQR0000203(GN)
We are replying to your memorandum dated July 31, 1996 which dealt with three different requests, concerning the eligibility to file rebates: the first, as a school authority by Student Representative Councils, the second, by the Local Board of Trustees and the third, by XXXXX[.] This letter will reply to your first request which deals with the XXXXX (i.e. the "School Board"). We will reply to your other requests under separate cover at a later date.
Question 1
Are the Student Representative Councils separate legal entities from the School Board ?
Facts
• the School Board has Student Representative Councils which submit to the School Board a claim for the GST paid during the year. The School Board claims a GST rebate equal to 68 % of that amount;
• in addition, the Student Representative Councils have separate bank accounts from the School Board;
• the Student Representative Councils require permission from the School Board to operate;
• the School Board sets the agenda for the activities of the Student Representative Councils;
• the School Board sets guidelines on how the Student Representative Councils can spend their money (the money has to be spent on athletics and social programs);
• the School Board is liable for the debts of the Student Representative Councils;
• the School Board pays for any financial deficit incurred by the Student Representative Councils;
• the Student Representative Councils do not own property;
• in the event of a school closure, remaining funds of the Student Representative Councils would go to the school where the students are transferred;
Answer
As you know, there are many criteria that must be looked at in order to determine if Student Representative Councils are separate legal entities from the School Board. The majority of the facts listed above seem to support the idea that the Student Representative Councils are not separate legal entities from the School Board. However, a more definitive response to this question would be possible if we had information concerning the following:
• Can the Student Representative Councils sue and be sued in their own name?
• Are the Student Representative Councils capable of holding property in their own name?
• Do the Student Representative Councils have the capacity to contract in their own name?
• Do the Student Representative Councils have their own constitution and by-laws?
• Do the Student Representative Councils enjoy a considerable degree of autonomy in their day to day operations?
• Do the Student Representative Councils raise most of their revenues?
It may be more evident from the replies to the above questions as to whether the Student Representative Councils are separate persons. However, please do not hesitate to contact us if the issue remains unclear.
Question 2
Can the School Board claim a rebate on general indemnities paid to School Board "trustees" XXXXX?
Question 3
Can the School Board claim a rebate on all the other amounts shown in the Schedule of Remuneration and Expense Allowances?
Facts
• The Schedule of Remuneration and Expense Allowances (the "schedule") for the XXXXX effective XXXXX (assuming it's been approved as amended) states, inter alia, that:
"Individual Board Members shall be responsible for submitting signed statements, to the Secretary-Treasurer, indicating meetings, conferences or seminars attended; and expenses incurred. All statements shall be signed by the Chairman or Deputy Chairman prior to payment."
• The School Board pays board members indemnities and allowances for attending meetings. The schedule provides that 1/3 of the total indemnities and allowances are designated as general expenses and therefore exempt from income tax as per subsection 81(3) of the Income Tax Act. The School Board claims a GST rebate equal to 1/3 of the indemnities and allowances multiplied by the school board authority rebate of 68%.
• Furthermore, the schedule provides a listing of the following expenses which the School Board will either reimburse its members or pay them an allowance:
Expense Allowance, XXXXX
• Hotel Accommodation: room accommodation supported by a receipt. Board members not requiring hotel accommodation will be entitled to an allowance of XXXXX per day.
• Meals: a maximum of XXXXX per day. Claims for over XXXXX per day must be supported by receipts.
• Incidental expenses: maximum allowances for all charges such as gratuities and taxis is XXXXX per day, without receipts.
• Registration Expenses: actual expenses supported by receipts.
• Travel: travel rates paid to Board members shall be the average of the travel rates paid to the XXXXX (these rates will be adjusted on January 1st and July 1st of each year); or round trip economy air fare.
• Where necessary, expenses be paid for a total of two days for travel to and from a convention or related function.
Expense Allowance, XXXXX:
• Registration expense supported by official receipt.
• Any extraordinary expenditures supported by receipts.
You also provided the following information:
• Indemnities are paid out monthly at the beginning of the month following the month in which the person attended the meeting or meetings at a rate of XXXXX per meeting attended. Board members do not have to provide receipts to support the XXXXX received for each meeting. However if the board member does not attend any meeting, he does not receive any money.
