GST/HST Ruling

Please note that the following document, although correct at the time of issue, may not represent the current position of the Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence.

Dear XXXXX:

Thank you for your letter XXXXX and subsequent telephone conversations and e-mails concerning the application of the Goods and Services Tax (GST) to supplies made by your client, a condominium corporation ("CC"), to its residential condominium unit ("RCU") owners.

Statement of Facts & Transactions

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

Your client operates a condominium that comprises about XXXXX RCUs in XXXXX-storey buildings. In addition to the RCUs, there are XXXXX units situated in these buildings that operate outside the condominium environment: XXXXX commercial units and XXXXX residential units formerly occupied by superintendents.

Your client makes the following supplies to RCU owners and lessees (#1 through #7) and to the public (#8 and #9):

1. Maintenance of common elements for condominium fees of $XXXXX.

We understand that these fees are for supplies of property and services by your client, a duly registered CC, that relate to the occupancy or use of the RCU.

2. Rental of additional parking spaces XXXXX. The lease is over a month, the lessees are owners or lessees of RCUs and the additional parking spaces are in the same buildings as the RCUs.

3. Rental of party room XXXXX. The party room is on the condominium plan but it is not a separate lot or a separate unit number.

4. Issuance of status certificates to prospective buyers XXXXX.

Your client issues status certificates (formerly estoppel certificates) to prospective buyers upon request, for a charge of $XXXXX per certificate. The certificates are described in section XXXXX of the Condominium Act, XXXXX. They provide the prospective buyer with various information such as common expenses, names and addresses of directors and officers of the corporation, by-laws and rules, status of condominium fees, etc. The certificate is binding against your client.

5. Rental of additional storage lockers XXXXX.

The storage lockers are in the same buildings as the RCUs.

6. Charges for late payment on monthly common element fees XXXXX.

7. Sale of membership cards XXXXX and fees for swimming and aerobic classes XXXXX offered at the condominium recreation centre.

Membership is optional and restricted to unit owners and tenants. The membership card is for administrative and control purposes to restrict the use of the recreation centre to RCU owners and occupants. It does not confer any additional rights that the RCU owners and occupants do not already have from paying condominium fees. The recreation centre is in the basement of one of the XXXXX buildings of the condominium at issue. It is on the condominium plan but it is not a separate lot or a separate unit number.

8. Supply to the public by way of lease of XXXXX commercial units (convenience store for example) that have been part of the CC since the beginning XXXXX.

9. Supply to the public of XXXXX residential units. They have been part of the CC since the beginning and were initially used to house the corporation's superintendents. They are now rented on an arm's length basis XXXXX.

Rulings Requested

What is the application of GST to the above supplies #1 through #7 made by your client to RCU owners and lessees and the above supplies #8 and #9 made by your client to the public?

Rulings Given

Based on the facts set out above, we rule that

1. Condominium fees

Under section 13 of Part I of Schedule V to the Excise Tax Act (ETA), condominium fees are not subject to GST where the fees are consideration for supplies of property or service made by your client to the owner or lessee of an RCU, where the property or service relates to the occupancy or use of the unit. Your client generally cannot claim input tax credits in respect of GST paid on goods and services obtained for use in providing such supplies to the RCU owners and lessees.

2. Rental of additional parking spaces

The supply of additional parking by your client is exempt from GST where it meets the requirements of either paragraph (a) or (b) of section 8.1 of Part I of Schedule V to the ETA. Otherwise, the supply is subject to GST under subsection 165(1) of the ETA.

3. Rental of Party Room

The supply of the party room is subject to GST under subsection 165(1) of the ETA.

4. Issuance of status certificates to prospective buyers

The supply of the status certificate is subject to GST under subsection 165(1) of the ETA.

5. Rental of storage lockers

The supply of storage lockers by your client to RCU owners and lessees is exempt from GST under section 13 of Part I of Schedule V to the ETA.

6. Charges for late payment on monthly common element fees

These late payment charges are not subject to GST.

7. Sale of Membership Cards XXXXX and fees for swimming and aerobic classes offered at the recreation centre

The supply of membership cards is exempt from GST under section 13 of Part I of Schedule V to the ETA. The supply of swimming and aerobics classes is subject to GST under subsection 165(1) of the ETA.

8. Supply to the public by way of lease of XXXXX commercial units

The supply by way of lease of the XXXXX commercial units is subject to GST under section 165 of the ETA.

9. Supply to the public of XXXXX residential units

The supply of these XXXXX residential units XXXXX by way of lease qualifies for exemption from GST under paragraph 6(a) of Part I of Schedule V to the ETA, provided the units are supplied for a period of at least a month for the purpose of their occupancy as a place of residency or lodging by an individual.

Explanations

We provide the following explanations for rulings #2 to #8:

2. Rental of additional parking spaces

Paragraph 8.1(a) of Part I of Schedule V to the ETA exempts the lease of a parking space to an occupant or lessee of a residential unit (e.g., a house or an apartment). If the parking space is situated in the same complex as the residential unit, it does not matter who supplies the parking space, e.g., it could be a tenant subleasing a parking space to another tenant. If the parking space is not situated in the same complex as the residential unit, the lease of the parking space is exempt only if the supplier of the parking space is also supplying the residential unit and the use of the parking space is incidental to the use of the residential unit as a place of residence.

Paragraph 8.1(b) of the same Part and Schedule provides an exemption for the lease of a parking space to an occupant, owner or lessee of a RCU provided the parking space is part of the condominium complex in which the RCU is located. In this case, it does not matter who supplies the parking space.

Where the supply of additional parking by your client meets the requirements of either paragraph (a) or (b) of section 8.1 of Part I of Schedule V to the (ETA), the supply is exempt from GST under that provision. Otherwise, the supply is subject to GST under subsection 165(1) of the ETA.

3. Rental of party room

Please refer to our XXXXX office's interpretation letter to you XXXXX. The party room is considered not to relate to the occupancy or use of the RCUs as it does not relate to residency, which is the purpose of the RCU owners and lessees. Accordingly, the supply of the party room by your client is subject to GST under subsection 165(1) of the ETA.

4. Issuance of status certificates to prospective buyers

It is the CRA's view that the issuance of the status certificate is part of the closing procedure in the sale of a RCU. The supply of the status certificate does not qualify for exemption from GST under section 13 of Part I of Schedule V to the ETA because it is a supply of a service made by your client before possession of the unit. The exemption under the cited provision applies to property and services provided to a RCU owner or lessee after taking possession of the unit. Moreover, the service of issuing the status certificate as described in section XXXXX of the Condominium Act XXXXX relates to the purchase of a RCU and not to its use or occupancy.

5. Rental of storage lockers

The supply of additional storage lockers by the CC to the owner or lessee of a RCU qualifies for exemption from GST under section 13 of Part I of Schedule V to the ETA, as the storage lockers are considered to relate to the occupancy or use of the RCU.

6. Charges for late payment on monthly common element fees

The charges are as a consequence of the breach of an agreement for the making of supplies of property and services that are exempt from GST under section 13 of Part I of Schedule V to the ETA (please see the above Ruling 1 "Condominium fees"). It follows that subsection 182(1) of the ETA will not be applicable, as there is no breach of an agreement to make taxable supplies. As subsection 182(1) of the ETA is not applicable, there would be no GST consequences with respect to the late payment charges on condominium fees.

7. Classes and sale of membership cards XXXXX at the recreation centre

The recreation centre relates to the occupancy or use of the RCUs in the condominium complex. Consequently, the sale of membership cards for the recreation centre is exempt from GST under section 13 of Part I of Schedule V to the ETA.

The swimming and aerobic classes do not relate to the occupancy or use of the RCUs in the condominium complex, as many owners and residents in the condominium complex do not take swimming and aerobic classes at the recreational centre in the complex. The classes are in the nature of personal services to the RCU owners and residents, similar to personal care services (hairstyling, etc.) Consequently the supply of these classes does not qualify for exemption from GST under section 13 of Part I of Schedule V to the ETA, and as there are no other exempting provisions that would apply to the supply, it is subject to GST under subsection 165(1) of the ETA.

8. Supply by way of lease of XXXXX commercial units to the public

The supply of commercial units (a convenience store for example) does not qualify for exemption from GST under any provision of the ETA. Where the commercial units are used in the supply of taxable supplies in the course of commercial activities of your client's tenants, the latter may be eligible for input tax credits if they are registered for GST purposes.

