12 September 2000 GST/HST Interpretation 32588 - Application of GST to Fees Paid to Governor in Council Appointees

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 Governor in Council Appointees. This matter has been assigned to me for response.

Interpretation Requested

You would like to know whether the retainer fees, per diems, and travel expenses paid to persons appointed by the Governor in Council to serve as members of a federal Board, 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, you are seeking confirmation of your understanding that GST/HST would not apply to the retainer fees, per diems and travel expenses.

Interpretation Given

The GST/HST treatment of amounts paid to Governor in Council appointees in their capacity as board members generally depends on the treatment of such amounts for income tax purposes.

For GST/HST, the tax generally applies to taxable supplies (other than zero-rated) made in Canada.

A "taxable supply" is defined under subsection 123(1) of the Excise Tax Act (ETA) as a supply that is made in the course of a "commercial activity" while a "commercial activity" generally includes a business carried on by a 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. A "business" generally includes a profession, calling, trade, manufacture or undertaking of any kind whatever. However, the definition of "business" excludes an office or employment.

Under subsection 123(1) of the ETA, a "supply" generally means the provision of property or a service in any manner while a "service" excludes anything that is supplied to an employer by a person who is or agrees to become an employee of the employer in the course of or in relation to the office or employment of that person.

Subsection 123(1) of the ETA further provides that an "employee" includes an officer, an "officer" means a person who holds an office and an "employer" in relation to an officer means the person from whom the officer receives remuneration. Furthermore, an "office", with certain exceptions, has the meaning assigned by subsection 248(1) of the Income Tax Act (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 includes a judicial office, the office of a minister of the Crown, the office of a member of the Senate or House of Commons of Canada, a member of a legislative assembly or a member of a legislative or executive council and any other office, the incumbent of which is elected by popular vote or is elected or appointed in a representative capacity and also includes the position of a corporation director. Although "employment" is not defined in the ETA, it is defined under subsection 248(1) of the ITA to mean "the position of an individual in the service of some other person (including Her Majesty or a foreign state or sovereign)".

The combined effect of the previously explained provisions is that for GST/HST purposes, the duties or activities performed by an officer or employee in the course of or in relation to an office or employment are not taxable supplies, let alone supplies. As a result, the amounts described as being paid to Governor in Council appointees in their capacity as board members would generally not be subject to GST/HST to the extent that it is determined for income tax purposes that the amounts are being paid to the members for duties or activities performed by them in the course of or in relation to an office or employment.

The foregoing comments represent our general views with respect to the subject matter of your letter and are not a ruling. As the income tax treatment of a payment can vary according to the particular circumstances in which it is made, so too can the GST/HST treatment of a payment. Should there be any question about whether a payment that is made in a particular situation is subject to GST/HST, you may wish to request a more specific GST/HST response.

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