GST/HST memorandum 8-5
June 2026

This memorandum cancels and replaces GST Memorandum G400-3-1, Becoming and Ceasing to be a Registrant, GST/HST Policy Statement P-018R, Limitation on ITC Eligibility where Person becomes a registrant, and GST/HST Policy Statement P-019R, Eligibility for ITC on start‑up costs – Eligible capital property.

Except as otherwise noted, all statutory references in this publication are to the provisions of the Excise Tax Act (ETA). The information in this publication does not replace the law found in the ETA and its regulations. Although correct at the time of issue, this publication may not have been updated to reflect subsequent legislative changes.

If this information does not completely address your particular situation, you may wish to refer to the ETA or relevant regulation, or call GST/HST Rulings at 1-800-959-8287 for additional information. If you require certainty with respect to any particular GST/HST matter, you may request a ruling. GST/HST Memorandum 1-4, Requesting a GST/HST Ruling or Interpretation, explains how to obtain a ruling or an interpretation.

If you are located in Quebec and wish to request a ruling related to the GST/HST, please call Revenu Québec at 1‑800‑567 4692. You may also visit the Revenu Québec website at revenuquebec.ca to obtain general information.

For listed financial institutions that are selected listed financial institutions (SLFIs) for GST/HST or Quebec sales tax (QST) purposes or both, whether or not they are located in Quebec, the CRA administers the GST/HST and the QST. If you wish to make a technical GST/HST or QST enquiry related to SLFIs, please call 1-855-666-5166.

GST/HST rates

Reference in this publication is made to supplies that are subject to the GST or the HST. The GST/HST rates are those that were in effect at the time of publishing. For the list of all applicable GST/HST rates (current and historic), go to GST/HST calculator (and rates).

If you are uncertain as to whether a supply is made in a participating province, refer to GST/HST Memorandum 3-3-2, Place of Supply in a Province – Overview.

Table of Contents

• General
• Required registration
• Voluntary registration
• Input tax credits
  • Input tax credits for property
  • Basic tax content
  • Input tax credits for prepaid services, rents, royalties, and other similar payments
  • Restrictions
  • Taxi businesses – other commercial activities
  • Start-up costs
    • Establishing a commercial activity
    • Input tax credit restrictions and limitations
    • Documentary requirements
    • Input tax credit time limitations
    • Reporting periods for claiming input tax credits determined under subsections 171(1), 171(2), and 171.1(2)
• Reporting periods on becoming a registrant
  • Separate reporting periods
• Ceasing to be a registrant
  • Repayment of input tax credits when registered in error
  • Non-capital property on ceasing to be a registrant
    • Property other than capital property
  • Capital property on ceasing to be a registrant
    • Capital personal property
    • Capital real property
  • Services, rents, royalties, and other similar payments on ceasing to be a registrant
  • Taxi businesses – ceasing to be a registrant for other commercial activities
  • Reporting period when ceasing to be a registrant
  • Special cases when ceasing to be a registrant
    • Direct sellers and network sellers
    • Property outside Canada when person ceases to be a registrant
    • Leased passenger vehicles
    • Food, beverages and entertainment
• Appendix A – Paragraph (a) of the definition of basic tax content
• Appendix B – Paragraph (b) of the definition of basic tax content

General

1. Under subsection 123(1), the term registrant means "a person who is registered, or who is required to be registered, under Subdivision D of Division V".

Required registration

2. Under subsection 240(1), every person who makes a taxable supply in Canada in the course of a commercial activity engaged in by the person in Canada must register for the GST/HST, except where any of the following apply:

• the person is a small supplier
• the only commercial activity of the person is the making of supplies of real property by way of sale otherwise than in the course of a business
• the person is a non-resident person who does not carry on any business in Canada

3. A small supplier, at any time means "a person who is at that time a small supplier under section 148 or 148.1". In general, a person is a small supplier during any particular calendar quarter and the following month if the total value of the consideration for world-wide taxable supplies, including zero-rated supplies, made by the person (or an associate of the person at the beginning of the particular calendar quarter) that became due, or was paid without becoming due, in the previous four calendar quarters does not exceed $30,000 or, where the person is a public service body, $50,000. The calculation excludes consideration attributable to the sale of goodwill of a business, supplies of financial services, and supplies by way of sale of capital property. A charity or public institution will generally also be considered a small supplier where its annual gross revenue from all sources doesn't exceed $250,000.