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.

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) 954-1433.

Yours truly,

Bao Tran
Specialty Unit Unit
Financial Institutions and Real Property Division
Excise and GST/HST Rulings Directorate

2004/04/16 — RITS 48059 — [Leasehold Interest in Ground Lease]

Please note that the following document, although correct at the time of issue, may not represent the current position of the Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence.

Dear XXXXX:

This is in reply to your letter XXXXX in which you request a review of XXXXX the above matter XXXXX. The following facts are based on your letters XXXXX. All references are to the Excise Tax Act (ETA).

Statement of Facts

1. XXXXX purchased XXXXX separately titled and contiguous parcels of land from XXXXX. The parcels were originally registered on XXXXX. Taken together, these lots contained approximately XXXXX acres of land. XXXXX acquired the lots for XXXXX own personal use and enjoyment and that of XXXXX.

2. Shortly after the original purchase, XXXXX conveyed XXXXX while at the same time conveying to XXXXX a XXXXX% interest in the remaining lots, the latter of which the XXXXX held as joint tenants. XXXXX held all of the aforementioned land for their personal use and enjoyment.

3. XXXXX constructed and lived in a residential complex located on XXXXX, which they used as their principal residence until their respective deaths. A small, personal use garage was located on XXXXX. The construction of the complex entailed bringing the appropriate municipal services to XXXXX.

4. XXXXX did not engage in any business or commercial activity in respect of the subject land. Apart from XXXXX made no improvements to any of the lots.

5. XXXXX were sold to XXXXX, for XXXXX own personal use and enjoyment. These lots remained unimproved.

6. XXXXX severed and sold the XXXXX to a non-arm's length party. The purchaser constructed a residential complex thereon.

7. XXXXX was sold to XXXXX and XXXXX. XXXXX built a personal residence on the land. XXXXX provided personal aid to XXXXX as they advanced in age.

8. XXXXX died in XXXXX thus became the sole owner of the lots previously held in joint tenancy with XXXXX. Subsequent to XXXXX death, XXXXX continued to use all of the subject land, namely XXXXX (see point 6 above) for XXXXX personal use and enjoyment.

9. XXXXX helped XXXXX to maintain XXXXX property until XXXXX death XXXXX, at which time the property passed to XXXXX estate for disposal.

10. As the residential complex was dated and the garage in ruins, the estate undertook to demolish and remove those structures in order to make the underlying property more attractive to potential purchasers.

11. XXXXX was sold "as is" to XXXXX who proceeded to construct a residential complex thereon.

12. Before commencing construction of the complex, XXXXX were required to bring municipal services to XXXXX, including water, storm sewers and sanitary sewers. Since this required the closure of an adjacent road for XXXXX days, the municipality XXXXX approached the estate trustees and suggested that these services be brought to XXXXX at the same time as XXXXX to avoid a similar disruption in the future. Although not required to do so, the estate undertook the installation of the aforementioned services.

13. In an effort to make the small areas of land encompassing XXXXX more attractive to potential purchasers, the estate consolidated them with XXXXX. The resulting parcel (the "Consolidated Parcel") was then subdivided into two new lots, XXXXX was subsequently transferred to XXXXX, in partial settlement of the estate. XXXXX personal use and enjoyment.

14. In disposing of the lots, the estate engaged no outside agents nor listed the property, instead relying on "for sale" signs placed on the lots and word-of-mouth.

15. The estate has now sold XXXXX. The proceeds from the sale of XXXXX were reported for income tax purposes as a capital gain. XXXXX, together comprising XXXXX, had been designated as XXXXX principal residence and were reported as such for income tax purposes.

16. The estate did not file an election under subparagraph 9(2)(b)(ii) of Part I of Schedule V to the ETA. The estate is not a GST registrant.

Ruling Requested

The sales of XXXXX were not made in the course of a business and were exempt supplies pursuant to section 9 of Part I of Schedule V.

Ruling Given

The sales of XXXXX were not made in the course of a business and were exempt supplies pursuant to section 9 of Part I of Schedule V.

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 ETA 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 or any other GST or HST matter, please do not hesitate to contact me at (613) 952-8816.

Yours truly,

Paul Hawtin
Rulings Officer
Real Property Unit
Financial Institutions and Real Property Division
Excise and GST/HST Rulings Directorate

2004/05/17 — RITS 49728 — Coupons

Please note that the following document, although correct at the time of issue, may not represent the current position of the Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence.

Dear XXXXX:

Thank you for your letter XXXXX requesting partial relief of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) payable on the temporary importation of the amusement rides.

Statement of Facts

1. XXXXX intends to temporarily import the following amusement rides for use at fairs and exhibitions across Canada:

•   XXXXX

•   XXXXX

•   XXXXX

2. The amusement rides will be imported through XXXXX.The rides will be imported into Canada during the months XXXXX and will be in Canada for less than one year.

3. Neither title to nor beneficial use of the amusement rides is intended to pass, or passes, to a person while the amusement rides are in Canada.

4. The amusement rides are not imported for the purpose of further manufacture, alteration, processing, repair, or maintenance.

TEMPORARY IMPORTATION OF AMUSEMENT RIDES

Based on the above facts, the Canada Revenue Agency (CRA) will recommend that the GST/HST payable on the importation of the amusement rides be partially relieved by way of a special Order in Council. The GST/HST will be payable only on 1/60th of the value of the amusement rides for each month or portion thereof that the rides are in Canada. This recommendation is supported by the Department of Finance.

In view of the facts of the case, it was not possible to complete the order and obtain approval of the Governor in Council prior to the importation. Consequently, CRA will allow the importation on a 1/60th basis pending approval by the Governor in Council of the order, on the understanding that GST/HST, together with any interest and penalty, would be payable if approval is not granted or if the terms of the order are not met.

This letter is valid for a period XXXXX to permit the importation of the amusement rides. Special authority number XXXXX is to be shown in the special authority field on the Canada Border Services Agency (CBSA) accounting document as applying to amusement rides. A copy of this letter will be sent to Ms. Debbie Arcand, Manager, Trade Incentives and Refunds Unit, Trade Policy and Interpretation Directorate, CBSA in Ottawa. Please contact your local CBSA office with this letter for additional information concerning import procedures and export requirements.

TEMPORARY IMPORTATION OF OTHER GOODS

In your letter, you state that you will also be importing other goods like living quarters, office vans and shop vans. Please note that some of these goods may qualify for partial relief of the GST/HST under the Side Shows and Concessions Remission Order, which is administered by CBSA. If you need information concerning the temporary importation of these goods, please contact your local CBSA office.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact Donato Licursi at (613) 952-4294.

Yours truly,

John Sitka
Director
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate
Policy and Planning Branch

2004/04/27 — RITS 51331 — Temporary Importation of Amusement Rides

Please note that the following document, although correct at the time of issue, may not represent the current position of the Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence.

Further to a request submitted by XXXXX of Domestic Rebates and Processing XXXXX with regard to built-in appliances qualifying for a new housing rebate under section 256 of the Excise Tax Act (ETA), we provide the following comments.

Pursuant to subsection 256(2), the "owner-built" rebate is available where, among other requirements, "a particular individual constructs or substantially renovates, or engages another person to construct or substantially renovate for the particular individual, a residential complex ..." That is, GST/HST must have been paid on the land and/or construction materials and contracting services. Policy Statement P-085, Amounts Eligible for Section 256 GST New Housing Rebate discusses what an eligible claimant may include in the rebate claim under section 256. Generally, an eligible amount is any tax paid with respect to the sale of the land that forms part of a single unit residential complex or an interest therein or in respect of any improvements thereto.

The primary issue for purposes of section 256, as it relates to built-in appliances, is to what extent should an appliance be "attached" or "affixed" to the owner-built home to be eligible for this rebate. In this regard, P-085 states that, "... a qualifying improvement in respect of a residential complex would comprise the property and services relating to the qualifying land, the residential building itself and any appurtenances to such building." These normally include building materials, construction services, and anything affixed to the inside or outside of the qualifying building or appurtenance, that are included in the adjusted cost base of the complex for income tax purposes. Generally, real property includes items that are attached to land, such as buildings, utility poles, fences, and chattels that have been attached to real property (i.e., fixtures). Examples of fixtures include doors, windows, water heaters, and built-in appliances.

It is our view that the degree of affixation to the residential complex must be such that it is considered an improvement, as this term is defined in subsection 123(1) of the ETA. As a result, the essential consideration is the nature of the physical connection and mode of attachment to the residential complex. Furthermore, once the appliance is attached or installed, it must become part of the residential complex such that it is intended to remain as a permanent part of the home that cannot be easily removed.

Consequently, the question of whether an appliance is a "fixture" and hence part of the residential complex, can only be answered by examining the facts of each case. Generally, the appliance must be plumbed in and/or hard wired to the residential complex. However, where plumbing can be easily attached, as in the case of a clothes washer, this would not be considered a "built-in" appliance for purposes of section 256. In addition, custom-built cabinetry around the appliance would not bring the particular appliance within the meaning of "built-in" for purposes of section 256 without the appliance being plumbed in and/or hard wired.

With regard to certain appliances referred to in our discussions, we note the following:

•   A refrigerator that is attached to a water supply, similar to a clothes washer, is not considered to be a built-in appliance. Even where cabinetry is custom built, this would not bring the appliance within the meaning of built-in.

•   A microwave with a range/hood type air system that requires electrical wiring is considered to be a built-in appliance. However, a microwave that is placed on a custom built shelf and is plugged in to the wall is not a built-in appliance, regardless of its cost.

•   A slide-in-range, that is essentially a freestanding appliance, is not considered to be a built-in appliance, regardless of any cabinetry that me be custom built to accommodate the appliance. However, stovetops or cook-tops that are installed in the kitchen counter and hard wired to the home are considered to be built-in.

•   A dishwasher, one that is hardwired and plumbed in to the home, is considered to be a built-in appliance.

•   A wine cooler that is simply plugged in, similar to a refrigerator, is considered to be a freestanding appliance.

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

2004/05/07 F — RITS 48549 — XXXXX Application de la partie IX de la LTA

Please note that the following document, although correct at the time of issue, may not represent the current position of the Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence.

XXXXX,

Nous avons bien reçu votre lettre XXXXX au sujet d'un remboursement de droits de douanes et l'application de la partie IX de la Loi sur la taxe d'accise (LTA) à votre client, XXXXX.

Votre cliente XXXXX s'occupe principalement d'acheter des véhicules automobiles neufs au Canada de fournisseurs qui ont importés les véhicules et de les vendre à des non-résidents, dont l'adresse permanente se trouve à l'extérieur du pays. Les véhicules ne sont pas utilisés au Canada. Le droit de propriété des véhicules automobiles est transféré aux non-résidents avant leur exportation du Canada. Les non-résidents paient les frais de transport et de manutention.

Dans notre lettre XXXXX nous avons confirmé notre interprétation de TPS/TVH qu'aucune personne a le droit d'obtenir un remboursement de droits de douane en vertu de la partie IX de la LTA et, en particulier, en vertu des articles de cette loi cités dans votre lettre XXXXX. Dans votre lettre XXXXX vous indiquez que votre cliente s'oppose à notre interprétation pour des motifs nouveaux.

Selon vous, la TPS est assimilée à des droits de douane par le législateur et ces deux taxes étant confondues par le législateur aux fins du paragraphe 261(1) de la LTA, l'Agence du revenu du Canada (l'ARC) était, par l'effet de la LTA, en demeure de plein droit de rembourser à votre cliente, les droits de douane en même temps que la TPS payée par votre cliente sur l'achat des véhicules automobiles. Cette dernière a été récupérée par votre cliente par le biais d'un crédit de taxe sur les intrants demandé dans sa déclaration de TPS/TVH produite pour la période de déclaration donnée.

Vous soumettez que l'article 263 de la LTA renvoie clairement à l'article 261 de la LTA, lequel prévoit un remboursement d'un montant payé par erreur. Votre cliente soumet que la TPS et les droits de douane ont été payés par erreur ou autrement, aux termes de l'article 261. Au soutien de ses prétentions, elle soumet que l'ARC était dans l'obligation de lui rembourser les droits de douane en même temps que la TPS. Elle est d'opinion que les articles 212 et 214, les paragraphes 215(1) et 261(1) s'appliquent sans réserve en l'espèce, en ce que :

(a) les droits de douane sont réputés avoir été payés au moment de l'importation des véhicules;

(b) que les droits de douane font partie de la valeur des produits, aux termes de l'article 212 de la LTA;

(c) que, pour l'application de la présente section, la valeur des produits est réputée égale au total des montants suivants :

(i) la valeur des produits, déterminée aux termes de la Loi sur les douanes (LD) aux fins du calcul des droits imposés sur les produits ...,

(ii) le calcul des droits et taxes payables sur les produits aux termes du Tarif des douanes ..., de la présente loi (sauf la présente partie) et de tout autre texte législatif concernant les douanes.

(d) que l'article 214 de la LTA assimile la TPS à des droits de douane, aux fins du remboursement prévu au paragraphe 261(1) de la LTA;

(e) que le paragraphe 261(1) de la LTA prévoit clairement le remboursement de la TPS;

(f) que, vu l'assimilation de la TPS aux droits de douane (art. 214, LTA), l'agence des douanes était en demeure de plein droit de rembourser les droits de douane au même moment que la TPS;

(g) que, et subsidiairement, le paragraphe 261(1) prévoit aussi le remboursement «d'une autre obligation selon la présente partie ...». Les droits de douane constituent une telle obligation dont fait état le paragraphe 261(1) de la LTA. En conséquence, le ministre était en demeure de plein droit de rembourser les droits de douane en même temps que la TPS, tenant compte aussi des articles 212 et 214, et du paragraphe 215(1) de la LTA;

(h) que, et subsidiairement, le paragraphe 261(1) stipule qu'un remboursement est accordé «dans le cas où une personne paie un montant ... qui est pris en compte à ce titre». Votre cliente soumet que les droits de douane sont une telle taxe pris en compte dans le calcul de la taxe ou de la taxe nette. En conséquence, le ministre était en demeure de plein droit de rembourser les droits de douane en même temps que la TPS, tenant compte aussi des articles 212 et 214, et du paragraphe 215(1) de la LTA.

Interprétation rendue

Nous ne sommes pas d'accord avec votre interprétation des dispositions de TPS/TVH décrite ci-haut. En particulier, notre interprétation de la partie IX de la LTA est qu'aucune personne, incluant votre cliente, n'a le droit d'obtenir un remboursement de droits de douanes en vertu des dispositions de la Partie IX de la LTA.

Quoique l'article 263 de la LTA fait référence à l'article 261 de la LTA, parmi d'autres dispositions de remboursement, comme nous avons indiqué dans notre lettre XXXXX, cet article est tout simplement une restriction qui s'applique relativement au paiement des remboursements de TPS/TVH indiqués. L'article 263 de la LTA ne donne pas à une personne le droit d'obtenir un remboursement en vertu du paragraphe 261(1) de la LTA.

Tel que décrit ci-haut, en vous référant à l'article 214 de la LTA ainsi qu'à l'article 212 et au paragraphe 215(1) de la LTA, vous indiquez que l'ARC était en demeure de plein droit en vertu du paragraphe 261(1) de la LTA de rembourser les droits de douane au même moment que la TPS. Aussi, tel que décrit ci-haut, vous indiquez que, et subsidiairement, le paragraphe 261(1) de la LTA permet le remboursement du montant de droits de douane car ce paragraphe prévoit aussi le remboursement «d'une autre obligation» selon la partie IX de la LTA. De plus, vous indiquez que, et subsidiairement, le paragraphe 261(1) de la LTA permet le remboursement des droits de douane en question car ce paragraphe stipule qu'un remboursement est accordé dans le cas où une personne paie un montant qui est pris en compte au titre de la taxe ou de la taxe nette.

Le paragraphe 261(1) de la LTA stipule que dans le cas où une personne paie un montant au titre de la taxe, de la taxe nette, des pénalités, des intérêts ou d'une autre obligation selon la présente partie alors qu'elle n'avait pas à le payer ou à le verser, ou paie un tel montant qui est pris en compte à ce titre, le ministre lui rembourse le montant, indépendamment du fait qu'il ait été payé par erreur ou autrement.

La "taxe" à laquelle le paragraphe 261(1) de la LTA fait référence est la taxe payable en vertu de la partie IX de la LTA, c'est-à-dire la TPS payable en vertu de la partie IX de la LTA. Selon le paragraphe 225(1) de la LTA, la «taxe nette» pour une période de déclaration donnée d'une personne correspond au montant, positif ou négatif, obtenu par la formule «A - B». «A» représente le total des montants devenus percevables et les autres montants perçus par la personne au cours de la période donnée au titre de la taxe prévue à la section II de la Partie IX de la LTA et des montants à ajouter aux termes de la partie IX dans le calcul de la taxe nette de la personne pour la période donnée. «B» représente le total de l'ensemble des montants dont chacun représente un crédit de taxe sur les intrants pour la période donnée ou une période de déclaration antérieure de la personne, que celle-ci a demandé dans la déclaration produite pour la période donnée et l'ensemble des montants dont chacun représente un montant que la personne peut déduire en application de la partie IX dans le calcul de sa taxe nette pour la période donnée et qu'elle a indiqué dans la déclaration produite pour cette période.

Comme nous avons indiqué dans notre lettre XXXXX, selon l'article 214 de la LTA, la TPS imposée en vertu de la section III est payée et perçue aux termes de la Loi sur les douanes et les intérêts et pénalités sont imposés, calculés, payés et perçus aux termes de cette loi, comme s'il s'agissait de droits de douane imposés sur les produits en vertu du Tarif des douanes. À cette fin et sous réserve des dispositions de la présente section, la Loi sur les douanes s'applique, avec les adaptations nécessaires. La TPS est assimilée aux droits de douane en vertu de l'article 214 de la LTA dans le seul but de permettre l'imposition, le calcul, le paiement et la perception de la TPS sur les produits importés taxables. L'inverse n'est pas réciproque, c'est-à-dire que les droits de douanes ne sont pas imposés en vertu de la LTA et ne sont pas assimilés à la TPS pour l'application de la LTA. Dans notre lettre XXXXX, nous avons également confirmé notre interprétation de l'article 212 de la LTA qui impose la TPS sur les importations taxables et du paragraphe 215(1) de la LTA qui établit la valeur sur laquelle cette TPS s'applique. Nous confirmons que l'application de ces dispositions ne fait pas en sorte que des droits de douane sont imposés en vertu de la partie IX de la LTA.

Le paragraphe 261(1) de la LTA prévoit seulement le paiement d'un remboursement d'un montant payé ou versé à titre d'une des obligations imposées en vertu de la partie IX de la LTA qui n'était pas à être payé ou versé. En aucun cas les droits de douane ne sont imposés par la partie IX de la LTA. Le montant auquel vous référez n'est donc pas un montant qui a été payé ou versé au titre, ou pris en compte au titre, d'une obligation imposée en vertu de la partie IX de la LTA. Nous confirmons donc que le montant en question ne peut être remboursé en vertu du paragraphe 261(1) de la LTA.

Nous voulons aussi indiquer que suite à votre lettre XXXXX nous avons revu les arguments présentés dans votre lettre XXXXX. Cependant, suite à cette révision, notre position finale concernant ce dossier demeure inchangée, pour les raisons indiquées dans notre lettre XXXXX ainsi que les raisons indiquées dans la présente lettre, que les dispositions de la partie IX de la LTA n'accorde en aucun cas à votre cliente un remboursement d'un montant de droits de douanes.

Dans votre lettre vous nous avez demandé d'indiquer à votre cliente les recours qui lui sont maintenant ouverts. Si vous croyez toujours que votre cliente a droit à un remboursement en vertu de la LTA, elle peut produire une demande formelle de remboursement. Veuillez noter que le remboursement n'est versé que si la personne en fait la demande dans les deux ans suivant le paiement ou le versement du montant. Une copie du formulaire de remboursement est jointe à cette lettre. En vertu du paragraphe 301(1.1) de la LTA, votre cliente peut faire opposition à une cotisation du remboursement dans les 90 jours suivant le jour où l'avis de cotisation lui est envoyé, en présentant au ministre un avis d'opposition, en la forme et selon les modalités déterminées par celui-ci, exposant les motifs de son opposition et tous les faits pertinents. Si le délai pour votre cliente de faire une demande pour le remboursement est expiré, nous ne pouvons vous aviser d'un autre recours qui serait maintenant disponible à votre cliente.

Nous voulons confirmer que nous pouvons seulement traiter la question de l'application des dispositions de la partie IX de la LTA. Tel que mentionné, la partie IX de la LTA n'impose et ne rembourse pas les droits de douane. Les droits de douanes sont imposés et remboursés en vertu des lois et règlements concernant les douanes. Nous voulons confirmer que l'Agence des services frontaliers du Canada demeure responsable pour l 'application et l'interprétation des dispositions de ces lois et règlements. Nous comprenons que vous avez déjà communiqué de façon formelle avec les fonctionnaires de cette agence concernant la question du recouvrement de droits de douane en vertu des dispositions du Tarif des douanes et ses règlements.

Nous annexons, pour votre gouverne, une copie de la section 1.4 du chapitre 1 de la Série des mémorandums sur la TPS/TVH.

N'hésitez pas à communiquer avec moi au (613) 952-8810, si vous désirez de plus amples renseignements ou des éclaircissements concernant ce qui précède.

Veuillez agréer, XXXXX, l'expression de nos sentiments distingués.

Patrick McKinnon
Gestionnaire
Unité des questions frontalières
Division des opérations générales et des questions frontalières
Direction de l'accise et des décisions de la TPS/TVH

2004/05/26 — RITS 48073 — [Revocation of Section 150 Election on Retroactive Basis and Application of Section 156 Election for the Retroactively Revoked Period]

Please note that the following document, although correct at the time of issue, may not represent the current position of the Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence.

Dear XXXXX:

I refer to your letter addressed to the XXXXX GST/HST Rulings Centre regarding the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to XXXXX. Your letter was forwarded to me for reply.

XXXXX We are not able to provide a ruling as we have not been provided with detailed information, including signed contracts or agreements XXXXX or other related documentation. Therefore, this letter will provide you with our general views concerning the application of the Excise Tax Act ("ETA") to the issues raised in your ruling request.

Background

XXXXX

XXXXX

XXXXX

XXXXX

XXXXX

XXXXX

XXXXX

XXXXX

Issues

XXXXX

XXXXX

XXXXX

1) XXXXX

XXXXX

A recipient of a taxable good or service made in Canada is required to pay GST at the rate of 7% or HST at a rate of 15% on the value of the consideration for the supply (i.e., the amount charged by the supplier for the good or service). XXXXX does not pay GST/HST on the consideration for taxable goods or services it acquires as it is part of the province XXXXX and is therefore immune from paying the GST/HST under the Constitution Act, 1867.

The fact that XXXXX provides funds to XXXXX to be used to acquire the supplies in question, will not permit the XXXXX to share XXXXX immunity from paying the GST/HST. If the XXXXX signs a service contract with a service provider and is the person liable to pay consideration for goods and services supplied by the provider, then XXXXX is the recipient of those supplies and not XXXXX. Accordingly, the XXXXX will be responsible for paying tax when he or she acquires taxable goods or services.

However, if XXXXX was also a party to the contract such that XXXXX was also liable to pay consideration for the goods and services provided, immunity from paying the GST/HST may apply. If this is an option that you are considering, we would be pleased to discuss this matter further.

2) XXXXX

XXXXX

3) XXXXX

The XXXXX will still be the recipient of the services in question and liable to pay the GST/HST if the supplier sends XXXXX invoices for its taxable services and the XXXXX is the person required to pay for those services.

4) XXXXX

For GST/HST purposes, a person is an agent acting on behalf of another person if the person is an agent at law. Therefore, it will be a question of fact and law whether an agency relationship exists between XXXXX. The enclosed policy statement, P-182R, Agency, provides further information on the question of agency in the context of the ETA.

Exemptions from the GST/HST

As indicated above, the ETA provides exemptions from tax for certain goods and services. It is possible that some of the supplies acquired by XXXXX would not be subject to the GST/HST as they may fall under one of these exemptions.

For example, section 2 of Part II of Schedule V provides an exemption for institutional health care services made by the operator of a health care facility if the service is rendered to a patient or resident of the facility (not including services related to the provision of surgical or dental services for cosmetic purposes and not for medical or reconstructive purposes).

Section 13 of Part II of Schedule V provides an exemption for certain homemaker services rendered to an individual in the individual's place of residence whether the recipient is the individual requiring the services or another person. This exemption applies to services supplied by a government (meaning the federal, provincial or territorial governments) or a municipality. Homemaker services will also be exempt if a government, municipality or organization administering a government or municipal program for homemaker services pays an amount to a person for the acquisition of these services, or if payments are made by these bodies directly to the supplier in respect of its supply of homemaker services.

A "homemaker service" is defined in Part II of Schedule V as "a household or personal service, such as cleaning, laundering, meal preparation and child care, that is rendered to an individual who, due to age, infirmity or disability, requires assistance."

Section 2 of Part IV of Schedule V exempts a supply of a service of providing care, supervision and a place of residence to children, underprivileged individuals or individuals with a disability in an establishment operated by the supplier for the purpose of providing such service. In order for the service to be exempt of the GST/HST under this section, the operator of the establishment must provide the care, supervision and a place of residence.

Section 3 of Part IV of Schedule V provides an exemption to a supply of a service of providing care and supervision to an individual with limited physical or mental capacity for self-supervision and self-care due to an infirmity or disability, if the service is rendered principally at an establishment of the supplier.

Other exemptions in the ETA may apply depending on the status of the person providing the services.

Part V.1 and Part VI of Schedule V provide exemptions for many services provided by charities or public institutions. Therefore, if XXXXX enters into an agreement with a service provider that meets the definition of a charity or a public institution, then the services provided by that person may be exempt. An organization that is a registered charity under the Income Tax Act will generally be a charity or a public institution for purposes of the ETA.

I trust this information will be of assistance. Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 954-7656.

Yours truly,

P. Bertrand
Director General
Excise and GST/HST Rulings Directorate

Encl.

2004/06/28 — RITS 52950 — Temporary Importation of Amusement Rides

Please note that the following document, although correct at the time of issue, may not represent the current position of the Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence.

This memorandum is in response to your e-mail messages XXXXX relating to taxable benefits and the GST/HST. I have been asked to respond to your inquiry.

Background Information:

You have requested that we review the comments you propose to provide in response to the incoming e-mail message XXXXX from XXXXX. In the document attached to your e-mail, there is a segment that is an excerpt from the Employers' Guide - Taxable Benefits (T4130).

It is our understanding that the examples provided in the attached document, although pertaining to taxable benefits, are not excerpts from the guide. The segment from the guide reads, in part, as follows:

"The Employers' Guide - Taxable Benefits (T4130) (pg. 31) states that the amount of GST/HST the employer is considered to have collected on a taxable benefit is the total of:

(a) the amount reported on the T4 or T4A slip for the benefit;

and

(b) if the taxable benefit is for a standby charge or operating cost of an automobile, the amount, if any, that the employee or employee's relative reimbursed you for that benefit. Note: (When an employee or an employee's relative has reimbursed an amount equal to the entire taxable benefit for a standby charge or operating cost of an automobile and, as a result, no benefit is reported on the T4 slip, the value of the benefit for GST/HST purposes is equal to the amount of the reimbursement.)

However, when an employee or an employee's relative has reimbursed an amount for a taxable benefit other than for a standby charge or operating cost of an automobile, the employer is considered to have collected an amount equal to 7/107 of GST or 15/115 of HST on this reimbursement)."

Question 1:

Point a) above states "the amount reported on the T4 or T4A slip for the benefit". Is this amount the net amount or the gross amount of the taxable benefit (amount before any reimbursements or the amount after all reimbursements from the employee to the employer)?

Opinion presented in the attachment to the e-mail:

"The amount reported on the T4 or T4A slip, is the amount without the reimbursement. As per Chapter 1 of the T4130 guide, the taxable benefit does not include the reimbursement."

Comments from the Excise & GST/HST Rulings Directorate:

We have consulted with the Income Tax Rulings Directorate on this issue, and have confirmed that for income tax purposes, the amount reported on the T4 or T4A slip should be the amount of the benefit less (or minus) the amount of the reimbursement. Section 1.2 of the Employers' Guide - Taxable Benefits (T4130), entitled "Automobile benefits" states that the benefit for an automobile you provide for the year is generally the total of the following amounts:

•   a standby charge for the year; and

•   an operating cost benefit for the year;

minus

•   any reimbursements employees make in the year for benefits you otherwise include in their income for the standby charge or the operating costs.

For GST/HST purposes, the calculation under subsection 173(1) of the ETA is based upon the total of the benefit amount for income tax purposes (i.e., the amount reported on the T4 or T4A) plus all reimbursements relating to the use or operation of an automobile. That is to say, we take the amount of the benefit reported in the employee's income, and add the amount that the employee reimbursed to the employer with respect to the operation or use of an automobile, and multiply that amount by either the appropriate prescribed percentage (i.e., 5% or 11%) (These prescribed percentages are used for purposes of determining the amount of tax that the employer will be deemed to have collected with respect to operating cost benefits.), or the appropriate tax fraction (i.e., 6/106ths or 14/114ths). (These tax fractions are used for purposes of determining the amount of tax that the employer will be considered to have collected with respect to the standby charge.).

Please note that the Income Tax Rulings Directorate is responsible for interpretations relating to the ITA. As such, if you have further questions relating to taxable benefit calculations from an income tax perspective, we suggest that you consult with the Income Tax Rulings Directorate.

Question 2:

Point b) above states "if the taxable benefit is for a standby charge or operating cost of an automobile, the amount, if any, that the employee or employee's relative reimbursed you for that benefit", should be added to the amount in a) above.

Does this take into consideration both types of reimbursements as defined by the ITA? The ITA defines and differentiates the standby charge reimbursement from the operating cost reimbursement. Section 6(1)(e)(ii) of the ITA defines the standby charge reimbursement and section 6(1)(k)(iii)(B) of the ITA defines the operating cost reimbursement. Do we add both types of reimbursements to the amount computed in a) above? Please clarify.

Your comments with respect to Question 2:

Yes we have to add both types of reimbursements to the amount computed in a) above.

Comments from the Excise & GST/HST Rulings Directorate:

Yes. Reimbursements with respect to both standby charges and operating cost benefits are to be added to the benefit amount (i.e., the amount identified on the employee's T4 or T4A) for GST/HST purposes. Pursuant to subparagraph 173(1)(d)(v) of the ETA, reimbursements by the employee to the employer related to the use or operation of an automobile have to be added to the benefit amount that is included in the employee's income for income tax purposes.

Please note that it would be more appropriate to say subparagraph 6(1)(e)(ii) of the ITA, rather than section 6(1)(e)(ii) of the ITA. Furthermore, it would be more appropriate to say clause 6(1)(k)(iii)(B) of the ITA, rather than section 6(1)(k)(iii)(B) of the ITA.

Question 3:

Point b) above goes on to state "when an employee or an employee's relative has reimbursed an amount for a taxable benefit other than for a standby charge or operating cost of an automobile, the employer is considered to have collected an amount equal to 7/107 of GST or 15/115 of HST on this reimbursement". Does this mean that any reimbursement from an employee to the employer should have GST/HST calculated? Would it make a difference if the benefit has GST/HST applicable to it or not?

Your comments with respect to Question 3:

It does not make a difference to the taxable benefit that has to be reported on the T4 or T4A slips. The difference is for the employer to calculate the GST/HST that he has to remit to the CRA.

Comments from the Excise & GST/HST Rulings Directorate:

Where the supply made available to the employee is zero-rated or exempt for GST/HST purposes, the employer will not be required to account for any amount with respect to the reimbursement in their net tax calculation. That is to say, the employer would only be required to account for tax with respect to a reimbursement in those circumstances where the reimbursement related to a supply is taxable at either 7% or 15%.

Additional Examples:

Below are a few examples dealing with taxable benefits and reimbursements, and you have requested our views in regards to these examples.

Example 1:

As a corporation registered for the GST, the employer buys a vehicle that is used more than 50% in commercial activities and is made available to the employee during 2003. The last establishment where the employee ordinarily reported in the year for the corporation was located in Ontario. XXXXX calculates a taxable benefit (including GST) of $4,800 ($20,000 vehicle multiplied by 2% multiplied by 12 months) on the standby charge and an operating cost benefit of $595 (3,500 kilometers at 17 cents). The employee reimbursed the employer $500 for the automobile operating costs within 45 days following the end of 2003. The corporation claimed an ITC for the purchase of the automobile and also on the operating costs.

GST considered to have been collected:

Your summarized comments with respect to Example 1:

You presented the view that the example looked fine.

Comments from Excise & GST/HST Rulings with respect to Example 1

In our view the GST that the registrant will be deemed to have collected should be calculated as follows:

Example 2:

As a corporation registered for the HST, the employer buys a vehicle that is used more than 50% in commercial activities and is made available to the employee during 2003. The last establishment where the employee ordinarily reported in the year for the corporation was located in Nova Scotia. The XXXXX calculates a taxable benefit (including HST) of $6,000 ($25,000 vehicle multiplied by 2% multiplied by 12 months) on the standby charge and an operating cost benefit of $340 (2,000 kilometers at 17 cents). The employee reimbursed the employer $1,000 for standby charges and $600 for the automobile operating costs within 45 days following the end of 2003. The corporation claimed an ITC for the tax payable on the purchase of the automobile and also on the operating costs.

HST considered to have been collected:

The tax fraction of 14/114ths should be used here to calculate the tax that the employer will be deemed to have collected with respect to the standby charge reimbursement, rather than 11%.

Your summarized comments with respect to Example 2:

You expressed uncertainty about the amount calculated on the standby charge reimbursement. You would like to know if the amount should be calculated as $1,000 x 14/114?

Comments from the Excise & GST/HST Rulings Directorate with respect to Example 2:

In our view the HST that the registrant will be deemed to have collected should be calculated as follows:

As an observation, the amount reimbursed to the employer with respect to the operating costs exceeds the amount identified as being the operating cost benefit. Since the last establishment where the employee ordinarily reported in the year for the corporation was located in Nova Scotia, which is a participating province, the prescribed rate of 11% is to be used only in connection with operating cost benefit and/or operating cost reimbursements. In the case at hand, the tax fraction 14/114ths should be used for purposes of calculating the amount of tax the employer will be considered to have collected with respect to the standby charge, and the standby charge reimbursement.

Example 3:

As a corporation registered for the GST, the employer buys a vehicle that is used more than 50% in commercial activities and is made available to the employee during 2003. The last establishment where the employee ordinarily reported in the year for the corporation was located in Ontario. The XXXXX calculates a taxable benefit (including GST) of $10,800 ($45,000 vehicle multiplied by 2% multiplied by 12 months) on the standby charge and an operating cost benefit of $3,570 (21,000 kilometers at 17 cents). The employee reimbursed the employer $10,000 for standby charges and $4,370 for the automobile operating costs within 45 days following the end of 2003. The corporation claimed an ITC for the purchase of the automobile and also on the operating costs.

GST considered to have been collected:

Your comments with respect to Example 3:

You expressed the opinion that the operating cost reimbursement should be calculated as:

$4,370 x 5% = $218.50. You also expressed the opinion that the GST calculation with respect to the standby charge reimbursement should be calculated as $10,000 x 6/106 = $566.04.

Comments from the Excise & GST/HST Rulings Directorate with respect to Example 3:

In our view the GST that the registrant will be deemed to have collected should be calculated as follows:

As an observation, the reimbursement in the amount of $4,370 paid by the employee to the employer with respect to the operating costs exceeds the amount identified as being the operating cost benefit in the example.

Example 4:

As a corporation registered for GST, the employer buys a watch for $10,000 (including GST and PST) for any employee reaching 25 years of service. The employer buys a watch for John Doe for $12,356 (including GST and PST) to mark the employee's 25 years of service. The employee reimbursed the employer $2,356 for the excess cost of having his family name and extras put on the watch. The corporation could not claim an ITC because they bought the watch for the employee's exclusive personal use and enjoyment. The XXXXX calculates a taxable benefit and includes $10,000 in box 14 and under code 40 on the employee's T4 slip.

GST considered to have been collected:

Your summarized comments with respect to Example 4:

If the employer cannot claim an ITC, the employer is not considered to have collected the GST/HST so in your opinion, there should not be any amount to calculate on the reimbursement. You would like us to confirm that the employer will not have to remit any GST/HST on the benefit?

Comments from the Excise & GST/HST Rulings Directorate with respect to Example 4:

The reason the employer will not be considered to have collected tax with respect to the taxable benefit is because the situation at hand falls under subparagraph 173(1)(d)(i) of the ETA. The reason this exception applies is because an input tax credit would be denied with respect to the tax paid or payable in relation to the watch, pursuant to paragraph 170(1)(b) of the ETA.

No similar exception would apply with respect to the reimbursement made by the employee to the employer with respect to the watch. As such, we would conclude that the registrant employer would be required to account for tax collectible in the amount of $154.13 with respect to the reimbursement in its net tax calculation, in the reporting period in which the reimbursement was made to the employer.

Example 5:

As a corporation registered for GST, the employer pays for a golf club membership of $5,000 (including GST and PST) for any sales employee with sales greater than $250,000. The membership is purchased by the employer for the employee to provide dining, recreational, or sporting facilities for large clientele. The employer pays a club membership for Jane Doe for $7,500 (including GST and PST) for her to entertain various large clients. The employee reimbursed the employer $2,500 for the excess cost of having her yearly tab paid for by the corporation. The corporation could not claim an ITC for the club membership fees or dues. The XXXXX calculates a taxable benefit and includes $5,000 in box 14 and under code 40 on the employee's T4 slip.GST considered to have been collected:

Your summarized comments with respect to Example 5:

You presented the view that this situation should be treated the same way as in example 4 above.

Comments from Excise and GST/HST Rulings with respect to Example 5:

The employer will not be deemed to have collected tax with respect to the taxable benefit because the situation at hand falls under the scope of subparagraph 173(1)(d)(i) of the ETA. The reason this particular exception applies is because an input tax credit would be denied with respect to the tax paid or payable in relation club membership pursuant to paragraph 170(1)(a) of the ETA.

No similar exception applies with respect to the reimbursement made by the employee to the employer with respect to the golf membership. As such, the general imposition rules under the ETA would apply, and the registrant employer would be required to account for the tax collectible with respect to the membership reimbursement in its net tax calculation, in the reporting period in which the reimbursement was made to the employer. We agree that the tax collectible with respect to the amount reimbursed by the employee to the employer relating to the club membership would be equal to $163.55.

Thank you for consulting with the General Operations Unit in regards to this matter. Should you have any further GST/HST questions, please feel free to contact me at (613) 954-9699.

2004/08/11 — RITS 51963 — Supply of Recreational Vehicles on Behalf of Other Persons

Please note that the following document, although correct at the time of issue, may not represent the current position of the Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence.

XXXXX,

Nous avons bien reçu votre lettre XXXXX (avec documents en annexe) au sujet de l'application de la taxe sur les produits et services (TPS)/taxe de vente harmonisée (TVH) à vos opérations. Nous vous présentons nos excuses pour le délai à répondre à votre demande.

Les faits sur lesquels nous nous appuyons pour déterminer l'application de la Loi sur la taxe de l'accise (LTA) sont les suivants :

•   Vous êtes un assureur inscrit aux fins de la TPS/TVH.

•   Vous contractez, en tant qu'assureur, avec l'assuré. Le contrat, dont copie nous a été envoyée, prévoit le paiement de frais de sortie et de frais de transfert dans les circonstances décrites.

•   Les frais de transfert reliés aux transferts entre les Fonds sont décrits dans la section XXXXX aux pages XXXXX et XXXXX et les frais de transfert reliés aux transferts de Fonds ou d'un Compte à intérêt garanti sont décrits aux pages XXXXX et XXXXX dans la section XXXXX.

•   Les frais de sortie sont décrits dans la section, XXXXX aux pages XXXXX, XXXXX et XXXXX.

•   Dans la section XXXXX à la page XXXXX, le contrat indique que l'assureur XXXXX.

•   Vous nous avez confirmé que dans tous les cas, le montant de transfert ou de rachat (partiel ou total) est versé dans les Fonds généraux XXXXX et que les frais de transfert et les frais de sortie sont prélevés des Fonds généraux et non des fonds distincts (le cas échéant).

Interprétations demandées

1. Lorsque le propriétaire demande par écrit le transfert d'un Fonds avec frais de sortie à un Fonds sans frais de sortie ou à un compte à intérêt garanti avant la Date d'échéance, il peut effectuer, sans frais, XXXXX transferts entre les différents Fonds dans chaque année civile; des frais de XXXXX$ s'appliqueront à chaque transfert additionnel. (Voir pages XXXXX et XXXXX).

Vous désirez savoir si ces frais de transfert sont taxables.

2. Dans un contrat qui n'est pas enregistré à titre de régime d'épargne de retraite ("RER") ou de fonds de revenu de retraite ("FRR"), les prestations à l'échéance peuvent être utilisées pour l'achat ou la continuation, selon le cas, d'un fonds enregistré de revenu de retraite. Des frais de XXXXX$ sont déduits lors d'un transfert des fonds ou d'un compte à intérêt garanti à une autre institution financière. (Voir pages XXXXX et XXXXX.)

Vous désirez savoir si ces frais de transfert sont taxables.

3. Lorsque le propriétaire du contrat effectue un rachat partiel d'un fonds avec un frais de sortie ou un transfert d'un fonds avec frais de sortie à un compte à intérêt garanti ou à un fonds sans frais de sortie avant la fin de la XXXXX année suivant la date du dernier dépôt, y inclus tout transfert à ces fonds, les frais de sortie sont déduits du montant transféré ou racheté, selon le tableau à la page XXXXX du contrat que vous nous avez fourni. (Voir pages XXXXX et XXXXX.)

Vous désirez savoir si ces frais de sortie sont taxables.

4. Lorsque le propriétaire du contrat effectue un rachat dans les circonstances énoncées à la page XXXXX, les frais de transfert de XXXXX$ sont également applicables, en sus des frais de sortie.

Vous désirez savoir si ces frais de transfert sont taxables.

Interprétation rendue

XXXXX Par conséquent, nous ne pouvons pas vous donner une décision. Cependant, il nous fait plaisir de vous présenter notre interprétation de la LTA.

Selon les renseignements fournis, le montant du transfert ou rachat est versé du fonds distinct aux fonds généraux de l'assureur. Ce transfert constitue le montant d'un rachat aux termes de l'alinéa 131(2)a) de la LTA, et donc, l'alinéa 131(1)c) ne s'applique pas. Par conséquent, le montant transféré du fonds distinct aux fonds généraux représente une fourniture exonérée aux termes de l'alinéa 123(1)f) de la définition de "service financier."

Les frais de transfert et les frais de sortie payés par l'assuré à l'assureur par voie de déduction des fonds généraux de l'assureur constitue la contrepartie pour "le transfert de propriété ou le remboursement d'un effet financier" décrit à l'alinéa 123(1)(d) de la définition de "service financier."

Les commentaires précédents constituent notre opinion générale sur le sujet de votre lettre. Les modifications proposées à la Loi sur la taxe d'accise, si elles sont appliquées, peuvent avoir des répercussions sur l'interprétation donnée dans la présente. Ces commentaires ne sont pas des décisions et, conformément aux lignes directrices énoncées à la section 1.4 du chapitre 1 de la Série des mémorandums sur la TPS/TVH, ils ne lient pas l'Agence du revenu du Canada en ce qui a trait à une situation en particulier.

Nous annexons, pour votre gouverne, une copie de la section 1.4 du chapitre 1 de la Série des mémorandums sur la TPS/TVH.

N'hésitez pas à communiquer avec moi au 613-952-9262, si vous désirez de plus amples renseignements ou des éclaircissements concernant ce qui précède.

Veuillez agréer, XXXXX, l'expression de nos sentiments les meilleurs.

Sheena France
Unité des Institutions financières
Division des Institutions financières et des immeubles
Direction de l'accise et des décisions de la TPS/TVH

XXXXX
XXXXX

p.j.

2004/08/19 — RITS 50395 — Sponsorship Agreements

Please note that the following document, although correct at the time of issue, may not represent the current position of the Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence.

This is in reply to your memorandum XXXXX to XXXXX the XXXXX Tax Services office which has been forwarded to us.

You have requested our comments with respect to the inclusion of deferred finance mortgage revenues in the input tax credit allocation formula of the registrant, a Canadian bank.

Our understanding of the facts is as follows:

Facts

1. XXXXX (the Bank) is a financial institution engaged primarily in the business of providing financial services.

2. The Bank enters into contracts to sell its mortgages to mutual funds. A copy of one such contract (the Agreement) XXXXX was provided in which the Bank entered into an agreement to sell mortgages to the XXXXX (the Mortgage Fund), with XXXXX (the Agent), acting as agent of the Mortgage Fund for acquiring the mortgages.

3. The consideration paid for the purchase of the mortgages by the mutual fund is determined by a "Mortgage Valuation Formula" contained in the Agreement.

4. The Mortgage Fund pays a Guarantee Fee and a Premium/Discount Fee. The Guarantee Fee is a fee to ensure that if a mortgagee defaults on the mortgage, the Bank will repurchase the mortgage from the Mortgage Fund at an agreed upon value. The Premium/Discount Fee is a fee paid for the difference between the contractual interest rate of the mortgage and the current market interest rate for a mortgage of similar terms and conditions.

5. The Bank continues to administer the mortgages in consideration for a fee in an amount that is agreed upon between the Bank and the Mortgage Fund.

6. The Bank uses an output based allocation method for determining the percentage of input tax credits (ITCs) it is entitled to claim.

7. The CRA (formerly CCRA) is proposing that XXXXXth of the average balance of the Deferred Finance Mortgages balance sheet account for the year be included in the denominator of the ITC allocation formula (i.e., added to Total Other Income).

Interpretation Requested

Does the portion of proceeds credited to Deferred Revenues by the Bank on the sale of its mortgage receivables qualify as exempt income and therefore represent a bona fide constituent of the exempt income component of the ITC allocation formula of the Bank?

Our Comments

The main issue in this case is whether the proceeds from the sale of the mortgages should be included in the ITC formula.

The Bank is using the following output based formula:

(Non-resident Interest Expense + Non-resident Interest Income + Other Income)

(Total Interest Expense + Total Interest Income + Total Other Income)

Should the proceeds of sale of the mortgages be a constituent of "Total Other Income" in the denominator of the above equation?

GST/HST Memorandum 700-5-1: ITC Allocation for Financial Institutions states that "an output-based method is acceptable for the allocation of certain property and services where it can be shown to be fair and reasonable in the circumstances, provided it:

(a) reasonably reflects the actual use of the property and services; and

(b) is the only practical or fair method that can be applied in the circumstances.

This method might use the ratio of revenue from taxable supplies to revenue from total supplies to determine the ITC for acquired property and services.

In that case, certain items should be excluded from the numerator and denominator to avoid distortion of the ratio. They might include:

(a) any amount receivable for the supply of capital goods used for business purposes (e.g., proceeds from the sale of fixed assets/lands);

(b) the value of the sale of a business as a going concern; and

(c) proceeds from the sale of financial instruments held in the registrant's own account.

Other deficiencies in the design of the specific revenue-based allocation method used by the registrant should also be addressed. For example, allowances should be made if products have different profit margins which would distort input allocations, or if revenues include amounts that relate to prior periods such as the recovery of a bad debt. These types of income should be removed from a revenue-based allocation formula.

The previous XXXXX noted on page XXXXX of his memo XXXXX that the wording of paragraph (c), i.e., "financial instruments held in the registrant's own account", implies that proceeds from the sale of financial instruments not held in the registrant's own account might be included. He also noted that the overriding determinant for the exclusions noted is to avoid distortion in the ITC ratio arising from non-routine type transactions. The XXXXX then concluded that since the sale of the mortgages is a routine transaction, it should not be excluded. We disagree with the conclusion that it should not be excluded.

Although the sale of mortgages is part of the regular business of the Bank, I believe it would fall within the description of items that could potentially distort the formula [paragraph (c) in the section of the Memorandum noted above]. The mortgages are financial instruments which have been issued by the Bank and as such are considered to be held in the account of the Bank. It is our opinion that the proceeds from the sale of the mortgages should not be included in the formula.

Should you have further questions, do not hesitate to contact me at (613) 952-9577 or Duncan Jones at (613) 952-9210.

Marilena Guerra
Senior Rulings Officer
Financial Institutions Unit
Financial Institutions and Real Property Division
Excise and GST/HST Rulings Directorate

XXXXX

2004/08/31 — RITS 50657 — Legal Services Provided to a Non-resident

Please note that the following document, although correct at the time of issue, may not represent the current position of the Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence.

Dear XXXXX:

This is in response to your letter XXXXX, (with attachments) to Chantal Desrosiers concerning the allocation of input tax credits (ITCs) by public colleges and universities.

Interpretation Requested

You requested a ruling as to whether general purpose grant revenue can be excluded from the total revenue base when calculating the input tax credit (ITC) allocation ratio between taxable and exempt supplies for public colleges and universities.

Interpretation Given

Since we have insufficient information concerning some aspects of the situation you have described, we cannot provide a ruling. However, we can provide an interpretation.

The output based method of calculating ITC allocations may not be suitable for use by public colleges and universities. If a public college or a university does use the output based method, it should include as part of its outputs any grants or subsidies that it receives.

The foregoing comments represent our general views with respect to the subject matter of your letter. Proposed amendments to the ETA, if enacted, could have an effect on the interpretation provided herein. These comments are not rulings and, in accordance with the guidelines set out in section 1.4 of Chapter 1 of the GST/HST Memoranda Series, do not bind the Canada Revenue Agency with respect to a particular situation.

Rationale

An application ruling provides the CRA's position on specific provisions of the legislation as these relate to a clearly defined fact situation of a particular person. However, you requested a ruling for all public colleges and universities. We are unable to provide a ruling for such a broad group of entities without specific information on fact situations for an identified client. Since we do not have sufficient information to provide a ruling, we are providing an interpretation.

Subsection 141.01(5) of the ETA requires that a person use a fair and reasonable method in order to determine the extent to which properties or services are acquired, imported or brought into a participating province by the person for the purpose of making taxable supplies for consideration or for other purposes, or to determine the extent to which the consumption or use of properties or services is for the purpose of making taxable supplies for consideration or for other purposes.

The CRA's position with respect to ITC allocation methods is that the direct allocation method is the preferred method of allocation. Where it cannot be used, an input-based method may be used. Where these methods are not appropriate, an output based approach may be considered.

Policy Statement P-063, Output Based Method For Input Tax Credit Allocation, states that, in some circumstances, allocation methods based on inputs may not reasonably be possible. P-063 states that, in those limited circumstances, an output based method is acceptable for the allocation of certain property and services where it can be shown to be fair and reasonable in the circumstances. P-063 also states:

"An output based method implies that the revenue generated by an activity will give a reasonable approximation of the use of inputs in that activity. There are many factors that affect revenue that could result in this rationale being inappropriate."

However, we have particular concerns about the appropriateness of public colleges or universities using the output based method of ITC allocation since their educational services are generally supplied to students for consideration that is much less than the cost of providing such services. The difference is generally funded by grants and subsidies that may be other than consideration. Where a public college or university does use the output based method, the calculation should include any grants or subsidies that the public college or university receives, whether or not the grants or subsidies are consideration for supplies.

For your convenience, find enclosed a copy of section 1.4 of Chapter 1 of the GST/HST Memoranda Series. It indicates the circumstances in which we can decline to provide a ruling.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 952-9211.

Yours truly,

Don Dawson
Corporate Reorganizations Unit
Financial Institutions & Real Property Division
Excise and GST/HST Rulings Directorate

Encl.

2004/07/28 — RITS 48596 — GST/HST Status of "Dim Sum" and Other Chinese Food

Please note that the following document, although correct at the time of issue, may not represent the current position of the Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'agence.

Dear XXXXX:

Thank you for your letter XXXXX with attachments, concerning your eligibility to apply for a Goods and Services Tax (GST)/Harmonized Sales Tax (HST) employee rebate under section 253 of the Excise Tax Act (ETA). We apologize for the delay in this response.

Statement of Facts

Our understanding of the facts is as follows:

•   You are currently employed by XXXXX and were previously employed by XXXXX.

•   You have incurred certain expenses related to your employment with XXXXX and related to your employment with XXXXX.

•   You have completed Form T2200, Declaration of Conditions of Employment for the following periods:

XXXXX
XXXXX
XXXXX
XXXXX
XXXXX

in order to deduct employment expenses from your income for income tax purposes.

•   XXXXX is a registrant for purposes of the GST/HST and is a listed financial institution pursuant to subsection 123(1) and subparagraph 149(1)(a)(viii) of the ETA.

•   XXXXX is a registrant for purposes of the GST/HST and is a listed financial institution pursuant to subsection 123(1) and subparagraph 149(1)(a)(iv) of the ETA.

Ruling Requested

You are eligible to apply for an employee rebate under section 253 of the ETA for the following periods:

XXXXX
XXXXX
XXXXX
XXXXX
XXXXX.

Ruling Given

Based on the facts set out above, we rule that you are not eligible to apply for an employee rebate under section 253 of the ETA for the following periods:

XXXXX
XXXXX
XXXXX
XXXXX
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 for which you requested a ruling.

Explanation

Section 253 of the ETA provides for a rebate to certain employees and members of partnerships in respect of GST/HST paid on certain employment or partnership related expenses where various conditions are met. One of these conditions is that in order for an individual who is an employee to be eligible to apply for the rebate, the individual must be an employee of a registrant that is not a listed financial institution. Therefore, the fact that an employer is a listed financial institution has an impact on an employee's eligibility to apply for an employee rebate under section 253 of the ETA. Both XXXXX were and continue to be listed financial institutions. Copies of section 253 of the ETA as well as GST/HST Memorandum 17.6, Definition of "Listed Financial Institution" have been enclosed for your reference.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 952-3413.

Yours truly,

M. Dawn Weisberg
Financial Institutions Unit
Real Property and Financial Institutions Division
Excise and GST/HST Rulings Directorate

2004/09/24 — RITS 52848 — Sale of Leasehold Interest in First Nations Reserve Land

Please note that the following document, although correct at the time of issue, may not represent the current position of the Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'agence.

Dear XXXXX:

This letter is in response to your letter XXXXX to XXXXX the XXXXX Tax Services Office concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to accounts receivable and labour & material payment bonds. Your letter has been forwarded to our office for reply.

Background

I understand that XXXXX spoke with you in regards to concerns raised in your letter, and that you would like an explanation of section 231 of the Excise Tax Act (ETA).

In the case at hand, a supplier of XXXXX products charged GST on its goods and services. The supplier accounted for the GST in relation to the supply in its net tax calculation, and remitted any positive net tax owing. The supplier was unable to collect the GST from its customer. The supplier's account receivable was not collectible from the customer and proceeds were paid to the supplier by the surety pursuant to a labour and material payment bond (net of the GST).

It is our understanding that the function of a labour & material payment bond is to guarantee that all claimants will be paid for labour and materials furnished to the principal for use on the project described in the bond.

Interpretation Requested

Can a supplier write-off an amount for accounting purposes where they will be receiving proceeds from a labour & material payment bonds with respect to the account receivable?

Interpretation Given

In the case at hand, the core issue relates to whether or not a person would be entitled to write-off an amount for accounting purposes where they will be receiving proceeds under a labour & material payment bond, rather than an interpretation issue relating to the ETA. In accordance with paragraph 20 of section 1.4 of chapter 1 of the GST/HST Memoranda Series (see attached), the Canada Revenue Agency ("CRA") will not rule where an issue to be considered involves an opinion on Generally Accepted Accounting Principles ("GAAP"). Nevertheless, we can provide you with the following general comments.

The term "bad debt" is not expressly defined in the ETA. Accordingly, if the supplier would be entitled to write-off an account receivable as a bad debt in accordance with GAAP, then it may use subsection 231(1) of the ETA, Bad Debt - deduction from net tax, provided all of the conditions in the provision are satisfied.

Policy statement P-058R - Recovery Of Bad Debts (see attached), addresses the scenario where a company is registered for the GST/HST and has credit insurance that covers losses sustained on accounts receivable which become bad debts. Policy statement P-058R presents an example of a situation where a company made a taxable supply of its product and accounted for and remitted the GST/HST related to the sale. The customer subsequently went into receivership and the company wrote-off the account receivable at its year-end.

The foregoing comments represent our general views with respect to the subject matter of your letter. Proposed amendments to the Excise Tax Act, if enacted, could have an effect on the interpretation provided herein. These comments are not rulings and, in accordance with the guidelines set out in section 1.4 of Chapter 1 of the GST/HST Memoranda Series, do not bind the Canada Revenue Agency with respect to a particular situation.

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
Rulings Officer
General Operations Unit
General Operations & Border Issues Division
Excise & GST/HST Rulings Directorate

2004/09/16 — RITS 51121 — East Indian Sweets