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.
Human Resources Development Programs Policy Application Income Security Programs 932103 8th Floor, Tower B
Place Vanier355 River Road Vanier, Ontario K1A 0L1
Attention: Doug Jermyn
Dear Sirs:
RE: GST Rebate
We are replying to your letter of July 14, 1993 concerning the taxation of GST rebates and farm support rebates. We apologize for the delay in our response.
In our conversation of November 25, 1993 (Jermyn/Humenuk), you advised us that GST rebates and farm support rebates are not included in income for the purpose of determining eligibility for the Guaranteed Income Supplement (GIS). This exclusion is based on your understanding that such rebates are not included in computing net income as reported on an individual's personal income tax return. However, it has recently come to your attention that such rebates may be taxable in certain circumstances and you ask for clarification as to when a GST rebate or farm support rebate would be included in an individual's income for tax purposes.
A GST rebate is deemed to be government assistance received by a taxpayer at the time of receipt by reason of subsection 248(16) of the Income Tax Act (the Act). Where such government assistance is received in connection with a business or an income-earning property, paragraph 12(1)(x) of the Act requires the amount of assistance received to be included in income unless it meets one of the exceptions listed in that paragraph. The purpose of the exceptions is to ensure that the rebate is not effectively included in income twice. Thus, the rebate would not be required to be included in income if it has been included in income for a different taxation year or if it has been used to reduce the cost or capital cost of a property or the amount of a deductible expense. A taxpayer may choose to reduce the amount of his deduction in respect of such outlay or expense where the rebate pertains to a particular outlay or expense. Similarly, a taxpayer may choose to reduce the capital cost of such property where the amount relates to the cost of a capital property or depreciable property.
You also asked us to distinguish the situations where such income inclusion would be required to be included in a personal income tax return rather than some other tax return. An individual may carry on a business through a proprietorship, a partnership or a corporation. While a corporation files a separate tax return from that of its shareholders, an individual is required to include the income from any business carried on as a proprietor or as a member of a partnership in the income reported on that individual's personal income tax return. Where the individual receives a GST rebate in respect of a tax- deductible expenses incurred in respect of employment, paragraph 6(8) of the Act requires the rebate to be included in the individual's income from employment.
In summary, there are very few situations where an individual will receive a GST rebate which is not required to be included in income or which does not reduce the related cost or expense. One notable example where the GST rebate would not be taxable is the rebate received by an individual on certain new home purchases.
With respect to farm tax rebates, you advised us that you were primarily concerned about the Ontario Farm Tax Rebate, the Fuel Tax Rebate and the Property Tax Rebate received by farmers. Generally speaking, rebates received in respect of an expense incurred to earn income from a business or property will either reduce the related expense or will be included in income under paragraph 12(1)(x) of the Act.
Under the Ontario Farm Tax Rebate Program, eligible owners of farm properties in Ontario receive a rebate of 75% of property taxes paid on eligible farmland and outbuildings other than the farm residence and one acre of land. While the program requirements changed effective for 1990, such rebates are required to be included in income pursuant to 12(1)(x) of the Act to the extent that they were not applied to reduce the expense for taxes otherwise deductible in the year. Other property tax rebates and fuel tax rebates received in the course of earning income from a business or property would be treated in a similar manner.
We trust our comments will be of assistance to you.
Yours truly,
P.D. Fuoco for DirectorBusiness and General DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch
All rights reserved. Permission is granted to electronically copy and to print in hard copy for internal use only. No part of this information may be reproduced, modified, transmitted or redistributed in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, or stored in a retrieval system for any purpose other than noted above (including sales), without prior written permission of Canada Revenue Agency, Ottawa, Ontario K1A 0L5
© Her Majesty the Queen in Right of Canada, 1993
Tous droits réservés. Il est permis de copier sous forme électronique ou d'imprimer pour un usage interne seulement. Toutefois, il est interdit de reproduire, de modifier, de transmettre ou de redistributer de l'information, sous quelque forme ou par quelque moyen que ce soit, de facon électronique, méchanique, photocopies ou autre, ou par stockage dans des systèmes d'extraction ou pour tout usage autre que ceux susmentionnés (incluant pour fin commerciale), sans l'autorisation écrite préalable de l'Agence du revenu du Canada, Ottawa, Ontario K1A 0L5.
© Sa Majesté la Reine du Chef du Canada, 1993
Email this Content