17 March 1998 GST/HST Interpretation HQR0001083 - Election -

                                                                        GSTHST Rulings and Interpretations
Directorate
Place Vanier, Tower C, 10th Floor
25 McArthur Avenue
Vanier, Ontario
XXXXX                                                                                 K1A 0L5

                                                                        Case : HQR0001083

Dear XXXXX

Thank you for your facsimile of February 25, 1998, with attachments, concerning the application of the Goods and Services Tax (GST)Harmonized Sales Tax (HST) to the situations described below.

Our understanding of the facts is as follows:

Statement of Facts For XXXXX

XXXXX was incorporated on February 27, 1997.

The company is a wholly owned subsidiary of XXXXX, which is a member of the XXXXX group of companies XXXXX and its fiscal year end is October 31.

XXXXX is engaged in real estate investment and development, commercial activities for the purposes of GST.

The company has not made any taxable supplies to date.

The company registered for GST purposes on XXXXX, 19 xx ; its Business Number is XXXXX It is an annual filer.

XXXXX filed an election for exempt supplies under section 150 of the Excise Tax Act (ETA) on December 23, 1997 with XXXXX The election was filed with a request that it be backdated to February 27, 1997, the date upon which XXXXX was incorporated.

XXXXX fiscal year end is October 31 and it is an annual filer.

The election was not processed by the Business Window, XXXXX Tax Services; the reason given was that XXXXX was registered for GST purposes after the date upon which the election was requested to take effect.

Statement of Facts For XXXXX

XXXXX was incorporated on XXXXX

XXXXX is a whollyowned subsidiary of XXXXX, a member of the XXXXX group of companies XXXXX and its fiscal year end is October 31.

It is engaged in investment management, a commercial activity for GST purposes.

The company has not made any taxable supplies to date until approximately September or October 1997. We have not been provided with an exact date.

XXXXX registered for GST purposes on January 1, 1997; its Business Number is XXXXX It is a quarterly filer.

XXXXX filed an election for exempt supplies under section 150 of the ETA on December 23, 1997 with XXXXX another whollyowned subsidiary of XXXXX The election was filed with a request that it be backdated to November 1, 1996.

XXXXX year end is October 31 and it is an annual filer.

The election was not processed by the Business Window, XXXXX Tax Services; the reason given was that XXXXX was registered for GST purposes after the date upon which the election was requested to take effect.

Ruling Requested

You have asked us to determine the effective date of registration for XXXXX and XXXXX and accordingly the effective date of the election under section 150 of the ETA.

Ruling Given

Based on the facts set out above, we rule that XXXXX is not required to be registered under subsection 240(1) of the ETA and may be permitted to register under subsection 240(3). The effective date of registration is December 23, 1997. The effective date of the election made under section 150 of the ETA is December 23, 1997.

Based on the facts set out above, we rule that XXXXX is not required to be registered under subsection 240(1) of the ETA and may be permitted to register under subsection 240(3). The effective date of registration is January 1, 1997. The effective date of the election made under section 150 of the ETA is November 1, 1997.

This ruling is subject to the general limitations and qualifications outlined in section 1.4 of Chapter 1 of the GST Memoranda Series. We are bound by this ruling provided that none of the above issues is currently under audit, objection, or appeal; that there are no relevant changes in the future to the Excise Tax Act, or to departmental interpretative policy; and that you have fully described all necessary facts and transaction(s) for which you requested a ruling.

Explanation

Subsection 240(1) of the ETA sets out the criteria under which a person is required to register for GST purposes. It states that "every person who makes a taxable supply in Canada in the course of a commercial activity engaged in by the person in Canada is required to be registered for the purposes of this Part, except where

(a) the person is a small supplier;

(b) the only commercial activity of the person is the making of supplies of real property by way of sale otherwise than in the course of a business; or

(c) the person is a nonresident person who does not carry on any business in Canada."

In your facts, you have confirmed that none of the exceptions in (a) to (c) apply to either XXXXX or XXXXX and we agree. You have also confirmed by telephone that neither XXXXX nor XXXXX have made any taxable supplies. "Taxable supply" is defined in subsection 123(1) of the ETA. Since neither XXXXX nor XXXXX have made any taxable supplies, neither is required to be registered under subsection 240(1). They are both, however, permitted to register under subsection 240(3). XXXXX applied for registration and was permitted to register effective December 23, 1997. XXXXX applied for registration and was permitted to register effective January 1, 1997.

One of the requirements necessary before an election under subsection 150(1) can be made is that both members making the election must be registrants. Therefore, the election filed by XXXXX and XXXXX cannot be effective before December 23, 1997. The election filed by XXXXX and XXXXX cannot be effective before January 1, 1997. We must now refer to subsection 150(3) to determine the effective dates for the subsection 150(1) election.

Subsection 150(3) requires that the election referred to in subsection 150(1) be made in a prescribed form and be filed by the member with the Minister on or before the day its return for the reporting period in which the election is to become effective is required to be filed. Since XXXXX is an annual filer, its first return would be due January 31, 1999. Since the election form was filed on or before this date, its effective date will be December 23, 1997, XXXXX effective date of registration.

XXXXX is a quarterly filer. Its returns (subsequent to registering) are due February 28, 1997; May 30, 1997; August 30, 1997; November 30, 1997; and February 28, 1998. Since the election form was filed before the due date for the return due February 28, 1998, the earliest effective date will be November 1, 1997, the first day of XXXXX reporting period ending January 31, 1998 and due February 28, 1998.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 952-9577 or Duncan Jones at (613) 952-9210.

Yours truly,

Marilena Guerra
Rulings Officer
Financial Institutions and Real Property Division
GSTHST Rulings and Interpretations Directorate
Policy and Legislation Branch