4. Under subsection 240(1.1), every person who carries on a taxi business (as defined in subsection 123(1)) in Canada is required to register for GST/HST purposes, even if the person is a small supplier. The person would be considered a registrant on the day that the person began operating the taxi business. The GST/HST applies consistently to taxi and commercial ride-sharing services, therefore a provider of commercial ride-sharing services is generally subject to the same GST/HST rules that apply to taxi operators, including the requirement to register for the GST/HST regardless of whether the provider is a small supplier, and to collect the GST/HST on their fares.

5. If a person is a small supplier engaged in a taxi business and other commercial activities in Canada, the mandatory GST/HST registration will generally apply only to their taxi business unless they request to extend the registration to the other activities under subsection 240(3.1). If their combined total revenue from the taxi business and other activities exceeds the small supplier threshold at a particular time, the person would cease to be a small supplier. Their GST/HST registration would then begin to apply to those other activities and the person would be considered a registrant in respect of those other activities beginning at that time.

6. Investment plans that are selected listed financial institutions (SLFIs) and that make a reporting entity election, a consolidated filing election, or a tax adjustment transfer election are also required to register under subsection 240(1.2), (1.3), or (1.4).

7. In addition, certain non-resident performers are required to register under subsection 240(2) while suppliers of prescribed property are required to register under subsection 240(4).

8. For more information, refer to GST/HST Memorandum 2-1, Required registration.

Voluntary registration

9. A person who is not required to register for GST/HST purposes may register voluntarily under subsection 240(3) if the person is engaged in a commercial activity in Canada or the person meets one of the other conditions for registration described in that subsection, such as being a listed financial institution resident in Canada. The person becomes a registrant at the time the registration becomes effective, which is generally the day the person applies to be registered.

10. For more information, refer to GST/HST Memorandum 2-3, Voluntary registration.

Input tax credits

11. In general, according to subsection 169(1), in order to claim an input tax credit (ITC), a person must be a registrant during the reporting period in which the GST/HST becomes payable or is paid without having become payable on property or services acquired for consumption, use, or supply in the course of the registrant's commercial activities. For more information on the general rules for claiming ITCs, refer to GST/HST Memorandum 8-1, General Eligibility Rules.

12. Although generally a person must be a registrant during the reporting period in which tax first becomes payable or is paid without becoming payable to be entitled to an ITC in respect of that tax, there are special rules to allow a new registrant to claim ITCs for the tax paid or payable on certain expenses incurred before the person became a registrant.

Input tax credits for property

13. Under subsection 171(1), where at any time a person becomes a registrant and immediately before that time the person was a small supplier, for purposes of determining an ITC of the person, the person is deemed:

• to have received at that time, a supply by way of sale of each property that was held immediately before that time for consumption, use, or supply in the course of the person's commercial activities
• to have paid tax at that time in respect of the supply equal to the basic tax content of the property at that time

14. In addition, certain expenses, which would normally be attributed to a supply of a service may be treated as capital property under the Income Tax Act. Expenses incurred to set up a corporation (such as fees for legal and accounting services, or regulatory fees) may be considered attributable to depreciable property for purposes of Class 14.1 of Schedule II to the Income Tax Regulations. Where this is the case, the expenses that are included as depreciable property in Class 14.1 will meet the definition of property for GST/HST purposes and an ITC may be available under subsections 171(1) or 171.1(2). Property in Class 14.1 is excluded from the definition of capital property for GST/HST purposes.

15. These rules allow a person to recover all or part of the tax paid or payable in respect of the property that is held for consumption, use, or supply in the course of its commercial activities that could not have been claimed as an ITC at the time the property was originally acquired due to the fact that the person was not a registrant at that time. The ITC that is available to the new registrant is subject to the general ITC restrictions and limitations that are referred to in paragraph 29 of this memorandum.

16. The term property is defined in subsection 123(1) to mean "any property, whether real or personal, movable or immovable, tangible or intangible, corporeal or incorporeal, and includes a right or interest of any kind, a share and a chose in action, but does not include money".

Basic tax content

17. For many registrants, the basic tax content of a property is calculated under the formula contained in paragraph (a) of the definition of basic tax content in subsection 123(1). Paragraph (a) generally reflects the GST/HST that a person was required to pay on the acquisition of the property and any improvements made to it after deducting any amounts, other than ITCs, that the person was entitled to recover by rebate, remission, or similar method and after accounting for any depreciation of the property's fair market value. This formula is explained in Appendix A of this memorandum.

18. The formula in paragraph (b) of the definition of basic tax content (which is explained in Appendix B of this memorandum) is used when property is brought into a participating province from another province for consumption, use, or supply in the participating province and the person either:

• was required to self‑assess the provincial part of the HST under subsection 220.05(1) in respect of the property
• would have been required to self‑assess that tax but for the fact that the property was brought into that province for consumption, use, or supply exclusively in commercial activities or the person was exempt from paying that tax under any other Act or law

Input tax credits for prepaid services, rents, royalties, and other similar payments

19. There is a requirement to apportion services as well as, rents, royalties, and other similar payments that straddle the time at which a person becomes a registrant. The purpose of this apportionment is to determine a person's eligibility to claim ITCs for the tax payable on these payments.

20. Under paragraph 171(2)(a), where at any time a person becomes a registrant, in determining the ITCs of the person for the first reporting period of the person ending after that time, there may be included any tax that became payable by the person before that time to the extent that either the tax was payable in respect of services to be supplied to the person after that time or was calculated on the value of consideration that is a rent, royalty, or other similar payment relating to property attributable to a period after that time.

21. The person may claim the ITC only to the extent that the services, or the property to which the rent, royalty, or other similar payment relates, was for consumption, use, or supply in the course of the person's commercial activities after the time the person becomes a registrant.

Restrictions

22. Under paragraph 171(2)(b), an ITC may not be claimed for any tax that becomes payable after the time a person becomes a registrant to the extent that the tax is payable in respect of services supplied to the person before that time or is calculated on the value of consideration that is a rent, royalty, or other similar payment relating to property attributable to a period before that time.

Taxi businesses – other commercial activities

23. As noted in paragraph 5 of this memorandum, the GST/HST registration of a person who is a small supplier engaged in both a taxi business and other commercial activities generally applies only to the taxi business, unless the person voluntarily extends the registration to include those other activities under subsection 240(3.1). If at any time the registration of such a person applies only to a taxi business, subsection 171.1(1) provides that for GST/HST purposes, other than in respect of the sale of real property, the person is deemed not to be a registrant at that time other than in respect of the taxi business and anything done by the person in the course of that business or in connection with it. In addition, the person's other activities are deemed not to be commercial activities at that time for purposes of the ITC rules under section 169 and the rules regarding capital property.

24. Subsection 171.1(2) provides special rules where a person, who is a small supplier that carries on both a taxi business and is engaged in other commercial activities, other than the sale of real property, at any time extends the person's GST/HST registration under subsection 240(3.1) to apply to those other activities. Under the provision, the following rules apply:

• (a) the person is deemed, for the purpose of determining an ITC of the person, to have received, at that time, a supply by way of sale of each property of the person, other than capital property, that was held immediately before that time for consumption, use, or supply in the course of those other activities and to have paid, at that time, the GST/HST in respect of the supply equal to the basic tax content of the property at that time; and
• (b) for the purpose of determining the person's ITCs for the reporting period that includes that time, there may be included the total of any GST/HST that became payable by the person before that time, to the extent that the GST/HST is calculated on consideration, or a part thereof,
  
  • (i) that is reasonably attributable to a service that is to be rendered to the person after that time and that was acquired by the person for consumption, use, or supply in the course of those other activities
  • (ii) that is a rent, royalty, or similar payment in respect of property and that is reasonably attributable to a period after that time during which the property is used in the course of those other activities.

25. Paragraph 171.1(2)(a) allows a person engaged in a taxi business and other commercial activities to claim an ITC for the tax that was previously unrecoverable by the person with respect to property, other than capital property, that was acquired for consumption, use, or supply in the person's other commercial activities, with the ITC equal to the basic tax content of the property at the time the person's registration was extended to apply to the other activities. The GST/HST payable in respect of capital property may be recovered according to the change-in-use rules for capital property that generally apply where there is change in the proportion of commercial use of capital property over the life of an asset. Detailed information on these special rules is available in GST/HST Memorandum 8-3, Calculating Input Tax Credits.

26. Paragraph 171.1(2)(b) provides an additional rule that allows a person engaged in a taxi business and other commercial activities to claim ITCs for the reporting period that includes the time when the person's GST/HST registration was extended to apply to those other activities. Under the provision, such a person may recover any GST/HST that became payable before that time to the extent that it was calculated on all or part of the consideration that is either reasonably attributable to a service rendered to the person after that time for use in the other activities or a rent, royalty, or similar payment that is reasonably attributable to a period after that time when the person uses the property in the other activities.

27. For more information on the application of the GST/HST to taxi businesses go to GST/HST information for taxi operators and commercial ride-sharing drivers.