Note that the amount of XXXXX per meeting is not stated in the schedule provided to us for review. However, we will assume that this amount was approved by the School Board.
Answer
Proposed section 174 as amended by the April 23, 1996 Notice of Ways and Means Motion will apply where a person pays a reasonable allowance to an employee, a partner, or where the person is a charity or a public institution, a volunteer, to:
1) purchase supplies in Canada, all or substantially all of which are taxable (other than a zero-rated supply), or for the use of a motor vehicle in Canada, for use in activities engaged in by that person, and,
2) the allowance is deductible in computing the income of the person for purposes of the Income Tax Act or would be deductible if the person were a tax payer under the Income Tax Act and the activities were a business.
Where the above conditions have been met, the person shall be deemed to have received a taxable supply of property or service and to have paid, at the time the allowance is paid, tax in respect of the supply equal to 7/107ths of the amount of the allowance.
Proposed section 175 as amended by the April 23, 1996 Notice of Ways and Means Motion provides that where a person reimburses an individual who is an employee, a partner or a volunteer who gives services to a charity or public institution, for expenses incurred by the individual in relation to activities of the employer or partnership or charity and for which the individual paid the GST, the person is deemed to have received a supply of the property or the service and the person is deemed to have paid tax equal to the tax paid by the employee multiplied by the lesser of the percentage of the total expense that is reimbursed and the percentage of the total use of the good or service in the activities of the person.
For GST purposes and as explained under Policy number P-075 Allowances and reimbursements, an allowance means "any periodic or other payment that an employee receives from an employer, in addition to salary and wages, without having to account for its use". To be considered an allowance, the following criteria must be met:
• the amount must be limited and predetermined;
• the amount must be paid to enable the recipient to discharge a certain type of expense;
• the amount must be at the complete disposition of the recipient;
• there is no requirement to repay or account for the use of the amount. The recipient does not have to demonstrate that the amount was spent.
However, a reimbursement means "a payment by an employer to an employee to repay the employee for amounts spent by the employee on the employer's business".
• the amount must be fully accounted for by the recipient (e.g. supporting records).
• the amount must be spent by the recipient for an expense incurred in the course of the employer's business.
In response to question 2, the amount deemed to be an allowance under section 81(3) of the ITA (equal to 1/3 of the total allowances and indemnities), will only qualify for a rebate if it meets all the requirements of section 174 of the ETA. Therefore as the purpose of the allowance is unknown (i.e. is the allowance paid to enable the board member to purchase all or substantially all taxable supplies in Canada or for the use in Canada of a motor vehicle), it cannot qualify under section 174 of the ETA.
Please note that in the following discussion we will only identify (wherever possible), whether the amounts are an "allowance" or a "reimbursement". Some of these amounts may not meet all the requirements of sections 174 or 175; this can only be determined on a case by case basis. Also, if it is determined that the allowance or reimbursement meets all the conditions of section 174 or section 175 respectively, the requirements of section 259 of the ETA must be met in order to claim a GST rebate for public service bodies.
In response to question 3, based on the information provided in the schedule, we find that the following amounts may satisfy the definition of an "allowance" and accordingly, may qualify for a rebate:
Expense Allowance, XXXXX:
• Board members not requiring hotel accommodation who are entitle to an allowance of XXXXX per day.
• A maximum of XXXXX per day for meals.
• A maximum of XXXXX per day for incidental expenses.
Also, we find that the following amounts may satisfy the definition of a "reimbursement" and accordingly, may also qualify for a rebate:
Expense Allowance, XXXXX
• Room accommodation supported by receipts
• Claims for meals which are over XXXXX per day which must be supported by receipts.
• Registration expenses supported by receipts.
Expense Allowance, XXXXX:
• Registration expenses supported by receipts.
• Any extraordinary expenditures supported by receipts.
Lastly, because we have not been provided with sufficient information with respect to amounts which are categorized under "travel", we are unable to determine whether these amounts are considered to be a "reimbursement" or an "allowance".
We hope that the information provided above will help you to determine whether the payments made to School Board members entitle the School Board to a GST rebate. If you have any questions or comments, please do not hesitate to communicate with me at (613) 952-4157.
Gabrielle Nadeau
Ruling Officer
Charities, Non Profit Organizations and Educational Services
GST Rulings & Interpretations
c.c.: G. Nadeau
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