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CRA finds that Incoterms did not govern the place of delivery of goods for ETA purposes

Company B, a resident registrant, agreed to sell goods (the “Property”) to Company C, an unregistered non-resident, using the Incoterms® 2010 DAP Port of Liverpool, U.K. so that delivery and title transfer was to occur at the U.K. destination – although the parties agreed that Company C was to indemnify Company B if the Property were lost or damaged in transit. The Property was then loaded onto Company C’s vessel at the Port of Halifax and immediately exported.

CRA indicated that it appeared that, because Company C acquired physical possession of the Property in Canada pursuant to the terms of the agreement, ETA s. 142(2)(a) (which deems a supply of tangible personal property to be made outside Canada if it is, or is to be, delivered or made available outside Canada) did not apply. This answer does not appear to turn on the indemnity because CRA went on to indicate that its answer would not change if the indemnity instead had been provided by an affiliate of Company C.

This answer illustrates that CRA will not always let the determination of the place of supply be governed by the applicable Incoterms.

Similarly, CRA indicated that, as the delivery of the Property to Company C appeared to be in Canada, zero-rating also would not be available for the preceding supply of the Property by a Canadian vendor to Company B.

Neal Armstrong. Summaries of 8 March 2018 CBA Commodity Tax Roundtable, Q.9 under s. 142(2)(a) and Sched. VI, Pt. V, s. 1.

CRA indicates that no ITCs may be available where job candidates are reimbursed for their expenses

It may be unclear that an employee incurred an expense such as a hotel bill as agent for the employer. S. 175 provides that if the relevant property or service was acquired “in relation to” the activities of the employer, it is effectively deemed to have incurred the expense in relation to its own activities for input tax credit purposes. A similar rule under s. 175 applies to firms that reimburse their partners, and charities and public institutions that reimburse “volunteers.”

CRA confirmed that the s. 175 rule was unavailable where candidates for a position at a company were reimbursed for their travel and meal expenses by a headhunter, who then included those costs in its bill to the company, so that the company was not entitled to ITCs (unless an agency argument could be made, which was not discussed by CRA).

Neal Armstrong. Summary of 8 March 2018 CBA Commodity Tax Roundtable, Q.8 under ETA s. 175.

Hokhold – Federal Court of Appeal finds that a bad debt claim requires the specific identification of which “debt” claims went bad

Partly as a delayed consequence of CRA’s seizure of computers and dental equipment of a dental practice and the misplacing of records when his practice subsequently was closed, the dentist was only able to collect a portion of the revenues that he had included in his 2005 to 2008 returns. However, the Tax Court found that he was not entitled to a bad debt deduction on the basis inter alia that he was unable to identify which specific debts had gone bad. In agreeing with this finding, and before going on to dismiss the appeal, Boivin JA stated:

[I]n order to have a “liquidated money demand, recoverable by action” one must know the identity of the debtor and the amount owed … .

Neal Armstrong. Summary of Hokhold v. Canada, 2018 FCA 163 under s. 20(1)(p)(i).

CRA is considering whether crypto-currencies are “money”

CRA indicated that it “is presently considering its position regarding the GST/HST treatment of Bitcoin and similar crypto-currencies.” As it also noted that it had previously taken the position that Bitcoins do not come within the items specifically listed in the ETA definition of “money,” namely currencies and credit instruments or devices such as cheques, promissory notes, letters of credit and bills of exchange or “other similar instrument,” its consideration of whether payment using crypto-currencies is an exempt financial service likely is focusing on whether crypto-currencies are “money” within the undefined meaning of that word.

Neal Armstrong Summary of 8 March 2018 CBA Commodity Taxes Roundtable, Q.7 under ETA s. 123(1) – money.

CRA indicates that a single Notice of Objection can cover multiple disputed GST assessments

Where CRA issues multiple GST/HST assessments they can be objected to on a single Notice of Objection. The required particulars can be provided in attachments thereto.

Neal Armstrong. Summary of 8 March 2018 CBA Commodity Tax Roundtable, Q.6 under ETA s. 301(1.1).

CRA will change its practices so as to start denying partial ITC claims by orthodontists

Brian Hurd found that an incorporated orthodontic practice was making a single supply of exempt orthodontic health services rather than (as argued by it) two supplies comprised of a zero-rated supply of medical equipment (the orthodontic appliance) and of exempt orthodontic services (e.g., adjustment and maintenance services). (Zero-rating would have generated input tax credits.)

CRA has indicated that, as a consequence, it will be withdrawing its current administrative practice – which was to allow orthodontists to treat 35% of most of their taxable expenses as eligible for input tax credits provided that their invoices to their patients broke out a separate charge for the orthodontic device. (A similar practice respecting dental implants also will go.) However, it will provide advance notice of when this practice is being withdrawn so that “stakeholders … can prepare accordingly.”

Neal Armstrong. Summary of 8 March 2018 CBA Commodity Tax Roundtable, Q.5 under Sched. V. Pt. II, s. 5.

CRA finds that half-siblings are related

The definition of blood relationship in s. 251(6)(a) includes two persons who are the “brother or sister of the other.” Following inter alia Diktakis, CRA found that a sibling includes a half-sibling, so that two individuals who had the same father and different mothers were related to each other.

Neal Armstrong. Summary of 12 July 2018 External T.I. 2018-0755471E5 under s. 251(6)(a).

CRA confirms that it is possible to structure a P3 project so as to defer the applicability of GST/HST until revenues are ascertained

Typically, P3 project construction costs for a hospital, bridge etc. are intended for ITA purposes to be viewed as consideration for the grant of a concession or licence (a Class 14 property) by the public authority to the private operating company to enter onto the premises to operate it and earn a monthly operating fee (see e.g., 2006-0218781R3). On the ETA side, CRA instead views the consideration for the incurring of the construction costs as being included in the subsequent monthly amounts payable by the authority. Provided that the amount of such consideration is not yet ascertainable, GST/HST is not triggered (one month after substantial completion) under ETA s. 168(3)(c) on the value of the supply made to the public authority by virtue of the supply of the hospital etc. and is deferred under s. 168(6) until the monthly amounts become ascertainable.

Neal Armstrong. Summary of 8 March 2018 CBA Commodity Taxes Roundtable, Q.4 under ETA s. 168(6).

Over 650 translations of CRA French-language interpretations are available

The table below provides descriptors and links for six Interpretation released in March and February 2013, as fully translated by us.

These (and the other full-text translations covering all of the 651 French-language Interpretations released in the last 5 1/2 years by the Income Tax Rulings Directorate) are subject to the usual (3 working weeks per month) paywall.

Bundle Date Translated severed letter Summaries under Summary descriptor
2013-03-13 14 December 2012 External T.I. 2012-0436981E5 F - Ristournes de coopératives de travailleurs Income Tax Act - Section 135 - Subsection 135(4) - Allocation in Proportion to Patronage distribution on winding-up of enhancement reserve does not qualify
19 December 2012 External T.I. 2012-0463581E5 F - Allocation pour l'usage d'un véhicule Income Tax Act - Section 6 - Subsection 6(1) - Paragraph 6(1)(b) - Subparagraph 6(1)(b)(vii.1) travel to and from home where shifting clientele is in the performance of employment duties/Reg. 7306 rates presumptively reasonable
2013-03-06 19 December 2012 External T.I. 2012-0468511E5 F - GRIP addition for 2006 Income Tax Act - Section 89 - Subsection 89(7) - Element A no adjustment made for dividend received from connected CCPC sold over 4 years before 2006
2013-02-27 30 January 2013 External T.I. 2012-0449621E5 F - Belgian pension Treaties - Income Tax Conventions - Article 18 Belgian social security payment received by Canadan resident must be included in the personal return, but with offsetting s 110(1)(f)(i) deduction claimed
Income Tax Act - 101-110 - Section 110 - Subsection 110(1) - Paragraph 110(1)(f) - Subparagraph 110(1)(f)(i) Treaty-exempt receipt required to be reported, but with offsetting s 110(1)(f)(i) deduction
2013-02-20 13 February 2013 External T.I. 2013-0477151E5 F - Crédit d'impôt pour études Income Tax Act - Section 118.6 - Subsection 118.6(2) given 2012 disruptions, months to be computed based on the original schedule
5 February 2013 External T.I. 2012-0465591E5 F - Form T5018 Income Tax Regulations - Regulation 238 - Subsection 238(1) landscaping business could be construction

CRA has not accepted the Le Gardeur decision on zero-rating based on a component being zero-rated

Although CRA’s position was that supplies of in vitro diagnostic test kits designed for laboratory use are taxable, the Centre Hospitalier Le Gardeur decision (2007 TCC 425) found that certain in vitro diagnostic test kits were zero-rated pursuant to Sched. VI, Pt. I, s. 2(a). When asked whether CRA accepted this result, it responded that it was awaiting the Patterson Dental decision for clarification of this issue. Four months later, that decision came down and decided that zero-rating for epinephrine did not include a drug containing epinephrine. Although Patterson Dental distinguished rather than overtly disagreed with the earlier decision, perhaps CRA will decide to maintain its pre-Gardeur view.

Neal Armstrong. Summary of 8 March 2018 CBA Commodity Taxes Roundtable, Q.3 under Sched. VI, Pt. I, s. 2(a).