5 October 2001 GST/HST Ruling 35329 - Amounts Paid to as Per Diem Rates for Care

Dear XXXXX:

Thank you for your letter of March 19, 2001 (with attachments), concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the transaction(s) described below.

Statement of Facts

Our understanding of the facts is as follows:

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

2. The purpose of XXXXX is to provide temporary care in a family setting pending achievement of a permanent plan such as returning home, placement with relatives or adoption.

3. The per diem allowance is higher for some children with special needs, as they consume more resources of the XXXXX.

4. According to the XXXXX, the regular XXXXX care rate (the per diem) is comprised of the following elements:

•   Food - groceries and meals away from home with XXXXX[.]

•   Lodging - including furniture, bedding, towels, etc.

•   Clothing - a small portion only as most clothing costs will be reimbursed by the charity.

•   Personal care - includes shampoo, soap, tissues ...

•   Household Operation

•   Normal Transportation costs associated with health care, education, recreation etc.

5. "Expensible" items as defined in the above-noted report include extraordinary costs for a child that are not predictable and are normally reimbursed by the charity after submission of expense forms by parents.

Ruling Requested

Is the XXXXX regular rate per diem allowance all, or substantially all, a taxable supply allowance, thereby being fully subject to rebate?

If not, and knowing that this taxpayer is in the XXXXX, what percentage would qualify for rebate (i) across the board, (ii) in each age category?

Does the special needs premium qualify for the same percentage rebate as the regular rate?

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 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 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

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 (whether full or partial) in respect of the per diem.

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