7 July 1999 GST/HST Interpretation HQR-1745 - Joint Venture Election

This memorandum is in response to your email message of June 23, 1999 that provided additional information regarding the XXXXX[.] You have requested comments on the draft response you have prepared for this case.

Facts as represented by XXXXX

1. The XXXXX each of whom is registered for GST/HST purposes, XXXXX[.]

2. Pursuant to a XXXXX arranged for the ownership and operation of the interest in XXXXX[.] The activity contemplated by the XXXXX is a prescribed activity for the purposes of subsection 273(1) of the Excise Tax Act.

3. Also, pursuant to the XXXXX, through its operator, XXXXX[.]

4. XXXXX is party to a joint venture XXXXX whose membership includes XXXXX[.] The purpose of this particular joint venture is to develop XXXXX[.] This activity is a prescribed activity for purposes of subsection 273(1).

5. XXXXX will, subsequently, advance approximately XXXXX thereby acquiring XXXXX[.]

6. The XXXXX, will hold the legal interest of the XXXXX and will set up a bank account that will be used to receive funds distributed from the XXXXX and to facilitate the purchase of goods and services on behalf of the XXXXX[.]

7. XXXXX will transfer the beneficial interests of the XXXXX to each of the Owners individually. Thus, each person in the XXXXX will hold their respective beneficial interest in XXXXX directly at all times and will have acquired this interest for the sole purpose of consumption, use or supply in the course of the activities for which the Direction and Consent Agreement was entered into.

8. XXXXX in its capacity as operator of the XXXXX will be granted XXXXX to carry out the functions on behalf of the XXXXX including dealing with matters under the Income Tax Act and the Excise Tax Act.

Additional points of clarification provided by XXXXX[.] From fact #1 above, XXXXX represents that the arrangement may or may not be a joint venture but that it may still elect under section 273 as a bare trust as a result of the policy contained in TIB-068 and Policy P-015 that allows for one of the beneficiaries of the bare trust to be responsible for accounting for tax in respect of the property. They go on to state that the bare trust will continue during the development of XXXXX[.]

Further, from fact #4, XXXXX indicates that XXXXX [i]n its capacity as a bare trust, is acquiring a XXXXX as a full participant. In XXXXX opinion, the activities indicated in fact #4 would be activities that pertain to the development of XXXXX and as such would be prescribed activities that allow for the Operator to account for the tax and to transfer supplies between the Owners and the Operator without tax consequences.

Rulings requested by XXXXX has requested a ruling that XXXXX has Operator of the XXXXX and the Owners are entitled to make an election under section 273, enabling XXXXX to:

1. make the supply of the acquired beneficial interests in XXXXX their respective Owners such that the supply will be deemed not to be a supply; and

2. account for the GST on the supply, acquisition or importation of property and services by XXXXX on behalf of the Owners in the course of the activities for which the XXXXX was entered into.

Our Response

The primary question being asked in this case is whether the XXXXX is able to file an election under section 273 of the Excise Tax Act (the "ETA"). Although Mr. XXXXX stated that the XXXXX is a bare trust, and while TIB B-068 does state that it may be possible for the beneficial owners to elect one of the owners to account for the GST/HST under the joint venture election in section 273 of the ETA, this is only available if there is a joint venture. Since XXXXX unable to confirm the joint venture, it would not be possible to rule on whether an election may be made by the XXXXX[.] It should be noted that even if the XXXXX could be considered a joint venture, our response to whether they would still be able to file an election would be negative as the XXXXX joint venture does not relate to the XXXXX of the second group of venturers. Further, no ruling can be provided on the activities outlined in fact #4 as rulings are not provided on future transactions which are not defined and precise in their identification. The only information we have been given is that they are prescribed activities in the opinion of XXXXX. This is not sufficient information to provide a ruling.

If you would like to discuss this case any further, please contact me.