10 August 2012 Internal T.I. 2012-0441821I7 - Government Service Contract Payments

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Principal Issues: Are certain general ledger (GL) accounts that contain payments for tuition, rent of real property, property taxes, passports, permits, certificates, and licences exempt from the reporting requirements found in Section 237 of the Income Tax Regulations (the “Regulations)?

Position: Question of fact. However, it would appear that the payments would be exempt from the reporting requirements found in Section 237 of the Regulations.

Reasons: The GL account titles would suggest that the payments would not be made “in respect of goods for sale or lease, or services rendered” as required in the definition of payee found in subsection 237(1) of the Regulations.

August 10, 2012

XXXXXXXXXX HEADQUARTERS
Income Tax Rulings
Directorate
M. Gauthier
(613) 948-1143

Attention: XXXXXXXXXX 2012-044182

Government Service Contract Payments

This is in reply to your email of March 27, 2012 in which you asked for our opinion as to whether certain general ledger (GL) accounts of the XXXXXXXXXX are exempt from the reporting requirements found in Section 237 of the Income Tax Regulations (the “Regulations”) which is completed on a T1204, Government Service Contract Payments.

Subsection 237(2) of the Regulations generally provides that a federal body that pays an amount in respect of goods for sale or lease, or services rendered to a payee shall file an information return in prescribed form.

Subsection 237(3) provides exemptions from the T1204 reporting requirements where:

• all or substantially all of the amount is in respect of goods for sale or lease by the payee;
• the amount is subject to Part XIII tax under section 212 of the Act;
• the amount is not required to be included in the income an employee of the federal body;
• the amount is paid in respect of services rendered outside Canada by a non-resident; or
• the amount is paid or credited in respect of a program administered under the Witness Protection Program Act or any other similar program.

Subsection 220(2.1) also gives the CRA the authority to waive the requirement to file prescribed forms or provide information. According to web page on the CRA website entitled, Completing the T1204 slip (http://www.cra-arc.gc.ca/tx/bsnss/cntrct/frmt1204/pyr/slp-eng.html), the following types of payments are also exempt from T1204 reporting requirements:

• rental or leasing of office space or equipment;
• direct purchases made using acquisition cards;
• direct purchases made under local purchase; and
• utility payments.

It is a question of fact as to whether certain payments that are made and recorded in various GL accounts would require a T1204 information slip to be issued. Each payment would have to be analyzed in order to determine whether it was a payment “in respect of goods for sale or lease, or services rendered” and whether any of the exceptions detailed above would apply.

The terms “goods” and “services” are not defined in the Income Tax Act or Regulations for the purposes of T1204 reporting requirements. As such, these terms may adopt their general or ordinary meaning and/or from the courts. The meaning of those terms must take into consideration the context in which they are being used. For the purposes of T1204 reporting requirements, the term “goods” should be used “in the common sense of merchandise or wares” and “services” “are the work of the hand or the brain, valuable to the purchaser or user but not in themselves articles of trade or commerce.”

We have reviewed the GL accounts you provided, which can be generally categorized as payments for tuition, rental of real property, property taxes, passports, permits, certificates, and licences. Based on the descriptions of the GL accounts, in our view, the accounts were properly excluded from T1204 reporting.

If you have any questions regarding the above, please do not hesitate to contact Michel Gauthier at (613) 948-1143.

Terry Young, CA
Manager, Administrative Law Section
International Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch