9 August 2000 GST/HST Ruling 32224 - Application of GST to Fees Paid to Members of the

Dear XXXXX:

Thank you for your letter of July 27, 2000, (with attachments), addressed to Mr.J.A. Venne, Director, General Operations and Border Issues Division, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to fees paid to members and former members of the XXXXX This matter has been assigned to me for response.

We have forwarded a copy of your request to David Shugar, Manager of the Business Property and Employment Income Division, asking him to respond directly to you regarding the income tax, Canadian Pension Plan and Employment Insurance deduction issues. This ruling is limited to the GST.

Statement of Facts

Our understanding of the facts, the transaction(s), and the purpose of the transaction(s) is as follows:

1. Members of the XXXXX, appointed by the Governor in Council on the recommendation of the Minister of XXXXX, shall be paid retainer fees, per diems and reasonable travel and living expenses as established by the XXXXX XXXXX[.]

2. XXXXX the XXXXX establishes a board to be known as XXXXX[.]

3. XXXXX the XXXXX, the Board is composed of XXXXX[.]

4. XXXXX the XXXXX states that: XXXXX[.]

5. XXXXX[.]

6. XXXXX: XXXXX[.]

7. XXXXX

8. The XXXXX is listed in Schedule I.1 of the Financial Administration Act.

9. An order in Council establishes the fees of the former Vice-Chairs XXXXX.

Ruling Requested

You would like to know whether the retainer fees, per diems, and travel and living expenses paid to XXXXX members and former members appointed by the Governor in Council should be treated as employment income and consequently be subject to the relevant deductions (income tax, Canadian Pension Plan and Employment Insurance deduction). If so, GST would not apply to office holders' per diems.

As stated previously, this ruling is limited to the application of the GST to your situation.

Ruling Given

Based on the facts set out above, and provided that the income tax department determines that the terms of employment between XXXXX and its members meet the criteria of employer-employee relationship, we rule that the retainer fees, per diems, and travel and living expenses paid to XXXXX members and former members appointed by the Governor in Council are not subject to GST.

This ruling is subject to the general limitations and qualifications outlined in section 1.4 of Chapter 1 of the GST/HST 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 our interpretative policy; and that you have fully described all necessary facts and transaction(s) for which you requested a ruling.

Explanation

The first factor to be considered is whether XXXXX members are providing their services and are being remunerated as employees or as self-employed contractors. A person making a supply of his/her services would not be required to collect GST/HST if he/she was not engaged in a commercial activity. The definition of "commercial activity" in the Excise Tax Act (the ETA) includes a business, but the definition of "business" excludes an office or employment.

Subsection 123(1) of the ETA defines the meaning of "office", with certain exceptions, to be the meaning assigned by subsection 248(1) of the Income Tax Act (the ITA). Subsection 248(1) of the ITA defines "office" to mean "the position of an individual entitling the individual to a fixed or ascertainable stipend or remuneration ... and also includes the position of a corporation director, and "officer" means a person holding such an office".

The definition of business and service each exclude remuneration from an office or employment. Employment is not defined in the ETA, other than to say that an employee includes an officer. On the other hand, the ITA does have a definition for "employment". Subsection 248(1) of the ITA defines "employment" to mean "the position of an individual in the service of some other person (including Her Majesty or a foreign state or sovereign) and "servant" or "employee" means a person holding such a position".

Generally, services supplied by a Governor in Council appointee in his/her capacity of a Board member, to the Board to which he/she is appointed, are not subject to GST. A Governor in Council appointee to a Board XXXXX XXXXX holds an "office", as this term is defined in subsection 248(1) of the ITA. As a result, remuneration received by the appointee is generally treated as income from an office or employment. Accordingly, services provided by members or former members of the XXXXX to the Board, and in respect of which the retainer fees, per diems, and travel and living expenses are paid, would usually not be subject to GST.

Please note, however, that if the duties or activities performed by a member or a former member for the XXXXX are, in fact, performed in the course of a commercial activity and are supplies for ETA purposes, then the duties or activities are taxable supplies.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 957-8223.

Yours truly,

Carolle Mercier
Services and Intangibles Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate