News of Note
GST/HST Severed Letters October 2020
Email this ContentThis morning's release of two severed letters from the Excise and GST/HST Rulings Directorate (identified by them as their October 2020 release) is now available for your viewing.
The original version of the September 2020 post below indicated that there were five letters in that bundle; there were two.
GST/HST Severed Letters September 2020
This morning's release of two severed letters from the Excise and GST/HST Rulings Directorate (identified by them as their September 2020 release) is now available for your viewing.
Income Tax Severed Letters 28 April 2021
This morning's release of five severed letters from the Income Tax Rulings Directorate is now available for your viewing.
Bernardin – Quebec Court of Appeal finds that interest that arose prior to a class action judgment becoming res judicata was non-taxable
An individual, by virtue of being part of a group of class action claimants, was awarded damages in 2004 of $1,200 for each of the seven winter seasons in which she had endured snowmobile noise. In 2010 she received damages pursuant to Article 1619 of the Quebec Civil Code of $8,400 (capital) and $6,148 (interest).
Gagné JCA applied the principle:
[O]ne cannot speak of interest in the strict sense unless the debt is both certain and liquidated. These two qualities arise at the time when the judgment becomes res judicata, that is, when it is not, and is no longer, subject to appeal. As long as the validity and/or the amount of the debt is the subject to debate on appeal, it cannot constitute a debt that is certain and liquidated or, in other words, a capital sum on which interest may accrue.
Accordingly, the damages did not become a liquidated sum until all rights of appeal against the 2004 judgment were abandoned on October 1, 2009. It was only at that point that the 2004 judgment became res judicata.
On the other hand, it did not matter that the precise quantum of the amount payable to that individual was not established until the judgment of the Court Clerk issued on March 3, 2010. In this regard, Gagné JCA stated:
[T]he debt does not have to be due and payable to bear interest. It is sufficient (and here I paraphrase Rand J. in … Farm Security …) that there be a use or retention by one person of a sum of money belonging to or owed to another. This, in my view, is a debt that is certain and liquidated. …
The fact that [the Quebec Attorney General] was unaware of the extent of the members' claims at the time is irrelevant. … [T]he determination of whether an amount received or receivable is interest income must be made from the perspective of the taxpayer.
Neal Armstrong. Summary of Agence du revenu du Québec v. Bernardin, 2021 QCCA 625 under s. 12(1)(c).
Danby Products – Federal Court of Appeal applies a rebuttable presumption that the ordinary meaning of a word should prevail over its industry meaning
Locke JA rejected a taxpayer submission that a wine cooler was not a refrigerator notwithstanding that there was “no dispute … that the industry does not treat wine coolers as refrigerators,” stating:
I do not wish to suggest that the ordinary meaning of a term should always apply even where it has a meaning in the industry. But there is a presumption to that effect, and that presumption is not rebutted by the mere fact that the industry meaning of the term in question differs from the ordinary meaning.
Neal Armstrong. Summaries of Danby Products Limited v. Canada (Border Services Agency), 2021 FCA 82 under Customs Tariff Act, Customs Tariff Schedule, Chapter 84, Tariff Item 84.18 and Statutory Interpretation – Ordinary meaning.
An ETA s. 273 election for a real estate JV can prevent a subsequent unregistered purchaser of an interest therein receiving retroactive relief
CRA indicated that, in general, GST/HST “retroactive registration is only available if a person was required to be registered for GST/HST purposes pursuant to subsection 240(1).”
Thus, where a new co-venturer purchased an interest in an existing real estate joint venture for which an ETA s. 273 election was already in place (so that all the rental supplies of that real property were to be reported by the JV “operator” and not by it), it could not become retroactively registered to the date of acquisition so as to claim an ITC for the GST/HST payable by it on that acquisition, and to relieve the supplier from collecting tax under ss. 221(2)(b) and 228(4).
Neal Armstrong. Summaries of 27 February 2020 CBA Roundtable, Q.18 under ETA s. 273(1) and s. 167(1.1)(a)(iii).
We have translated over 1500 CRA Interpretations
We have published a further 10 translations of CRA interpretation released in July 2008. Their descriptors and links appear below.
These are additions to our set of 1,506 full-text translations of French-language Roundtable items and Technical Interpretations of the Income Tax Rulings Directorate, which covers all of the last 12 3/4 years of releases of Interpretations by the Directorate. These translations are subject to the usual (3 working weeks per month) paywall.
Levett – Federal Court finds that CRA had “pursued all reasonable domestic means available” before making an information request under the Swiss Treaty
The applicants (two couples and a corporation owned by one of them), whose disclosure that they had no foreign assets was doubted by CRA, brought an application to have CRA requests to the Swiss federal tax administration for information pursuant to Art. 25 of the Canada-Swiss Treaty declared invalid on the grounds that “the CRA did not exhaust all domestic avenues of compliance and did not provide full and frank disclosure to the Swiss authorities.” In dismissing the application, St-Louis J found:
- Regarding the stipulation in Art. 25, para 1 that “an exchange of information will only be requested once the requesting Contracting State has pursued all reasonable means available under its internal taxation procedure to obtain the information,” she stated (citing Blue Bridge, 2020 FC 893) that the “purpose of the ‘foreseeably relevant’ standard is to maximise the extent of the information that can be exchanged.”
- “[N]othing prevented the CRA auditor from faithfully presenting unconfirmed information or suspicions” to the Swiss authorities.
- Regarding the requirement in s. 2(a) of the Interpretative Protocol to the Treaty that, before sending a request for exchange of information pursuant to Art. 25 of the Convention, the CRA must have pursued “all reasonable means available under its internal taxation procedure to obtain the information” she found (at para. 162) that she was “satisfied that the CRA pursued all reasonable domestic means available” in light of the various roadblocks faced by CRA (e.g., the individual applicants claimed to have no foreign assets and to have no relationship with the corporations named by the AMF).
- Furthermore, the information sought of the corporate applicant was in the possession of a foreign corporation (“Socimbal”), as to which St-Louis J stated that the “auditor had no legal authority to require information from the contact person at Socimbal, as he was not a Canadian resident or a person carrying on business in Canada” and that “the Applicants have not convinced me that the CRA had a legal obligation to contact the person abroad simply because it was provided with the contact information.”
Neal Armstrong. Summary of Levett v. Canada (Attorney General), 2021 FC 295 under Treaties –Income Tax Conventions - Art. 27.
CRA considers that a Canadian Amalco was “incorporated” in Canada
ETA s. 132(1)(a) provides that a corporation is deemed to be resident in Canada if it “is incorporated or continued in Canada and not continued elsewhere.” CRA indicated (perhaps based on Deltona) that where two corporations are amalgamated in Canada, the amalgamated corporation is considered to have been incorporated in Canada. Although a Canadian corporation that is continued outside Canada will not thereafter be considered to have been incorporated in Canada, it will nonetheless be resident in Canada if its central management and control is in Canada - and it will be deemed under s. 132(2) to be resident in Canada in respect of activities carried on by it through any Canadian permanent establishment.
Neal Armstrong. Summary of 27 February 2020 CBA Roundtable, Q.17 under ETA s. 132(1)(a).
CRA indicates that payments to a retired partner generally are GST/HST exempt
CRA confirmed that payments made to a retired partner generally would be considered as consideration for an exempt financial service (assuming no rendering of services), including payments to which ITA s. 96(1.1) applies (which, broadly speaking, are treated for ITA purposes as akin to deferred earnings), stating:
When a partner acquires partnership units (i.e. an interest in a partnership), the partner has acquired certain rights which include a right to receive distributions. To the extent that payments made by a partnership to a retired partner are in respect of an interest in the partnership, or any right in respect of such an interest, the payment would be consideration for an exempt supply of a financial service … .
Neal Armstrong. Summary of 27 February 2020 CBA Roundtable, Q.16 under ETA s. 123(1) – para. (f).