CRA indicates that a limited partner can almost never claim an ITC in respect of expenses incurred by it in relation to the partnership business

ETA s. 272.1(1) sets out a general rule under which things done by a person as a member of a partnership are deemed to be done by the partnership in the course of the partnership’s activities and not by the person. However, s. 272.1(2)(b) provides that where a partner that is not an individual acquires property or a service for consumption, use or supply in the course of activities of the partnership, but not on the account of the partnership, for purposes of determining an ITC of the member, s. 272.1(1) does not apply to deem the partner not to have acquired the property or service and the partner is deemed to be engaged in those activities of the partnership – so that it may be able to claim an ITC.

CRA provided the following (restrictive) interpretation of the scope of s. 272.1(2)(b) before finding that expenses incurred by a limited partner of a type that were not contemplated under LPA as being ones that were to be incurred by any partner were not eligible for ITCs:

• In order to satisfy the requirement in s. 272.1(2), the property or service must be intended to be consumed, used or supplied in the course of the activities of the partnership – and, given that the s. 272.1(2) rule is an exception to the general rule in s. 272.1(1), this will generally be the case where the acquisition, importation or bringing in of such property or service by the partner “is a usual act undertaken in the ordinary course of the partnership business such that subsection 272.1(1) would otherwise apply to that partner’s action.”
• Since the application of s. 272.1(1) would generally be limited to the actions of a general partner, the exception to this rule in s. 272.1(2) would not apply to the actions of a limited partner of a partnership other than in an extraordinary circumstance such as where there is an express agency in writing referenced in the LPA to evidence that the expense of the limited partner was in fact an expense of the partnership.
• A particular partner cannot decide itself to pay for something: all of the partners would have to agree collectively if particular partnership expenses are to be borne by individual partners, so that CRA would expect a clause in the LPA stating that it is agreed that a partner is expected to incur and pay certain types of expenses - without which it would be difficult to determine whether the expense was an ordinary and necessary business expense of the partnership for consumption, use or supply in the course of the activities of the partnership.

Neal Armstrong. Summary of 13 August 2024 GST/HST Interpretation 246538 under s. 272.1(2)(b).