5 October 2001 GST/HST Ruling 33461 - Entitlement of Public Service Body (PSB) Rebate in respect of Per Diem Paid to

Dear XXXXX:

Thank you for your letter of November 6, 2000, concerning whether the XXXXX (a charity) is entitled to a Public Service Body (PSB) Rebate with respect to the per diem paid to XXXXX.

Statement of Facts

Our understanding of the facts is as follows:

1. The charity pays a per diem to XXXXX who provide care (residential) to XXXXX children.

2. The per diem is not taxable income pursuant to the Income Tax Act.

3. The per diem is designed to be used by XXXXX to pay regular and normal day-to-day expenses involved in caring for children. According to the XXXXX, major expenses covered by the per diem include food, housing, household operating expenses (soap, shampoo, etc.) laundry and dry cleaning, normal wear and tear and depreciation of appliances, personal care items (hair cuts, lipstick, etc), normal babysitting costs, normal transportation costs, normal recreational and sports activities.

4. Other payments made to XXXXX XXXXX include clothing allowances, spending allowances, diaper allowances, birthday allowances, school supply allowances and Christmas allowances.

5. The charity does not require XXXXX to maintain records of purchases and, therefore, is unable to determine to what degree the XXXXX use the per diem to purchase taxable goods and services.

Ruling Requested

Is the charity entitled to claim a rebate of GST in respect of the per diem paid to XXXXX pursuant to section 174 of the Excise Tax Act (ETA)?

Ruling Given

Based on the facts set out above, we rule that the charity is not entitled to claim a Public Service Body (PSB) rebate of GST in respect of the per diem paid to XXXXX.

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 ETA or to our interpretative policy; and that you have fully described all necessary facts and transaction(s) for which you requested a ruling.

Explanation

Section 174 of the ETA provides (in part) that where a volunteer who gives services to a charity acquires property or a service for consumption or use in relation to the activities of the charity and the charity pays an allowance to the volunteer, (a) the charity is deemed to have received a supply, (b) the consumption or use of the property or service by the volunteer in relation to the activities of the charity is deemed to be consumed or used by the charity and not the volunteer, and (c) the charity is deemed to have paid tax in respect of the purchase. The charity would be entitled to a Public Service Body (PSB) rebate in respect of the allowance if the allowance was used for supplies all or substantially all of which are taxable (other than zero-rated) and acquired in Canada for use in the activities of the charity.

Based on the nature of expenses to be dispensed by the per diem (e.g. food, housing, etc), it does not appear that in the normal course the per diem would be spent to acquire supplies all or substantially all of which are taxable other than zero-rated. Accordingly, as the charity will not be deemed under section 174 to have received the supplies and to have paid the tax, it will not be eligible to claim a PSB rebate in respect of the per diem.

Such a position takes into consideration the position taken in The Corporation of the City of Brantford v. Her Majesty The Queen.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 954-7936.

Yours truly,

Danielle Laflèche, c.a.
Manager
Charities, NPO's and Educational Services Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate