GST/HST Ruling

Dear XXXXX:

Thank you for your letter of September 28, 1999 with attachments, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the sale of real property.

Your letter was sent to our XXXXX and has been forwarded to us for a response.

Please note that as of November 1, 1999, Revenue Canada became the Canada Customs and Revenue Agency.

Statement of Facts

Based on the information provided in your letter, the plot plan provided by XXXXX XXXXX, and the telephone conversation between XXXXX XXXXX and XXXXX XXXXX of the XXXXX on November 4, 1999, our understanding of the facts is as follows:

1. You purchased approximately 27 acres of land XXXXX XXXXX in the Province of XXXXX in the 1980s with the intent of building your personal residence on it.

2. The land consisted of several separate parcels as described in fact #5 (original parcels).

3. You have severed a number of the original parcels into new parcels as described in fact #5 (new parcels).

4. You then consolidated some of these new parcels with some of the original parcels to create two new lots and three remainder areas. (Please refer to fact #6 and fact #7.)

5. The original parcels were altered as follows:

XXXXX has been severed, creating parcels A, M and U.

XXXXX has been severed, creating parcels B, N, T, C, and R.

XXXXX has been severed, creating parcels D and P.

XXXXX has been severed, creating parcels E and Q.

XXXXX has been severed, creating parcels G and S.

Lot F, H, J, and A-1 remain unchanged.

6. Lot 1 is a consolidation of Lot F and Parcels G, T, C, E and U.

7. Lot 2 is a consolidation of Lot H, and Parcels M, N, P, Q, R and S.

8. You are not in the business of buying and selling property.

9. The land has not been used primarily in the course of a business and is not being sold in the course of a business.

10. You are selling Lot 1 to a person who is neither a former spouse nor a person who is related to you and who is acquiring Lot 1 for his/her personal use and enjoyment.

Ruling Requested

You have requested a ruling as to whether the sale of Lot 1 is subject to the HST.

Ruling Given

Based on the facts set out above, we rule that the sale of Lot 1 is a taxable supply of real property as it is excluded from the general exemption provided for in section 9 of Part I of Schedule V to the Excise Tax Act (ETA) by virtue of paragraph 9(2)(c) of that section.

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 9 of Part I of Schedule V provides that a supply of real property by way of sale by an individual is exempt from the HST.

Paragraph 9(2)(c) of Part I of Schedule V excludes from exemption, and renders taxable, a supply of a part of a parcel of land, which parcel the individual subdivided or severed into parts. There are two exceptions to this rule. Where the parcel of land was subdivided or severed into only two parts and the individual did not subdivide or sever that parcel from another parcel of land, paragraph (c) does not apply. This paragraph also does not apply in the case of a subdivision or severance where the recipient of the supply is an individual who is related to, or is a former spouse of, the individual supplier, and the recipient is acquiring the part for his/her personal use and enjoyment. Further, for the purposes of determining whether the land has been subdivided or severed, where the individual supplies a part of a parcel of land to a person who has the right to acquire the land by expropriation, such as a municipality or utility commission, that part and the remainder of the parcel will not be considered to have been subdivided or severed from each other by the individual.

In this case, you are selling parts of parcels of land which parcels were subdivided by you into more than two parts. As a result, the sale of Lot 1 is subject to the HST as it is excluded from the exemption in section 9 of Part I of Schedule V to the ETA by reason of paragraph 9(2)(c) of Part I of Schedule V.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 952-8816.

Yours truly,

Anne Kratz
Real Property Unit
Financial Institutions and Real Property Division
Excise and GST/HST Rulings Directorate

Dear XXXXX:

This letter is in response to the query of January 18, 2000, from XXXXX, formerly of your organization, wherein he requested that the XXXXX (the XXXXX ) be considered a "specified person" as defined in subsection 259.1(1) of the Excise Tax Act (ETA), for purposes of claiming a 100% rebate of the Goods and Services Tax (GST) paid on printed books and other related items.

The following documents were submitted for our consideration: a copy of the XXXXX's incorporation documents, a list of the current board of directors and officers, a copy of the mission statement (as well as the program mission statement), and the audited financial statements for the year ending March 31, 1999.

Statement of Facts

Our understanding of the facts is as follows:

1. The XXXXX is a registered charity for purposes of the Income Tax Act (ITA) and is therefore a charity for GST purposes.

2. One of the stated objects of the XXXXX is:

a) to receive and maintain a fund or funds and other property and to apply from time to time all or part thereof and the income therefrom for charitable purposes including, without limiting the generality of the foregoing, the following objects:

(i) XXXXX[;]

(ii) XXXXX[;]

(iii) XXXXX[;]

(iv) to provide the media with accurate information XXXXX;

(v) to seek and provide funding for XXXXX, public education and support services and to present information to the general public and various levels of government about the need for financial support for such projects.

3. The XXXXX operates a research and lending library where books are available for reference or loan to the general public.

4. The XXXXX acquires and imports, otherwise than for resale, printed books and audio recordings, all or substantially all of which are spoken readings of printed books.

Ruling Requested

The XXXXX is a "specified person" as defined in subsection 259.1(1) of the ETA, and thus eligible to claim a rebate of 100% of the GST paid on the acquisition of printed books and other related goods.

Ruling Given

Based on the facts set out above, we rule that the XXXXX is a specified person for purposes of subsection 259.1(1) of the ETA. Therefore, it is able to claim a rebate of 100% of the GST paid on the acquisition of printed books and other related goods.

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

Pursuant to section 259.1 of the ETA, a charity that operates a public lending library is considered to be a "specified person" and is eligible to claim a rebate of 100% of the GST paid on printed books and other related goods that are acquired by the charity otherwise than for resale.

For purposes of the rebate, a "charity" has the meaning assigned to it under subsection 123(1) of the ETA, i.e.; a registered charity or a registered Canadian amateur athletic association within the meaning of subsection 248(1) of the Income Tax Act, but not including a "public institution". A public institution means a registered charity within the meaning of subsection 248(1) of the Income Tax Act that is a school authority, public college, university, hospital authority or a local authority determined by Revenue Canada to be a municipality.

It is our position that a public lending library, for purposes of the rebate, means a place where a collection of documents and other items such as films and recordings are kept and maintained and which is open to the public for their use. It includes libraries from which these documents and other items can be borrowed, as well as those libraries accessible to the public where the documents may be viewed "on site" only (e.g. for research purposes).

The XXXXX meets the definition of "specified person" in subsection 259.1(1) of the ETA, as it is a charity, and it operates a public lending library. We have enclosed for your consideration, a copy of Technical Interpretation Bulletin B-076, entitled "Proposed Rebate for Printed Books, Audio Recording of Printed Books, and Printed Versions Of Religious Scriptures Under the GST/HST." This Bulletin provides more information on the rebate, including the mechanism for claiming the rebate. Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 954-4206.

Yours truly,

Dwayne Moore
Charities, NPOs, and Educational Services Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate

Dear XXXXX:

Thank you for your facsimile transmission of August 9, 2000, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to your client's operation of a refuse disposal site.

Statement of Facts

Our understanding of the facts is as follows:

1. The Rural Municipality of XXXXX passed Resolution No. XXXXX, authorizing the Public Works Committee to find a company with the expertise to properly manage the municipal disposal grounds.

2. XXXXX of the Municipal Act of XXXXX allows a Municipality to enter into agreements with a person, with an agency of the Government of XXXXX or the Government of Canada, or with another municipality, including a municipality in another province, to do with or on behalf of the municipality anything the municipality has the power to do within the municipality. Accordingly, XXXXX has entered into a public/private partnership agreement with XXXXX to manage the XXXXX Disposal Grounds.

3. The revenues from this partnership shall not be used to subsidize the normal operating budget of XXXXX. The intent is that the funds are to be used to increase reserve fund balances, retire all outstanding debts and for special projects deemed appropriate by Council.

4. XXXXX is the registered owner of the land used as the disposal grounds.

5. Pursuant to the Agreement dated September 1, 1998, between Ritchot and Mid Canada, Mid Canada wishes to manage, on behalf of XXXXX the existing waste disposal grounds, currently operating under the authority of Waste Disposal Ground Permit No. XXXXX[.]

6. XXXXX agrees to allow XXXXX, on XXXXX behalf, to manage the operation of the waste disposal grounds for a period of five years.

7. XXXXX represents and warrants that it will keep the Operating Permit in good standing throughout the term of this Agreement.

8. XXXXX shall operate the waste disposal grounds in accordance with the existing Operating Permit and the applicable laws and regulatory controls, and XXXXX hereby consents to the use of the premises for such purpose and hereby authorizes XXXXX to operate the waste disposal grounds.

9. Together the parties shall prepare an operating budget for the year.

10. Tipping fees for commercial/industrial solid waste shall be $28.00 per tonne. This revenue shall be distributed in the following manner:

11. When the Operations/Maintenance fund reaches $100,000, distribution of the amount in excess of $25,000 will be made to XXXXX and XXXXX, 37% to XXXXX and 63% to XXXXX.

12. Assets (not including the land) obtained throughout the duration of this Agreement related to landfill operations will be owned jointly by XXXXX and XXXXX, 37% to XXXXX and 63% to XXXXX.

13. XXXXX will be responsible at its own cost for providing land and access to that land, as required, and providing operations overview.

14. XXXXX will be responsible at its own cost for sales, invoicing and reporting, overall site management and daily supervision of operations, regulatory management and liaison with XXXXX Environment.

15. XXXXX will carry $2,000,000 of liability insurance, per incident, for the duration of this Agreement, showing loss payable to XXXXX XXXXX shall supply a copy of the policy to XXXXX.

16. XXXXX shall be liable for all real property taxes, if any, assessed or levied against, or payable in respect of the premises during the term of this Agreement.

17. XXXXX shall allow at all reasonable times unimpeded access to the premises for inspection purposes by representatives of XXXXX and such regulatory authority as may exist from time to time.

18. XXXXX acknowledges that XXXXX powers as a municipality under the Municipal Act are not affected by this Agreement.

19. XXXXX is registered for purposes of the GST/HST under Business Number XXXXX.

Ruling Requested

Is XXXXX required to collect and remit GST on the tipping fee charged for the dumping of commercial/industrial solid waste?

Is XXXXX entitled to claim ITCs for the GST paid on expenses incurred in managing the refuse disposal site for XXXXX?

Ruling Given

Based on the facts set out above, we rule as follows:

The ruling issued on August 5, 1999, case number XXXXX, is correct. The supply of the right to deposit refuse at the XXXXX Disposal Grounds is a supply made by XXXXX for the consideration of $28.00 per tonne. This supply, made by XXXXX, a municipality, is exempt under the paragraph 20(i) of Part VI of Schedule V to the ETA. XXXXX is not required to collect and remit the GST on the tipping fee charged to consumers.

XXXXX is supplying a taxable service to XXXXX of managing the XXXXX Disposal Grounds for consideration equal to the amount it retains under the Agreement. XXXXX as a registrant, is required to collect from XXXXX and remit the GST applicable to this amount.

XXXXX as a registrant, is entitled to claim ITCs for the GST paid or payable on the purchases it uses, consumes or supplies in the course of providing management services to 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.

Should you have any further questions or require clarification on the above matter please do not hesitate to contact Mr. Owen Newell, Manager, at (613) 941-3268.

Yours truly,

Shashi Fernando
Municipalities and Health Care Services Unit
Public Service Bodies & Governments Division
Excise and GST/HST Rulings Directorate

Dear XXXXX

Thank you for your letter of July 27, 2000 (with attachments), concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the transaction(s) described below.

It is our understanding, as noted in your written submission, that the issues contained herein were brought forward by XXXXX with the XXXXX. You have requested an application ruling to determine how the Nominee and the Owner should treat ongoing transactions under Part IX of the Excise Tax Act (ETA), thereby confirming your current practice of GST reporting in connection with transactions pertaining to the development of the Property.

Statement of Facts

Our understanding of the facts, the transaction(s), and the purpose of the transaction(s) is as follows:

1. XXXXX (the "Nominee") is a corporation continued under the Federal laws of Canada. The Nominee is registered for purposes of the GST.

2. XXXXX (the "Owner") is a corporation continued under the Federal laws of Canada. The Owner is registered for purposes of the GST.

3. The Nominee is the registered legal owner of certain lands located in the XXXXX (the "Property"). Under the terms of the Nominee Agreement, XXXXX, made between the Nominee and the Owner, the Nominee acknowledged that it held legal title to the Property as bare trustee for and on behalf of the Owner.

4. Under the terms of the Nominee Agreement, the Nominee agreed to deal with the Property only on the directions of the Owner and to execute and deliver all agreements, leases, covenants, instruments and assurances required by Owner from time to time in connection with the Property.

5. The Owner is developing the Property and is carrying on all of the commercial activities related thereto.

6. The Nominee has contracted on behalf of the Owner for the supply of goods and services from third parties in connection with the development of the Property for which GST has been paid. All invoices for the supply of the goods and services and any contracts or agreements related thereto are in the name of the Nominee.

7. The Owner, as the beneficial owner of the Property, files the GST returns required under the ETA, accounts for any GST collected and claims input tax credits for GST paid.

8. The Nominee has provided a written undertaking to the local tax services office not to claim input tax credits for any of the GST paid by the Owner in connection with the supply of any goods or services made to develop the Property.

Ruling Requested

A. That the Owner will be entitled to claim input tax credits in connection with the GST paid on the inputs that are consumed, used or supplied in the course of the development of the Property pursuant to the Canada Customs and Revenue Agency's (CCRA's) administrative policy with respect to treatment of bare trusts under the ETA.

B. That the Nominee will be considered the Owner's authorized agent or representative for purposes of the Input Tax Credit Information Regulations (Regulations) and the Owner will be entitled to claim input tax credits with respect to GST paid on contracts or invoices in the name of or addressed to the Nominee as recipient of inputs supplied in connection with the development of the Property by the Owner. That is, the Owner will meet the documentary requirement to support its claim for input tax credits if the recipient identified in the supporting documentation is the Owner or the Nominee.

Ruling Given

Based on the facts set out above and consistent with CCRA's administrative position concerning bare trusts and nominee corporations, we rule as follows:

A. The Owner is entitled to claim input tax credits in connection with the GST paid in the course of development of the Property.

B. The Nominee may be considered to be the Owner's representative for purposes of the Regulations. Invoices and contracts supporting the Owner's claim for input tax credits, identifying either the Nominee or the Owner as the recipient of the supplies, along with the Nominee Agreement, satisfy the documentary requirements as prescribed in the Regulations.

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.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 957-8226.

Yours truly,

Indra Singh
Corporate Reorganizations Unit
Financial Institutions and Real Property Division
Excise and GST/HST Rulings Directorate

Dear XXXXX

Thank you for your letter of May 10, 2000, with the attached contract, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the agreement between XXXXX and XXXXX[.]

Statement of Facts

Our understanding of the facts is as follows:

1. XXXXX, sole proprietor of XXXXX have entered into an agreement whereby XXXXX will be assigned to the XXXXX.

2. The agreement provides for the following:

•   The assignment will begin on XXXXX and terminate on XXXXX but may be extended or terminated upon two months notice of either party. It is agreed that no offer of continuing employment will be made by XXXXX during or immediately after the termination of the assignment.

•   XXXXX will make payments to XXXXX for XXXXX salary at a monthly rate not to exceed XXXXX. These payments include an amount in respect of benefits XXXXX. There is no mark-up on the salary and benefits paid to XXXXX.

•   The terms of the agreement also include up to four weeks leave during each year.

•   XXXXX[.]

3. During the assignment, XXXXX will perform the following duties:

•   management of activities related to XXXXX;

•   management of activities related to XXXXX; and

•   technical and program support for XXXXX in the implementation of other XXXXX initiatives including those with XXXXX[.]

4. XXXXX works under the direction and supervision XXXXX.XXXXX reviews XXXXX work on a regular basis and sets out the annual work plan which may evolve throughout the work term. Changes to the work plan will not result in changes to the terms of the original agreement entered by the parties.

5. XXXXX works from XXXXX offices using equipment supplied by XXXXX[.]

Ruling Requested

Are the payments made to XXXXX in respect of XXXXX assignment with XXXXX subject to the GST/HST?

Ruling Given

Based on the facts set out above, we rule that the payments made XXXXX in respect of XXXXX assignment with XXXXX are not subject to the GST/HST.

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.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 952-0370.

Yours truly,

Brent Fleming
Governments Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate

Dear XXXXX:

Thank you for your letter of March 8, 2000 (with attachments), concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to funds received by XXXXX XXXXX from the XXXXX.

Statement of Facts

Our understanding of the facts, the transactions, and the purpose of the transactions is as follows:

1) The XXXXX agreed to contribute XXXXX to XXXXX. (i.e., the "Firm").

2) XXXXX XXXXX[.]

3) According to the Contribution Agreement (i.e., the Agreement), XXXXX wishes to make the contribution to the Firm in order to assist it in establishing or improving a business collaboration in XXXXX, as well as to increase the developmental impact of this business collaboration in XXXXX.

4) XXXXX contribution was made under the condition that the firm would use the contribution solely to carry out the activity specified in order to lead or to facilitate the implementation of the Project.

5) XXXXX.

The Firm proposes to carry out a viability study for XXXXX. The viability study will investigate development of a joint venture between the Firm and a XXXXX partner company, XXXXX.

XXXXX would have three broad mandates:

a) To offer applied short term training programs to the public and private sectors;

b) To undertake consulting assignments and project management;

c) To sponsor applied research XXXXX.

6) XXXXX will allocate its contribution for expenses incurred and fully paid for by the Firm towards deliverables identified in XXXXX Agreement in carrying out the activity in accordance with the terms and conditions of the Agreement.

7) The Deliverables identified in XXXXX are: XXXXX.

8) XXXXX shall contribute XXXXX of the total amount of allowable costs for carrying out the activity to a maximum of XXXXX.

9) The Firm's financial participation would amount to XXXXX of the total amount of allowable costs incurred in carrying out the activity, XXXXX. The Firm shall also provide human, material and financial resources necessary to carry out the activity.

10) XXXXX will not make any advance payment. It will allocate its contribution solely for expenses incurred and fully paid by the Firm towards deliverables identified XXXXX of the Agreement.

11) The Firm authorizes XXXXX to compile and publish statistics based on the information contained in the documents comprising the Agreement and arising from its performance.

12) In any instances where the Firm publicizes the activity of the Project, it shall also mention XXXXX participation in carrying out the activity and its support in implementing the Project.

13) The Firm shall facilitate access for XXXXX authorized representatives to the activity site; its premises in Canada and those of its client or partner in XXXXX to evaluate the activity. XXXXX reserves the right to seek such access whenever it deems necessary during the activity and for five years following the final payment of the XXXXX contribution.

14) No provision of the Agreement has the effect of creating a partnership, joint venture or mandate relationship between the XXXXX and the Firm.

15) The Firm agrees to replay the contributions made by XXXXX in respect of the Project if the following circumstances are both present during the effective period of the Project:

a) XXXXX has paid a minimum of XXXXX under one or more contribution agreements to carry out an activity or activities in order to lead or facilitate implementation of the Project; and

b) the Firm, its affiliates or the Firm and its affiliates have realized Project revenue totalling a minimum of XXXXX.

Ruling Requested

Should the Firm charge GST/HST on amounts received from XXXXX in respect of this Project?

Ruling Given

Based on the facts set out above, we rule that amounts paid by XXXXX to the Firm are grants that are not consideration for a supply. Therefore, these payments are not subject to the GST/HST.

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 transactions for which you requested a ruling.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 952-9590.

Yours truly,

Elaine Bonnah
Government Sectors Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate

Dear XXXXX:

Thank you for your facsimile message of September 23, 1999, to the XXXXX, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the activities of your client. Your inquiry was forwarded to our office for reply. Our comments are set out below.

Statement of Facts

Our understanding of the facts of the case, based on the documentation submitted and information provided in a telephone conversation between you and me on June 9, 2000, is as follows :

1. XXXXX is a business run by XXXXX XXXXX as a partnership and is registered for GST/HST since XXXXX XXXXX. The advertising literature for the XXXXX identifies it as a school providing English language instruction.

2. The main activity of the XXXXX consists of supplying an all inclusive package to non-residents which includes room and board at the XXXXX, English-as-a-second-language (ESL) training along with school supplies (hereinafter be referred to as "the Package"). The period of time that is included in the Package can vary from one to three months.

3. The non-residents purchase the Package from their travel agent in XXXXX.

4. A qualified ESL instructor is retained to provide the language training provided as part of the Package and a certificate is provided to the graduates. Each student receives 6 hours language training daily, 5 days a week.

5. The XXXXX promotional material breaks down the consideration for the various components of the package. However, the components must be acquired together as a package by the non-residents. Supplementary hours of one-on-one instruction in English are also offered at a per hour rate.

6. Currently, the provision of this package represents 90% or more of the XXXXX revenue and human resources requirements. The remaining percentage represents clients coming only for excursions. The XXXXX is planning to diversify its business activities in the future and as a result of this change the percentage could go down.

Ruling Requested

You would like to know if any GST is applicable to the package.

Ruling Given

Based on the facts above, we rule that in supplying the Package the XXXXX is making a single supply of instruction in English as a second language which is exempt pursuant to section 11 of Part III of Schedule V to the Excise Tax Act (section 11 and the ETA).

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

Having determined that the XXXXX is making a single supply of ESL instruction in supplying the Package, we would point out that all elements included in the Package have the same tax status as the supply of ESL instruction.

Tax Treatment of ESL Instruction

Section 11 exempts the service of instructing individuals in language courses that form part of a program of second language instruction in either English or French, where the supply is made by an organization that is established and operated primarily to provide instruction in languages.

To determine whether an organization is established primarily to provide instruction in languages, we will examine an organization's governing documents. These documents include letters patent, articles of incorporation, memoranda of agreement and by-laws and should contain information as to the reason or purpose for the establishment of the organization. If that information is not readily available, how the organization is operated will be evidence of the purpose of its establishment. With respect to the operated primarily requirement, the organization's revenues and human resources should be primarily attributed to the supply of instruction in languages.

Based on the description of the XXXXX activities, as outlined above, supplies of ESL instruction provided by it qualify for exemption pursuant to section 11. This means that it is not required to charge GST on supplies of ESL instruction.

Please note a Ways and Means Motion was tabled in Parliament on December 10, 1998, to amend section 11. The proposed amendment is set out below.

"11. A supply of a service of instructing individuals in, or administering examinations in respect of, language courses that form part of a program of second-language instruction in either English or French, if the supply is made by a school authority, a vocational school, a public college or a university or in the course of a business established and operated primarily to provide instruction in languages."

The reference in section 11 to "organization" is removed to clarify that the exemption is available whenever the supplier is a person whose business is primarily to provide instruction in languages. It does not affect the exempt status of the ESL supplied by the XXXXX. This proposed amendment to section 11 applies to supplies made after April 1999.

We have ruled that the ESL courses offered by the XXXXX are not subject to GST. However, it should be noted that if the XXXXX diversifies its activities and ceases to be operated primarily to provide instruction in languages, the supply of English courses may become taxable. Further, if the XXXXX offers other courses which are not within the exemption in section 11, these courses will be taxable as well as any other supply of excursion supplied otherwise than as part of the ESL instruction package.

It is important to note that a GST/HST registrant is not able to claim input tax credits in respect of the GST/HST paid or payable on purchases and operating expenses related to its exempt supplies.

Also, we would point out that, generally, registration is optional where revenues from taxable sales are $30,000 per year or less. Persons who are registered and have taxable sales of $30,000 per year or less may choose to no longer be registered. If so, they are not required to collect the GST on their taxable sales, but they are also not able to claim input tax credits.

In the present case, if the XXXXX revenue from taxable supplies is $30,000 per year or less, it may apply to cease being registered. Please find enclosed the GST/HST memoranda 2.2 Small Suppliers, 2.3 Voluntary Registration and 2.7 Cancellation of Registration. More information on cancellation of registration can be obtained from the XXXXX. The telephone number is XXXXX.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 957-8223.

Yours truly,

Carolle Mercier
Services and Intangibles Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate

Dear XXXXX:

Thank you for your letter of July 29, 2000, concerning the application of the Goods and Services Tax (GST) to goods sent to you outside of Canada.

Statement of Facts

Our understanding of the facts is as follows:

You have acquired from XXXXX operating out of Toronto, Ontario, taxable goods that were sent to you by mail outside of Canada.

The goods were mailed by XXXXX to a Department and Foreign Affairs and International Trade (DFAIT) mailing address in Ottawa at XXXXX has charged you GST on its supplies of the goods that were mailed to you at such an address in Canada.

Ruling Requested

The shipments of the goods acquired from XXXXX and sent to you outside Canada through the DFAIT address in Canada are GST and/or PST exempt.

Ruling Given

Based on the facts set out above, we rule that goods acquired by a recipient that are sent by mail by the supplier to XXXXX), a DFAIT address, and which are ultimately exported from Canada are zero-rated (taxed at 0 per cent), pursuant to section 12 of Part V of Schedule VI to the Excise Tax Act.

With respect to the Ontario provincial retail sales tax, you may contact the Regional Retail Sales Tax Ottawa Office, at 300-1400 Blair Place, Gloucester, ON, K1J 9B8 or by calling their number at (613) 746-9200, for further information regarding the application of the Ontario retail sales tax.

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.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 957-8220.

Yours truly,

Daniel E.B. Chamaillard
Senior Technical Analyst
Border Issues Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate

Dear XXXXX :

Thank you for your letter of August 30, 1999, to Mr. Owen Newell, Manager of the Municipal and Health Care Services Unit, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to taxable benefits, specifically employer provided parking. I have been asked to respond to your enquiry.

In response to the ruling you received from the XXXXX dated July 7, 1999, you would like to clarify the application of sections 170 and 173 of the Excise Tax Act (ETA), as these provisions relate to parking benefits provided to your employees. XXXXX[.] Please note that effective November 1, 1999, Revenue Canada became the Canada Customs and Revenue Agency (CCRA).

Statement of Facts

The City of XXXXX (the City), a GST/HST registrant owns four properties that are available for employee parking. The parking spots located on these properties are for the exclusive personal use of designated City employees. The City's employees do not pay for the use of these parking spots.

The parking privilege provided to these designated City employees is considered a taxable benefit under paragraph 6(1)(a) of the Income Tax Act (ITA). The four properties in question were acquired by the City prior to 1991 and, therefore, GST was not applicable in respect of their initial acquisition.

Any maintenance of the properties (i.e., sweeping, cleaning, snow removal, etc.) is provided internally by the City. As a result, the City has not been claiming input tax credits in respect of these internal costs. If the City incurs external costs associated with the maintenance of these properties, it claims the municipal rebate equal to 57.14% of the GST paid or payable, if any, in respect of those costs.

Ruling Requested

Is the City required to include an amount of tax in respect of the taxable benefits identified above, pursuant to subsection 173(1) of the ETA, in its net tax calculation, or is it precluded from having to do so because of the application of section 170 of the ETA?

Ruling Given

Based on the information provided, it is our view that the City would be required to "self-assess" tax in respect of the taxable benefit attributable to employer provided parking in determining its net tax, pursuant to subsection 173(1) of the ETA. As such, we are hereby confirming the earlier ruling issued by the XXXXX.

Explanation

It is the City's position that subsection 173(1) of the ETA does not apply to employer provided parking because of the application of section 170 of the ETA. As well, it is the City's view that it is not relevant that GST was not paid or payable on the last acquisition of the four properties used to provide parking benefits to employees. It is the City's position that it would not be obligated to "self-assess" tax under subsection 173(1) of the ETA since the parking spaces were for the exclusive personal use of City employees.

Subsection 173(1) of the ETA applies where a registrant makes a supply (other than a zero-rated or an exempt supply) of property or service to an employee and an amount is required to be included in the employee's income under paragraph 6(1)(a), (e), (k) or (l) of the Income Tax Act (ITA), subject to certain exceptions.

The City made a taxable supply to its employees and amounts were required to be included in the income of employees under paragraph 6(1)(a) of the ITA with respect to the employer provided parking. Fundamentally, the City provided its employees with the right to use real property, and we would regard the external maintenance costs associated with providing that parking benefit to employees as being "incidental".

As you are aware, there are a few exceptions which relieve registrants from having to "self-assess" tax under subsection 173(1) of the ETA. Subparagraph 173(1)(d)(i) of the ETA is one of those exceptions. Essentially, this exception provides that a registrant would not be required to "self-assess" tax in respect of a taxable benefit where the registrant was denied an input tax credit in respect of the last acquisition of the property or service as a result of the application of section 170 of the ETA.

Since the four properties in question were acquired prior to 1991, the City would not have paid the GST in respect of their initial acquisition. As such, the City would not have been denied input tax credits under paragraph 170(1)(b) of the ETA, since no tax would have been payable in respect of the acquisition of the properties. Rather, the City would not have satisfied one of the very basic conditions under subsection 169(1) of the ETA, which requires tax to be paid or payable for an input tax credit to be claimed by a person.

The preamble to section 170 of the ETA specifically requires tax to be payable for the restrictions under that provision to apply. It is our view that section 170 of the ETA did not apply in respect of the acquisition of the properties in question. Consequently, the exception under subparagraph 173(1)(d)(i) of the ETA would not apply, and the City would be required to "self-assess" tax in respect of the taxable benefit attributable to employer provided parking.

I regret that a more favourable response could not be provided to you concerning this matter.

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 there are no relevant changes in the future to the Excise Tax Act, or to CCRA interpretative policy; and that you have fully described all necessary facts and transaction(s) for which you requested a ruling. For your convenience, find enclosed a copy of section 1.4 of Chapter 1 of the GST/HST Memoranda Series.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 954-9699.

Yours truly,

Douglas Wood, CGA
A/Technical Analyst
General Operations Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate

Dear XXXXX:

This is in reply to your request for a ruling on the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the supply of administrative services by the XXXXX to regional associations of the XXXXX.

All statutory references are to the Excise Tax Act, RSC 1985, Chapter E-15, as amended, unless otherwise noted.

Statement of Facts

Our understanding of the facts, based on your correspondence dated March 7, August 2, August 17 and August 29, 2000, and our telephone conversations on August 17 and September 13, 2000, is as follows:

1. The XXXXX is a federally-incorporated non-share capital corporation and is a "registered charity" under the Income Tax Act, RSC 1985, Chapter 1 (5th Supplement), as amended.

2. XXXXX is a "charity" for GST/HST purposes, as defined in subsection 123(1).

3. XXXXX is a GST/HST registrant.

4. XXXXX is a national organization with its head office located in the Regional Municipality of Ottawa-Carelton, in the Province of Ontario.

5. XXXXX, authorises a national general meeting of the XXXXX to recognise a regional association of the XXXXX. A regional association is required to meet certain conditions, including: to be a membership based XXXXX association using the same membership criteria as the XXXXX; to be governed by a board; and, to have a business plan.

6. There are a number of regional associations located in each province of Canada. Each regional association is a separate corporation.

7. One of the activities of the XXXXX is to support the operations of regional associations by providing certain administrative services. The XXXXX charges a fee for the administrative services based on a regional association's percentage participation in XXXXX's core activities of memberships and XXXXX, as well as the financial requirements of the XXXXX.

Ruling Requested

What is the GST/HST status of the administrative services supplied by the XXXXX to the regional associations?

Ruling Given

Based on the facts set out above, we rule that the supply by the XXXXX of administrative services to regional associations is exempt from GST/HST.

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

The obligation on XXXXX to collect tax is found in subsection 221(1) which provides (emphasis added):

Every person who makes a taxable supply shall, as an agent of Her Majesty in right of Canada, collect the GST/HST.

XXXXX has the obligation to collect GST/HST on the supply of administrative services to regional associations if this supply is a taxable supply. A "taxable supply" (All definitions in this ruling are found in subsection 123(1).) is defined as a supply made in the course of a commercial activity. "Commercial activity" is defined, in part, as a "business" ("includes a profession, calling, trade, manufacture or undertaking of any kind whatever, whether the activity or undertaking is engaged in for profit ...") carried on by a person, except to the extent to which the business involves the making of exempt supplies.

An "exempt supply" is defined to mean a supply included in Schedule V. Schedule V is organized into eight parts. For the purposes of this ruling, the only relevant part is Part V.1, entitled Supplies by Charities. Part V.1 of Schedule V contains six (6) sections. The issue is whether the supply of administrative services by the XXXXX to the regional associations falls within the language of one of the sections of Part V.1 of Schedule V.

The opening words of section 1 of Part V.1 of Schedule V provide that (emphasis added):

A supply made by a charity of any property or service, but not including ...

In short, the general rule is that any supplies made by charities are exempt, unless specifically excluded in paragraphs 1(a) to (m) of Part V.1 of Schedule V. It is our view that the supply of administrative services by the XXXXX to the regional associations is not described in any of the exclusions to section 1. (Although not applicable in this case, we note that where a supply is excluded from section 1 of Part V.1 of Schedule V, it may fall under another exempting provision in Schedule V.)

Thus, the supply of administrative services by the XXXXX to the regional associations is an exempt supply under section 1 of Part V.1 of Schedule V. XXXXX is not obligated to charge and collect GST/HST.

If you have questions or require clarification, please do not hesitate to contact me at 952-0329.

Yours sincerely,

Aurelia I. Mauro
Charities, Non-Profit Organizations and Educational Services Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate

XXXXX

Thank you for your letter of August 3, 2000 (with attachments), concerning the application of the Goods and Services Tax (GST) under the Excise Tax Act (the Act) to the transaction(s) described below. I apologize for the lateness of this response.

Statement of Facts

Our understanding of the facts, the transaction(s), and the purpose of the transaction(s) is as follows:

-    XXXXX, manufactures truck mounted concrete mixers.

-    XXXXX customers place orders to acquire concrete mixers, which are to be mounted on the customer's truck chassis that are delivered to XXXXX facility.

-    Once the concrete mixer is mounted on the customer's truck, XXXXX ships the truck back to its customer.

Transaction(s)

-    Specifically, one of XXXXX customers is an unregistered non-resident operating as XXXXXsituated in XXXXX

-    XXXXX places orders with XXXXX to purchase concrete mixers, which are to be mounted on truck chassis that are acquired by XXXXX outside Canada.

-    XXXXX imports XXXXX truck chassis in order to mount the concrete mixers acquired by XXXXX.

-    XXXXX imports the truck chassis under the Deferred Duty Program with an exemption for GST.

In all cases, XXXXX customers own the truck.

Ruling Requested

The Import Certificate issued by the Canada Customs and Revenue Agency (the CCRA) to XXXXX, under the Exporter of Processing Services (EOPS) Program, remains is effect, as XXXXX has no proprietary interest in the concrete mixers or the truck chassis at the time the processing services are performed.

Ruling Given

Based on the facts set out above, we rule that XXXXX does not have any proprietary interest in the goods imported or the processed products and that the Import Certificate issued by the CCRA to XXXXX under the above EOPS Program remains in effect.

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.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 957-8220.

Yours truly,

Daniel E.B. Chamaillard,
Senior Technical Analyst
Border Issues Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate

XXXXX

Dear XXXXX

Thank you for your letter of July 13, 2000, (with attachments), concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the transactions described below.

Statement of Facts

Our understanding of the facts, the transactions, and the purpose of the transactions is as follows:

1. XXXXX is a registered charity that establishes and operates facilities as hospitals, nursing homes and/or related facilities that provide health care to patients and the elderly in need of health care.

2. XXXXX is a corporation that owns and/or manages nursing homes, retirement homes and other extended health care or similar facilities. XXXXX is a wholly-owned subsidiary of XXXXX[.]

3. XXXXX and XXXXX have formed a joint venture to establish and operate an interim-care nursing home (the "Facility") located in a building of the XXXXX. The details of the joint venture are outlined in a Joint Venture Agreement ("the Agreement") effective XXXXX, and signed on XXXXX, by XXXXX and XXXXX[.]

4. The Facility is a XXXXX interim-care nursing home, fully funded by the XXXXX, and meets the definition of a health care facility under section 1 of Part II of Schedule V to the Excise Tax Act (ETA). XXXXX and XXXXX are supplying institutional health care services, as defined in section 1 of Part II of Schedule V to the ETA. The supply of such services is exempt from GST/HST under section 2 of Part II of Schedule V to the ETA.

5. The term of the Agreement is from XXXXX until the later of

(a) 18 calendar months after the admission of the first resident, or

(b) the closure of the last of the resident beds located in the Facility, as stated in XXXXX of the Agreement.

6. XXXXX contributions to the joint venture, outlined in the preamble and XXXXX of the Agreement, include the following:

•   the license to operate the nursing home, issued by the XXXXX;

•   the furnishings and equipment used in the Facility, which are either owned or leased by XXXXX;

•   the lease of the building at XXXXX, owned by the XXXXX, in which the Facility is located; and

•   XXXXX, the principal of a bank loan, to pay for the construction and renovation costs to the Facility.

7. XXXXX contributions to the joint venture, outlined in the preamble and XXXXX of the Agreement, include the following:

•   its management services and expertise on a day-to-day basis;

•   the specifications for, and supervision of, the construction and renovations to the Facility;

•   providing the staff necessary to operate the Facility; and

•   acquiring the utilities, food, operating supplies, and all other goods or services necessary for the operation of the Facility, through contracts with third parties.

8. Under XXXXX of the Agreement XXXXX has the sole and exclusive right to supervise, manage and operate the Facility in the name, and for the account of, the joint venture.

9. XXXXX of the Agreement states that XXXXX is responsible for hiring and training all the employees of the Facility. All such employees are employees of XXXXX or under contract to XXXXX, and the joint venture reimburses XXXXX promptly for the total compensation paid by XXXXX to these employees.

10. XXXXX of the Agreement states that XXXXX is responsible for entering into contracts for the utilities, services, concessions, and supplies necessary for the maintenance and operation of the Facility, in the name of XXXXX, and at the expense of the joint venture.

11. XXXXX is responsible for entering into contracts for the food, beverages, operating supplies and other materials and supplies necessary for the maintenance and operation of the Facility, in the name of and for the account and at the expense of the joint venture, under XXXXX of the Agreement.

12. XXXXX is responsible for all necessary repairs, replacements, additions and improvements in and to the Facility and the Furnishings and Equipment in order to keep and maintain the same in good repair, working order and condition, at the joint venture's expense, under XXXXX of the Agreement.

13. XXXXX of the Agreement states that XXXXX shall deposit in a banking institution selected by XXXXX in XXXXX name, as agent for the joint venture, all funds resulting from the operation of the Facility or otherwise received by XXXXX for and on behalf of the Joint Venture, and XXXXX is authorized to pay from this account such amounts and at such times as the same are required to be made in connection with:

(a) the ownership, maintenance and operation of the Facility;

(b) payment of the costs, expenses and expenditures outlined above;

(c) payments of the amounts for which XXXXX is entitled to reimbursement from the Joint Venture pursuant to this Agreement;

(d) payments on the bank loan; and

(e) payment of XXXXX Priority Distribution outlined below.

14. XXXXX of the Agreement states that the joint venture will pay all reasonable costs and expenses for the maintenance, operation and in-house supervision of the operation of the Facility, and will reimburse XXXXX for all expenses reasonably incurred by XXXXX for the account of or in connection with the operation of the Facility.

15. XXXXX outlines the Priority Distribution paid to XXXXX:

"In recognition of the services rendered by XXXXX in managing the Facility and XXXXX contributions to the feasibility and start-up of the Nursing Home Joint Venture, the Joint Venture ... shall pay to XXXXX ... at the times hereinafter specified, a priority share of surplus (a "Priority Distribution") during each month that the Facility is operated as a nursing home during the Term of this Agreement equal to:

(a) XXXXX revenues derived from the XXXXX interim beds from the date that the first resident takes up occupancy in the Facility until the earlier of:

(i) the date that the operation of the Facility is ceased; and

(ii) the thirty-sixth calendar month from the month of admission of such first resident, inclusive; and

(b) such other amount as may be agreed to in writing between XXXXX and XXXXX in respect of any period that extends beyond the period described in paragraph (a).

Such Priority Distribution ... shall arise and be owing commencing with the calendar month in which the first resident takes up occupancy in the Facility and shall be paid in monthly instalments on the last day of each month for the preceding month on the above-mentioned percentage of the gross revenues for such preceding month."

16. XXXXX outlines the provisions respecting the loan taken out by XXXXX. It states, in XXXXX, "The parties agree that all surplus arising from the operation of the Facility will be paid to the Joint Venture Banker on account of the Joint Venture Loan on a monthly basis as soon as possible after such surplus has been determined by XXXXX and, in any event, within 15 days after delivery to XXXXX of the Monthly Income Statement by XXXXX."

17. XXXXX outlines the sharing of any surplus revenue: "Provided and subject to the precondition that exclusively from revenues from the Facility arising in respect of the Scheduled Operating Period, the Joint Venture Loan has been repaid in full, the Joint Venture shall pay to XXXXX an amount ("XXXXX of Scheduled Operating Period Surplus") equal to XXXXX of all Scheduled Operating Period Surplus. Such amount, if any, as is payable hereunder shall be paid to XXXXX within 60 days after the end of the Scheduled Operating Period ... XXXXX shall not withdraw Scheduled Operating Period Surplus from XXXXX bank account maintained under XXXXX prior to payment by the Joint Venture to XXXXX of XXXXX XXXXX of Scheduled Operating Period Surplus. XXXXX shall be entirely unrestricted in respect of withdrawal and payment in XXXXX discretion of Facility Surplus arising after the Scheduled Operating Period." The Scheduled Operating Period is defined in the paragraph as the first 18 months of operation of the Facility.

Ruling Requested

1. Is the Priority Distribution to XXXXX subject to GST?

2. Are the reimbursements to XXXXX for expenses paid in respect of the Facility subject to GST?

Ruling Given

Based on the facts set out above, we rule that the Priority Distribution and the reimbursements to XXXXX are subject to GST to the extent of XXXXX interest in the joint venture.

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 273 is the only provision in the Excise Tax Act (ETA) that applies specifically to joint ventures. Under section 273 of the ETA, the participants of a joint venture, whose activities are the exploration or exploitation of mineral deposits or a prescribed activity, may make a joint election with the operator of the joint venture such that:

(a) all properties and services that are, during the period the election is in effect, supplied, acquired, imported or brought into a participating province under the agreement by the operator on behalf of the co-venturer in the course of the activities for which the agreement was entered into shall, for the purposes of this Part, be deemed to be supplied, acquired, imported or brought into the province, as the case may be, by the operator and not by the co-venturer;

(b) section 177 does not apply in respect of a supply referred to in paragraph (a); and

(c) all supplies of property or services made, during the period the election is in effect, under the agreement by the operator to the co-venturer shall, for the purposes of this Part, be deemed not to be supplies to the extent that the property or services are, but for this section, acquired by the co-venturer for consumption, use or supply in the course of commercial activities for which the agreement was entered into.

XXXXX and XXXXX are not eligible to make an election under section 273 since the joint venture activities are not the exploration and exploitation of a mineral deposit or a prescribed activity. Therefore, the general GST/HST rules will apply to supplies made to and by the participants under the Agreement. The application of the general GST/HST rules to a joint venture is outlined in Policy Statement P-139R, Tax Liability and Input Tax Entitlement of a Non-Electing Joint Venture Participant (copy attached). Pursuant to Policy Statement P-139R, "Since a joint venture is not a "person" for GST/HST purposes, it cannot register in its own right. Therefore, under the general rules, each participant in a joint venture must generally account for the tax on its share of joint venture sales and claim input tax credits for tax paid or payable on its share of joint venture purchases."

The payment of the Priority Distribution is one of the expenses of the joint venture; it is not part of XXXXX share of the revenue from the joint venture. It is a payment to XXXXX for performing the day-to-day supervision, management and operation of the Nursing Home. XXXXX is making a supply of services to the joint venture. Since a joint venture is not an entity separate from its participants, XXXXX is supplying these services to the participants in the joint venture. XXXXX commercial activity is the management of nursing homes, retirement homes and other extended health care or similar facilities. The supply of management services to the joint venture is made in the course of XXXXX commercial activity, and would be taxable. As such, the consideration paid to XXXXX is subject to GST under subsections [sic] 165(1) of the ETA. XXXXX is making a taxable supply of services to XXXXX, and would collect GST on the consideration paid for providing these services.

XXXXX receives the Priority Distribution in recognition of the supply of management services; XXXXX does not pay XXXXX directly. The Priority Distribution is paid out of the revenues of the joint venture in which both XXXXX and XXXXX are participants. The consideration for the supply of services is the Priority Distribution to the extent of XXXXX interest in the joint venture.

Policy Statement P-139R states "where an operator purchases property or services otherwise than as agent on behalf of a non-electing participant, the operator, not the participant, may claim an input tax credit under section 169 for the tax payable in respect of the purchase, subject to the usual restrictions. If the participant subsequently reimburses the operator for all or part of the amount of the purchase, the reimbursement is regarded as part of the consideration for the supply of services made by the operator to the participant (i.e., the service of operating the joint venture) and is therefore subject to tax."

XXXXX is reimbursed by the joint venture for the wages and salaries it pays to its employees. These expenses are incurred by XXXXX alone, and XXXXX makes a supply to the joint venture of the services of these employees. A joint venture is not a separate entity; XXXXX is supplying these services to its co-participant XXXXX. The reimbursements of the salaries and wages would form part of the consideration for the supply. The reimbursements are paid out of the revenues of the joint venture in which XXXXX is a participant; therefore the reimbursements would be consideration for the supply to the extent of XXXXX interest in the joint venture.

The Agreement indicates that there may be other expenses that XXXXX pays directly, in the course of managing the Facility, for which XXXXX is reimbursed by the joint venture. These reimbursements would be part of the consideration for the supply of management services by XXXXX to XXXXX. As these reimbursements are paid out of the revenues of the joint venture, the reimbursements are consideration for the supply to the extent of XXXXX interest in the joint venture.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 957-8253.

Yours truly,

Jacqueline Russell
Goods Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate