GSTHST Rulings and Interpretations
Place Vanier, Tower C, 10th Floor
25 McArthur Avenue
Vanier, Ontario
XXXXX K1A 0L5
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XXXXX
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M. Guerra|
Case : HQR0001044
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Subject:
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REQUEST FOR GSTHST INTERPRETATION
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Dear XXXXX
Our understanding of the facts is as follows:
XXXXX is a national trade association which provides a variety of services to the XXXXX insurance industry in Canada.
It is nonprofit organization whose members are Canadian insurance and reinsurance companies.
The major services it provides to its member companies are:
Lobbying the federal and provincial governments on insurance issues;
Statistical information and analysis on all lines of XXXXX insurance;
Legal services, including monitoring of insurance legislation;
Development of the industry's policies on national issues affecting insurance;
Public relations and advertising on insurance topics;
Maintenance of Canadawide consumer information centers.
Membership fees account for approximately XXXXX revenues. XXXXX is treating its supplies of memberships as exempt.
Approximately XXXXX of its revenues derive from the sale of statistical information to both members and nonmembers. XXXXX charges GST on these supplies.
You ask if XXXXX would be allowed to claim full ITCs on expenditures relating to lobbying activities under subsection 169(1) of the Excise Tax Act (ETA).
Interpretation Given
"Commercial activity" is defined in subsection 123(1) of the ETA as:
(a) a business carried on by the person (other than a business carried on without a reasonable expectation of profit by an individual, a personal trust or a partnership, all of the members of which are individuals), except to the extent to which the business involves the making of exempt supplies by the person,
(b) an adventure or concern of the person in the nature of trade (other than an adventure or concern engaged in without a reasonable expectation of profit by an individual, a personal trust or a partnership, all of the members of which are individuals), except to the extent to which the adventure or concern involves the making of exempt supplies by the person, and
(c) the making of a supply (other than an exempt supply) by the person of real property of the person, including anything done by the person in the course of or in connection with the making of the supply.
Section 17 of Part VI of Schedule V to the ETA exempts "a supply of a membership in a public sector body (other than a membership in a club the main purpose of which is to provide dining, recreational or sporting facilities or in a registered party) where each member does not receive a benefit by reason of the membership, other than
(a) an indirect benefit that is intended to accrue to all members collectively,
(b) the right to receive services supplied by the body that are in the nature of investigating, conciliating or settling complaints or disputes involving members,
(c) the right to vote at or participate in meetings,
(d) the right to receive or acquire property or services supplied to the member for consideration that is not part of the consideration for the membership and that is equal to the fair market value of the property or services at the time the supply is made,
(e) the right to receive a discount on the value of the consideration for a supply to be made by the body where the total value of all such discounts to which a member is entitled by reason of the membership is insignificant in relation to the consideration for the membership, or
(f) the right to receive periodic newsletters, reports or publications
(i) the value of which is insignificant in relation to the consideration for the membership, or
(ii) that provide information on the activities of the body or its financial status, other than newsletters, reports or publications the value of which is significant in relation to the consideration for the membership and for which a fee is ordinarily charged by the body to nonmembers, except where the body has made an election under this section in prescribed form containing prescribed information.
That is to say that if memberships are exempt under this provision, the organization may elect to have them treated as a taxable supply.
You have informed us that XXXXX is treating its memberships as an exempt supply. Since approximately XXXXX revenues relates to the making of exempt supplies, i.e., the supply of memberships, this portion of XXXXX activity is not considered to be commercial activity. Consequently, the lobbying activity associated with the benefits of memberships is not considered to be commercial activity.
You stated that approximately XXXXX portion of XXXXX revenues relates to the making of taxable supplies. This portion of XXXXX activity is considered to be commercial activity under the definition in subsection 123(1).
Based on the information provided, XXXXX is eligible to claim ITCs on expenses relating to its taxable commercial activities. XXXXX cannot claim ITCs on expenditures relating to its lobbying activities; it must apportion ITCs and claim ITCs only on expenses related to its taxable activities.
The foregoing comments represent our general views with respect to the subject matter of your letter. Proposed amendments to the Excise Tax Act, if enacted, could have an effect on the interpretation provided herein. These comments are not rulings and, in accordance with the guidelines set out in section 1.4 of Chapter 1 of the GST Memoranda Series, do not bind the Department with respect to a particular situation.
Please note that there is insufficient information to determine whether, in fact, membership in XXXXX is an exempt supply. For more information in this regard, you may contact Mike Place, AManager, Public Service Bodies at (613) 7936.
Should you have any further questions or require clarification, please do not hesitate to contact me at (613) 9577 or Duncan Jones at (613) 952-9210.
Yours truly,
Marilena Guerra, CMA
Rulings Officer
Financial Institutions and Real Property Division
GSTHST Rulings and Interpretations Directorate
Policy and Legislation Branch
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