News of Note
CRA indicates that supplier documentary deficiencies can be remedied for GST/HST purposes by the recipient’s internal records
Email this ContentObservations of CRA on the documentary requirements for supporting input tax credit claims included:
- It is not necessary that an invoice have the supplier’s registration number. That number can be obtained in any other document.
- Deficiencies in the supplier’s documents can be remedied by the recipient’s internal records. For example, if there is only a cash register receipt that does not list the recipient’s name, that deficiency can be remedied by “sufficient evidence” in the internal records of the recipient that identify itself as the recipient.
- Invoices etc. can be issued in the name of the recipient’s agent provided that the agency arrangement is properly documented and established.
Neal Armstrong. Summaries of 19 June 2019 GST/HST Interpretation 197123 under Input Tax Credit Information (GST/HST) Regulations, s. 3(b)(i) and s. 3(c(ii).
Adélard Soucy – Court of Quebec finds that a building for warming equipment qualified as “manufacturing or processing machinery or equipment”
The taxpayer custom-fabricated pieces of heavy specialized equipment at the northern mining site of one of its mining customers. In order that its soldering work did not fracture (which required that the soldering be carried out at close to room temperature), it needed to house its operation in a pre-assembled shelter (the “Econox”) which it installed at the site. Whether the Econox qualified for Quebec investment tax credit purposes turned on whether it constituted a Class 29 property which, in turn, rested on whether it was a property described in Class 8. In finding that the Econox was a “a structure that is manufacturing or processing machinery or equipment” as per para. (a) of the Class 8 description, Popescu JCQ stated:
[T]he manufacturing and processing activities of the taxpayer could only be carried out within the Econox, which was closely linked to this activity.
The Econox also was fixed equipment which permitted the plaintiff to manufacture and process industrial and mining items.
… In default of being able to speak of permanent physical integration, one can certainly speak of a functional integration as the plaintiff could not carry out its operations in the Great North without the Econox.
Neal Armstrong. Summary of Adélard Soucy (1975) Inc. v. Agence du revenu du Québec, 2019 QCCQ 6956 under Schedule II – Class 8(a).
Patrie – Tax Court of Canada found that a value-enhancing home renovation could qualify for home accessibility tax credit purposes
The house of the taxpayer and his wife had rickety stairs leading down to the yard. To address increasing mobility issues of his wife, the taxpayer replaced these with a deck with a 5-foot wide stairway and aluminum railing – and claimed the $10,000 home accessibility tax credit. CRA was bothered that, with the exception perhaps of the railing, this was what anyone who was trying to improve his home might have built. The definition of “qualifying expenditure” excluded an outlay or expense “made or incurred primarily for the purpose of increasing or maintaining the value of the eligible dwelling.”
In the course of allowing the taxpayer’s appeal, Bocock J stated:
The intention to add or maintain value must be primary. Absent some evidence that the taxpayer foremost sought to improve or maintain the value of the property and only secondarily solve accessibility, the exclusion in sub-paragraph (g) of being “primarily undertaken” to increase or maintain value cannot be sustained.
Neal Armstrong. Summaries of Patrie v. The Queen, 2019 TCC 276 under s. 118.041(1) - “qualifying renovation”, “qualifying expenditure” - (g).
Income Tax Severed Letters 18 December 2019
This morning's release of 10 severed letters from the Income Tax Rulings Directorate is now available for your viewing.
Stover – Federal Court requires CRA to think about waiving interest that accrued during a three-year delay in dealing with a late-filed Objection
The taxpayer, who had not filed a Notice of Objection within the normal 90-day period for doing so, filed his Notice of Objection barely within the one-year period under s. 166.1(7)(a) for applying to the Minister for an extension of that deadline. CRA apparently did not recognize that, under the jurisprudence, the late-filed Notice of Objection was to be treated as an implicit s. 166.1 request for an extension. It essentially did nothing until the Tax Court issued an order three years later declaring the Notice of Objection to be valid - notwithstanding that s. 166.1(5) required it to consider an extension application “with all due dispatch.” The taxpayer ultimately discontinued his Tax Court appeal (due, he claimed, to his lawyer’s mistake), but applied to CRA for interest relief under s. 220(3.1).
Favel J considered it to be unreasonable for the CRA delegate not to take the three-year delay of CRA in responding to the Objection into account in considering the interest-relief request, so that the matter was “remitted to another Delegate for redetermination of the Applicant’s entitlement to relief from interest accrued due only to delays caused by the CRA.”
Neal Armstrong. Summaries of Stover v. Canada (National Revenue), 2019 FC 1599 under s. 220(3.1) and s. 166.1(5).
CRA confirms that, where all shareholders of a private corporation are directors, an eligible dividend designation can be made through the dividend declaration
CRA essentially repeated its position in 2009-0347491C6 that examples of a valid eligible dividend designation by private corporation include identifying eligible dividends through letters to shareholders and dividend cheque stubs, or where all of the shareholders are directors of a corporation, a notation in the Minutes. CRA elaborated on this “notation in the minutes” method as follows:
Thus, where all of the shareholders are also directors of the corporation, we consider that a directors’ resolution declaring a dividend and containing a designation that such dividend is an eligible dividend constitutes valid notification in writing for the purposes of subsection 89(14).
Neal Armstrong. Summary of 3 December 2019 CTF Roundtable, Q.16 under s. 89(14).
B.C. Investment Management – Supreme Court of Canada indicates that a statutory trust is not necessarily a trust
BCI was a B.C. Crown agent which was formed to manage and hold investments for the provincial pension plans. The B.C. governing Act (the PSPPA) created a statutory trust under which each pension plan only had an entitlement to units in the investment pools managed by BCI and did not have ownership in any investment pool assets. CRA took the view (and ultimately assessed BCI for $40M in uncollected GST on the basis) that ETA s. 267.1(5)(a) deemed the statutory trust to be a person separate from BCI as agent for the provincial Crown, so that the investment services of BCI were supplied to that separate person.
In finding that such assessments would contravene s. 125 of the Constitution Act, 1867 but for the effect of Intergovernmental Agreements between B.C. and the federal government, Karakatsanis J focused on the ownership interest of BCI (the provincial Crown agent) in the portfolio assets:
In this case, the ETA places the burden of the tax on the Portfolio assets to which BCI holds legal title. BCI, a Crown agent, has thus successfully shown that it has an ownership interest in the property which bears the federal tax. I recognize that the beneficiaries of the trust may also be seen as bearing the burden of the tax. However, the key point is that the provincial Crown’s interest is being taxed under federal law, which is not permitted by s. 125.
In interesting obiter, she questioned whether the statutory arrangement created by the PSPPA, which stated that the portfolio assets were to be “held in trust,” in fact created a trust, stating:
[I]t is not clear whether the PSPPA … contain sufficient language to satisfy the three certainties. For example, the statutory framework does not identify a beneficiary for the Portfolio assets.
Neal Armstrong. Summaries of Canada (Attorney General) v. British Columbia Investment Management Corp., 2019 SCC 63 under ITA s. 104(1) and Constitution Act, s. 125.
Dow & Duggan – Tax Court of Canada finds that CRA does not have the discretion to stipulate the documentary requirements for direct-shipment export zero-rating
Sched. VI, Pt. V. s. 1 generally zero-rates sales made in Canada to a recipient who promptly exports the goods, whereas Sched. VI, Pt. V. s. 12 may inter alia zero-rate sales made in Canada to a non-resident where the supplier itself ships the goods out of Canada. Unlike s. 1, s. 12 does not state a requirement that the supplier “maintains evidence satisfactory to the Minister of the exportation of the property by the recipient.”
Wong J noted:
This Court has previously held that the evidentiary threshold in section 1 of Schedule VI, Part V means: (1) that the Minister has the discretion to set the standard as to what evidence will satisfy her for the purposes of zero-rating under that section; and (2) this Court should not intervene unless the Minister commits a reviewable error in exercising her discretion… .
She found that the Minister did not have the same discretionary authority under s. 12, although she indicated that it would be “reasonable to refer to the Minister’s [published] list of satisfactory evidence for qualifying under section 1, as a guideline for section 12.” However, she found that most of the supplies before her were not zero-rated in the absence of satisfactory documentary support in any form.
Neal Armstrong. Summaries of Dow & Duggan Log Homes International (1993) Limited v. The Queen, 2019 TCC 280 under Sched. VI, Pt. V. s. 12 and s. 168(9).
6 more translated CRA interpretations are available
We have published a further 6 translations of CRA interpretations released in April and March, 2011, including 3 items from the 2010 APFF Roundtable. Their descriptors and links appear below.
These are additions to our set of 1,029 full-text translations of French-language Roundtable items and Technical Interpretations of the Income Tax Rulings Directorate, which covers all of the last 8 ¾ years of releases of Interpretations by the Directorate. These translations are subject to the usual (3 working weeks per month) paywall.
GST/HST Severed Letters June 2019
This morning's release of three severed letters from the Excise and GST/HST Rulings Directorate (identified by them as their June 2019 release) is now available for your viewing.