28. For more information on commercial ride sharing services refer to info sheet GI-196 GST/HST and Commercial Ride-sharing Services.

Start-up costs

Establishing a commercial activity

29. Under subsection 141.1(3), anything done by a person (other than the making of a supply) in connection with the acquisition or establishment of a commercial activity is deemed to have been done in the course of the person's commercial activities. Accordingly, where a person incurs start up costs in connection with the acquisition or establishment of a commercial activity, the GST/HST paid or payable on these expenses may qualify for an ITC.

Input tax credit restrictions and limitations

30. The general ITC restrictions and limitations apply with respect to the tax deemed paid under subsection 171(1) and paragraph 171.1(2)(a), as well as the tax paid or payable on services, rent, royalties, or other similar payments under paragraphs 171(2)(a) and 171.1(2)(b). For instance, a registrant is generally restricted from claiming an ITC for the tax payable on supplies of property and services acquired for the exclusive personal benefit of employees, or the amount of an ITC may be limited in relation to passenger vehicles or meal and entertainment expenses.

31. For more information, refer to GST/HST Memorandum 8-2, General Restrictions and Limitations.

Documentary requirements

32. As is the case with any ITC, sufficient documentation must be available to substantiate, among other things, the amount of tax that was paid or payable. Accordingly, when a person is deemed under subsection 171(1) or paragraph 171.1(2)(a) to have paid the GST/HST in respect of property equal to its basic tax content, the person must be able to substantiate the ITC claim with documentary evidence to support the calculation of the amount of deemed tax paid. Documentary requirements must also be satisfied for purposes of determining the ITC entitlements in relation to tax reasonably attributable to consideration for services supplied to the person or for rent, royalties, or other similar payments under paragraph 171(2)(a) or 171.1(2)(b).

33. For more information, refer to GST/HST Memorandum 8-4, Documentary Requirements for Claiming Input Tax Credits.

Input tax credit time limitations

34. The general time limitations under subsection 225(4) for claiming an ITC apply when a person becomes a registrant. In most cases, an ITC that arises (first becomes available) in a given reporting period of a person (other than a specified person, as defined in paragraph 34 of this memorandum) must be claimed in a return filed by the due date of the return for the last reporting period that ends within four years after the end of the given reporting period. In the case of a person that is a specified person during a given reporting period in which an ITC arises, the ITC must be claimed in a return filed by the due date of the return for the last reporting period that ends within two years after the end of the person's fiscal year that includes the given reporting period.

35. For the purposes of subsection 225(4), a person is a specified person during a reporting period of the person if either the person is a listed financial institution described in any of subparagraphs 149(1)(a)(i) to (x) or the person's threshold amounts, determined in accordance with subsection 249(1), exceed $6 million for both the particular fiscal year of the person that includes the reporting period and the person's previous fiscal year.

36. There are two exceptions where a person who is not a listed financial institution described in any of subparagraphs 149(1)(a)(i) to (x) during the reporting period will not be a specified person. These exceptions apply where the person is a charity during the reporting period or where all or substantially all (90% or more) of the person's supplies, other than supplies of financial services, made during either of the person's two fiscal years immediately preceding the particular fiscal year that includes the reporting period are taxable supplies.

Reporting periods for claiming input tax credits determined under subsections 171(1), 171(2), and 171.1(2)

37. With respect to the application of subsections 171(1) and 171(2), amounts may be included in determining the ITCs of a person for the first reporting period that ends after the person becomes a registrant, or in the case of subsection 171.1(2), after the registration of a person engaged in a taxi business is extended to the person's other commercial activities. These amounts are subject to the statutory ITC time limitations. Therefore, amounts that may be included in determining ITCs under these provisions may be claimed as ITCs in subsequent reporting periods, provided that the amounts are claimed in a return filed by the statutory time limitations provided under subsection 225(4), as explained in paragraph 33 of this memorandum.

38. In the case of a new registrant to whom these provisions apply, an ITC is considered to arise in their first reporting period that ends after they become a GST/HST registrant. Accordingly, the determination of the 2 or 4 year limit to claim the ITC is generally based on that reporting period.

39. For additional information on time limitations for claiming ITCs, refer to GST/HST Memorandum 8-1.

Reporting periods on becoming a registrant

Separate reporting periods

40. Under subsection 251(1), where a person becomes a registrant, the person is deemed to have two separate reporting periods as follows:

• the first reporting period begins on the first day of the calendar month that includes the day the person becomes a registrant and ends on the day immediately preceding that day
• the second reporting period begins on the day the person becomes a registrant and ends on the last day of the person's reporting period (determined under subsection 245(2)) that includes the day the person becomes a registrant

41. Generally, a person is not required to file a GST/HST return for the first reporting period unless the person has a positive amount of net tax to report or the person is an SLFI. As a new registrant, the person is required to file a return for the second reporting period.

Ceasing to be a registrant

42. According to subsection 242(1), the Minister of National Revenue (the Minister) may, after giving reasonable notice in writing, cancel the GST/HST registration of a person, provided the Minister is satisfied that the registration is no longer required (for example, the person is no longer engaged in any commercial activity). When cancelling a registration, subsection 242(3) requires the Minister to notify the person in writing and state the effective date of the cancellation.

43. If a person is a small supplier (other than a person engaged in a taxi business) who has been registered for a period of at least one year, the person may request that its registration be closed or cancelled by accessing My Business Account through the Sign in to your CRA account portal or calling 1‑800‑959‑5525 or by mailing or faxing Form RC145, Request to Close Business Number (BN) Program Accounts or Form RC7345, Request to Close Business Number Program Accounts for Certain Selected Listed Financial Institutions to the Prince Edward Island Tax Centre or the Sudbury Tax Centre within six months of the date it was signed or it will not be processed. The tax centres are listed at Canada.ca/tax centres. Upon receipt of the request, the Minister is required by subsection 242(2) to cancel the person's registration. The effective date of the cancellation is generally after the last day of the person's fiscal year, but may be any other date established by the CRA in consultation with the person.

44. If a person is a small supplier who carries on a taxi business and is engaged in other commercial activities, and the person has previously had its GST/HST registration extended to those other activities (as discussed in paragraphs 5 and 23 of this memorandum), the person may request under subsection 242(2.1) to have the registration varied to apply only to the person's taxi business. In that case, after receiving the request to have the person's registration varied, the Minister is required to vary the registration.

45. Pursuant to subsection 242(2.1), the effective date of the variation of a small supplier's GST/HST registration must be at least one year after the registration last began to apply to all of the small supplier's commercial activities in Canada and will generally be the first day of a fiscal year of the small supplier. Administratively, the effective date may be any other date established in consultation with the small supplier, as long as it is at least one year from the date upon which the registration applied to all of the small supplier's commercial activities. The Minister is required by subsection 242(3) to notify the small supplier in writing of the effective date of the variation.

46. For detailed information regarding the cancellation of registration, including other circumstances where a person's registration would no longer be required, refer to GST/HST Memorandum 2-7, Cancellation of Registration.

Repayment of input tax credits when registered in error

47. Where a person has registered in error (for example, the person advises the CRA that they are engaged in a commercial activity and applies to be registered, and they are subsequently discovered that there was no commercial activity), the CRA may cancel their registration. Any ITCs claimed during the period when the person was registered in error must be paid back upon cancellation of the registration.

Non-capital property on ceasing to be a registrant

Property other than capital property

48. Under paragraph 171(3)(a), when a person ceases at any time to be a registrant, the person is deemed to have:

• made, immediately before that time, a supply of each non-capital property (for instance, inventory) held for consumption, use, or supply in the course of its commercial activities immediately before that time
• collected immediately before that time, tax in respect of the supply calculated on the fair market value of each property at that time
• received, at that time, a supply of the property by way of sale and to have paid tax in respect of the supply calculated on its fair market value

49. The purpose of this provision is to treat the person as having disposed of its non-capital property at its fair market value immediately before ceasing to be a registrant, and as having collected tax on that property. As a result, the person is required to account for the GST/HST on the deemed disposition in the person's last return as a registrant.

50. For a person that has ceased to be a registrant, the tax that is deemed to have been collected by the person is calculated on the fair market value of the property rather than being equal to its basic tax content. Thus, a tax liability may exist in certain circumstances where the property was originally acquired without payment of the GST/HST (for instance, purchased from small suppliers).

Capital property on ceasing to be a registrant

51. Under paragraph 171(3)(b), where a person ceases at any time to be a registrant and had been using capital property in its commercial activities immediately before that time, the person is deemed to have, immediately before that time, ceased using the capital property in those commercial activities. This deeming provision triggers the change-in-use rules of subsection 200(2) for capital personal property, subsection 206(4) or subsection 207(1) for capital real property, and section 204 for certain capital property of a financial institution.

52. For more information on capital property, refer to GST/HST Memorandum 8-3.

Capital personal property

53. Where a person is deemed by paragraph 171(3)(b) to have ceased using capital personal property in commercial activities immediately before the time at which they cease to be a registrant, the person is deemed under subsection 200(2) to have sold the property immediately before that time, and to have collected at that time, tax in respect of the supply equal to the basic tax content of the property. The person is also deemed to have purchased the property at that time and to have paid tax equal to the basic tax content of the property. As a result of these deeming provisions, the person must include the amount of tax deemed collected in its net tax calculation for their last reporting period as a registrant.

54. Special rules apply to capital personal property of a financial institution and to a passenger vehicle or aircraft of an individual or a partnership that ceases to be a registrant. For detailed information on these special rules, refer to GST/HST Memorandum 8-2.

55. For more information on personal property, refer to GST/HST Memorandum 8-1.

Capital real property

56. Where a person is deemed by paragraph 171(3)(b) to have ceased using capital real property in commercial activities immediately before ceasing to be a registrant, the person is generally subject to another deeming provision under subsection 206(4) or 207(1).

57. For most registrants other than an individual, these deeming provisions are found in subsection 206(4). The deeming rules applicable to registrant individuals are found in subsection 207(1). Note that in the case of a registrant individual, there may be an adjustment to the deemed tax collected under subsection 207(1) if tax is also deemed to have been collected under section 190.

58. As a result of these deeming provisions, the person is required to include the amount of tax deemed to have been collected in its net tax calculation for their last reporting period as a registrant.

59. For information on the deeming provisions found in subsections 206(4) and 207(1), refer to GST/HST Memorandum 19-4-2, Commercial Real Property - Deemed Supplies.

60. For information on the operation of the self‑supply rules under section 190, refer to GST/HST Memorandum 19-2-3, Residential Real Property - Deemed Supplies.

Services, rents, royalties, and other similar payments on ceasing to be a registrant

61. Where a person who engages in commercial activities ceases at any time to be a registrant, the person must determine its ITC entitlement on services, rents, royalties, and other similar payments that straddle that time. The person must apportion the tax that becomes payable on these expenses to the periods before and after the time the person ceases to be a registrant. The person may claim ITCs for tax (or a portion of tax) paid or payable on services consumed, used, or supplied in commercial activities, or on rents, royalties, or similar payments relating to property consumed, used, or supplied in commercial activities, while the person was a registrant.

62. Under paragraph 171(4)(a), in the final reporting period of a person who ceases at any time to be a registrant, the person may claim ITCs for tax payable by the person after that time to the extent that either the tax is payable for services that were supplied to the person before that time for consumption, use, or supply in the course of the person's commercial activities or the tax is calculated on the value of consideration that is a rent, royalty, or similar payment attributable to a period before that time in respect of property used in the person's commercial activities.

63. When calculating the net tax for the last reporting period of a person as a registrant, the person is not eligible to claim an ITC for any tax paid or payable to the extent that it relates to services to be supplied to the person after the time the person ceases to be a registrant, or to the value of consideration that is a rent, royalty, or similar payment attributable to a period after that time. Under paragraph 171(4)(b), if a person has previously claimed an ITC on such services, rents, royalties, or similar payments, the person is required to add the amount of that ITC to their net tax for the final return.

Taxi businesses – ceasing to be a registrant for other commercial activities

64. Subsection 171.1(3) provides special rules where at any time a person that carries on a taxi business and is engaged in other commercial activities in Canada, other than the sale of real property, varies at that time the person's GST/HST registration under subsection 242(2.1) to apply only to the taxi business and not to the other activities.

65. Paragraph 171.1(3)(a) deems a person that at any time, is carrying on a taxi business and is engaged in other commercial activities, and whose registration ceases at that time to apply to those other activities, to have made a supply of each property of the person, other than capital property, that was held by the person for consumption, use, or supply in those other activities and to have collected the GST/HST calculated on the fair market value of the property at that time. In addition, the person is deemed to have received a supply of the property by way of sale and to have paid the GST/HST in respect of the calculated on the property's fair market value.

66. Paragraph 171.1(3)(b) allows a person carrying on a taxi business and engaged in other commercial activities to claim ITCs for the reporting period that includes the time when the person's GST/HST registration was varied to apply only to the taxi business. Under the provision, such a person may recover any GST/HST that became payable after that time to the extent that it was calculated on all or part of the consideration that is either reasonably attributable to a service rendered to the person before that time for use in the other activities, or rent, royalty, or similar payment that is reasonably attributable to a period before that time when the person uses the property in those other activities.

67. Paragraph 171.1(3)(c) requires the repayment of certain ITCs that were previously claimed by a person carrying on a taxi business and engaged in other commercial activities in a reporting period of the person before the time that the person's GST/HST registration was varied to apply only to the taxi business. Specifically, if ITCs were claimed in a previous reporting period of the person in respect of tax that was calculated on all or part of the consideration that is reasonably attributable to a service to be rendered to the person after the time when the person's GST/HST registration is varied, an amount must be added when determining the net tax for the person's reporting period that includes that time, to the extent to which the service was acquired by the person for consumption, use, or supply in the person's other activities. Similar recapturing occurs in respect of tax that was calculated on all or part of the consideration that is a rent, royalty, or similar payment and reasonably attributable to a period (the lease period) after that time, to the extent that the property is used by the person during the lease period in the course of those other activities.

Reporting period when ceasing to be a registrant

68. Under subsection 251(2), where a person ceases to be a registrant on a particular day, the person is deemed to have two separate reporting periods as follows:

• the first period begins on the first day of the reporting period, otherwise determined under subsection 245(2), that includes the particular day and ends on the day immediately preceding the particular day
• the second period begins on the particular day and ends on the last day of the calendar month that includes the particular day

69. Generally, there are no requirements to file a return for a subsequent reporting period, unless the person has a positive amount of net tax to report or the person is a SLFI.

Special cases when ceasing to be a registrant

Direct sellers and network sellers

70. An exclusion to the special rules under subsection 171(3) exists with respect to certain property that was an exclusive product of a direct seller and held by a person immediately before that person ceases to be a registrant. Pursuant to subsection 171(5), subsection 171(3) does not apply to such property where any of the following provisions applied to the property at an earlier time:

• subsection 178.3(1) (sales of exclusive products by a direct seller)
• subsection 178.4(1) (sales of exclusive products by a distributor of a direct seller)
• subsection 178.5(1) (exclusive products held by an independent sales contractor at the time an approval has been granted under subsection 178.2(3))
• subsection 178.5(2) (exclusive products held by a distributor at the time an approval granted under subsection 178.2(4) ceases to have effect)

71. Similar exclusions from the application of subsection 171(3) exist with respect to sales aids of direct sellers and network sellers. Under subsection 178(21), sales aids of a sales representative of a network seller may be excluded from subsection 171(3) in certain circumstances, while a similar exclusion exists in respect of sales aids of an independent sales contractor of a direct seller under subsection 178.5(11).

72. For more information on direct sellers, refer to GST/HST Memorandum 14-1, Direct Sellers.

Property outside Canada when person ceases to be a registrant

73. When a non-resident person, who has no permanent establishment in Canada, ceases to be a registrant, the person is not required to account for any tax in respect of property (including capital property) that is located outside Canada and not used in its commercial activities in Canada immediately prior to that time.

74. When a person, other than in the situation described in paragraph 71 of this memorandum, ceases to be a registrant and holds property outside Canada at that time, the matter of whether the person would be required to account for tax in respect of that property is a question of fact that would have to be determined on a case-by-case basis. For instance, where the basic tax content of a person's capital property is zero because the property was acquired outside Canada and never imported into Canada, there would be no requirement to self‑assess tax on a deemed supply of that property, regardless of whether the person is a non-resident of Canada.

Leased passenger vehicles

75. Under paragraph 235(2)(a), where a person ceases to be a registrant in or at the end of a taxation year and an amount is required to be added to net tax under subsection 235(1) in respect of a lease of a passenger vehicle (that is, the lease amounts exceed the maximum lease costs that are deductible for income tax purposes), the appropriate reporting period to recapture the ITCs is the last reporting period of the registrant in that year.

Food, beverages and entertainment

76. Under paragraph 236(1.1)(a), where a person is required under subsection 236(1) to add, in determining the net tax of the person for a reporting period in a fiscal year, a portion of the ITCs previously claimed in respect of food, beverages, and entertainment, and the person ceases to be a registrant in a reporting period ending in that fiscal year, the appropriate reporting period to recapture the ITCs is the reporting period that includes the date the person ceased to be a registrant.

77. For more information on ITCs on leased passenger vehicles, as well as claiming ITCs on food, beverages, and entertainment, refer to GST/HST Memorandum 8-2 General Restrictions and Limitations.

Appendix A – Paragraph (a) of the definition of basic tax content

This formula has been simplified to help most registrants. In addition, while it can be used in most cases, additional amounts generally need to be added to element A and B when the registrant is a selected listed financial institution.

The basic tax content of property of a person under paragraph (a) of the definition of that term in subsection 123(1) is equal to:

(A – B) × C

where:

A is the total of the following:

• (i) the tax payable on the person's last acquisition or importation of the property
• (ii) the tax payable on improvements to the property acquired, imported, or brought into a participating province after the property was last acquired or imported
• (iii) the tax that would have been payable in either A(i) or A(ii) in the absence of subsection 153(4) (used tangible personal property trade ins), section 167 (supply of business assets), section 167.11 in the case of property acquired under an agreement for a qualifying supply (as defined in that section) that was not, immediately before that acquisition, capital property of the supplier or the fact that the property or improvements were acquired by the person for consumption, use, or supply exclusively in commercial activities
• (iv) the tax under sections 218 and 218.1 (tax payable on imported taxable supplies), and Division IV.1 (tax self-assessed on property brought into a participating province) that the person would have been liable to pay if the property or improvement were not for consumption, use, or supply exclusively in the course of commercial activities

B le total des montants suivants :

• (i) any tax included in A that the person was exempt from paying under any other Act or law
• (ii) amounts of tax referred to in A(i) and A(ii) that the person was entitled to recover by way of a rebate, refund, remission, or otherwise under the ETA or any other Act or law or would have been entitled to recover if the property or improvement had been acquired for use exclusively in activities that are not commercial activities, other than ITCs and amounts referred to in B(i)
• (iii) amounts of tax referred to in A(iii) and A(iv) that the person would have been entitled to recover by way of a rebate, refund, remission, or otherwise under the ETA or any other Act or law if the tax had been payable and the property or improvement had been acquired for use exclusively in activities that are not commercial activities, other than ITCs and amounts referred to in B(i)

C is the lesser of 1, and the fair market value of the property at the time the basic tax content is being determined divided by the total of the consideration payable on the last acquisition of the property plus the consideration for any improvements made to the property since that last acquisition.

Appendix B – Paragraph (b) of the definition of basic tax content

This formula has been simplified to help most registrants. In addition, while it can be used in most cases, additional amounts generally need to be added to element A and B when the registrant is a selected listed financial institution.

If the person brought the property into a participating province from another province for consumption, use, or supply in the participating province in circumstances in which the person was required to pay tax in respect of the property under section 220.05, or would have been required to pay that tax but for the fact that the property was brought into that province for consumption, use, or supply exclusively in commercial activities or the person was exempt from paying that tax under any other Act or law, the basic tax content of property under paragraph (b) of the definition of that term in subsection 123(1) is equal to:

(J – K) × L

where:

J is the total of the following:

• (i) the basic tax content of the property, determined under paragraph (a) of the definition of basic tax content, immediately before the property was brought into the province (refer to Appendix A)
• (ii) the provincial part of the HST that the person was required to self-assess under section 220.05 when the property was brought into the province
• (iii) the tax payable on improvements to the property made after the property was brought into the province
• (iv) the tax that would have been payable in J(iii), in the absence of subsection 153(4) (used tangible personal property trade ins), section 167 (supply of business assets), section 167.11 in the case of property acquired under an agreement for a qualifying supply (as defined in that section) that was not, immediately before that acquisition, capital property of the supplier or the fact that the improvements were acquired for consumption, use, or supply exclusively in commercial activities
• (v) the tax that would have become payable under J(ii) and the tax under sections 218 and 218.1 (tax payable on imported taxable supplies), and Division IV.1 (tax self-assessed on property brought into a participating province) that would have become payable on improvements made after the property was brought into the province, but for the fact that the person brought the property into the province or acquired the improvement for consumption, use, or supply exclusively in the course of commercial activities

K is the total of the following:

• (i) any tax included in J(ii) to J(v) that the person was exempt from paying under any other Act or law
• (ii) amounts of tax referred to in J(ii) and J(iii) that the person was entitled to recover by way of a rebate, refund, remission, or otherwise under the ETA or any other Act or law, or would have been entitled to recover, if the property or improvement had been acquired for use exclusively in activities that are not commercial activities, other than ITCs and amounts referred to in K(i)
• (iii) amounts of tax referred to in J(iv) and J(v) that the person would have been entitled to recover by way of a rebate, refund, remission, or otherwise under the ETA or any other Act or law if the tax had been payable and the property or improvement had been acquired for use exclusively in activities that are not commercial activities, other than ITCs and amounts referred to in K(i)

L is the lesser of 1, and the fair market value of the property at the time the basic tax content is being determined, divided by the total of the value of property when brought into the participating province plus the consideration on any improvements made to the property since that time

Further information