News of Note
CRA indicates that s. 110.6(14)(f)(i) can apply to an amalgamation and that s. 110.6(1)(e) applies to successive share substitutions (including an amalgamation)
Email this ContentS. 110.6(14)(f)(i) provides that, for purposes of the requirement in s. 110.6(1)(b) that mooted qualified small business corporation shares ("QSBCSs") must not have not been owned during the 24 months preceding their disposition (the “determination time”) by anyone other than the disposing individual or a related person or partnership, such shares will be considered to have been so owned prior to their issuance by a “bad” owner unless they were issued as consideration for other shares (the “original shares”).
However, s. 110.6(1)(e)(i) requires that throughout the period beginning 24 months before the determination time and ending at the time of the share exchange (the “substitution”), the original share was not owned by anyone other than the individual or a related person or partnership.
Furthermore, s. 110.6(1)(e)(ii) requires that the original share had qualified under the asset and activity test described under para. (c) during such initial (pre-substitution) period.
Regarding the situation where an individual (Mr. X) exchanges his majority shareholding of Opco for shares of a new personal holding company Holdco) and then, around a year later, receives replacement shares of Amalco on an amalgamation of Holdco with Opco followed by a sale by him (and the minority shareholder) of their Amalco shares to a third party, CRA accepted that s. 110.6(14)(f)(i) applied on the amalgamation, i.e., that the Amalco shares could be regarded under the scheme of the Act as being “issued” in consideration for the shares of the relevant predecessor (Holdco).
CRA further indicated that s. “110.6(1)(e) can apply respecting multiple substitutions” so that, under s. 110.6(1)(e)(ii), it would be necessary both for Holdco to satisfy the s. 110. 6(1)(c) test for the period from its issuance of shares in exchange for Opco shares through to the amalgamation, and for Opco to satisfy that test the portion of the period beginning 24 months before the sale ending and ending with such share exchange.
Neal Armstrong. Summary of 4 January 2022 External T.I. 2015-0607531E5 F under s. 110.6(1) - qualified small business corporation share - para. (e),
A-Supreme Nursing – Tax Court of Canada finds that the provision of agency nurses to seniors’ homes qualified as exempt nursing services
The appellant, in addition to providing nurses directly to individuals, placed nurses in the Ontario long-term care facilities and nursing homes of other clients and did not charge GST/HST on the related fees in reliance on the exemption for nursing services in Sched. V, Pt. II, s. 6.
In confirming such exemption, MacPhee J distinguished Hôpital Santa Cabrini (which found that a hospital which contracted for the services of nurses employed by a personnel-services agency was receiving a taxable supply of personnel services) on the basis that, here, the nurses had significant operational control over the manner of their provision of the nursing services to the residents and such delegation of day-to-day control by the facility operators to agency nurses was permitted by the Regulations under the Long-Term Care Homes Act, 2007. It did not matter that the home operators retained general responsibility over the provision of health care services at their facilities.
Neal Armstrong. Summary of A-Supreme Nursing & Home Care Services Inc. v. The King, 2023 TCC 39 under ETA Sched. V, Pt. II, s. 6.
CRA indicates that there is no UHTA filing obligation for a building or condo unit that was not substantially completed on December 31
In a technical interpretation issued on March 10, 2023, the GST/HST Rulings Directorate indicated that a property does not become a “residential property” for underused housing tax purposes until its construction is substantially completed (generally, 90% or more) so that an individual is able to reasonably inhabit the premises. Accordingly, if a rental building or a condominium unit was not substantially completed on December 31 of the year, there would be no obligation to include it in a return filed for that year.
The Directorate is also described as indicating that “a property’s assessed value and most recent sale price do not have to be reported on a UHT return (“$0” can be entered on lines 280 and 285) if: (i) no tax is payable in respect of the property, due to an available exemption; and (ii) the UHT return is filed by December 31 of the following calendar year.”
Neal Armstrong. Summary of PwC, "Tax Insights: The underused housing tax – A new compliance requirement for many owners of Canadian residential property," Issue 2023-06R, 5 April 2023 under Underused Housing Tax Act, s. 2 – residential property.
GST/HST Severed Letters December 2022
This morning's release of eight severed letters from the Excise and GST/HST Rulings Directorate (identified by them as their December 2022 release) is now available for your viewing.
Income Tax Severed Letters 5 April 2023
This morning's release of three severed letters from the Income Tax Rulings Directorate is now available for your viewing.
3792391 Canada – Tax Court of Canada confirms that s. “215(6) is devoid of any requirement that the payer have knowledge that the payee is a non-resident”
The taxpayer was assessed under s. 215(6) for failure to withhold and remit Part XIII tax on rents paid by it in its 2011 to 2016 taxation years to its ultimate lessor, Ms. Trimarchi, who lived in Italy (and who had acquired the property subject to the lease before the years in issue from some apparently-resident siblings). St-Hilaire J stated that “subsection 215(6) is devoid of any requirement that the payer have knowledge that the payee is a non-resident” Although the taxpayer was able to point to some minor indicators suggestive of Canadian residence of Ms. Trimarchi (e.g., a Canadian bank account to receive the rent payments, a Canadian SIN, and a Montreal address shown on some documents), the preponderance of the evidence (presented by the Crown, even though the onus was not on it) suggested that Ms. Trimarchi was a non-resident.
Regarding the penalty imposed under s. 227(8), she agreed that a due diligence defence was available, but stated:
The Appellant has not proven that it has exercised reasonable care to ensure compliance with its obligations. … Counsel submitted that the Appellant was justified in not taking steps to ensure compliance because it had no reason to believe that Sebastiana Trimarchi was a non-resident. Unfortunately, that is not enough to meet the standard of a high degree of diligence.
The assessments under ss. 215(6) and 227(8) were confirmed.
Neal Armstrong. Summaries of 3792391 Canada Inc. v. The King, 2023 TCC 37 under s. 215(6) and s. 227(8).
GST/HST Severed Letters November 2022
This afternoon's release of six severed letters from the Excise and GST/HST Rulings Directorate (identified by them as their November 2022 release) is now available for your viewing.
Enns – Tax Court of Canada applies judicial comity principle to find that a widow is a spouse of her deceased husband
At issue was whether a widow receiving funds from the RRSP of her deceased spouse was a “spouse” for purposes of s. 160(1)(a), so that s. 160 could be applied regarding his tax debt. In similar circumstances, Kiperchuk had briefly found (without the “spouse” issue having been specifically raised) that a widow was not a spouse of her deceased husband, whereas in Kuchta, Graham J, after a thorough analysis of that precise issue, had concluded the opposite.
Russell J indicated that, in light inter alia of the principle of judicial comity, he would follow the same Kuchta approach (notwithstanding that Kuchta might be technically a nullity as it had been decided by a substituted judge – see High-Crest). S. 160 applied.
Neal Armstrong. Summary of Enns v. The King, 2023 TCC 28 under s. 160(1)(a).
CRA announces that credit card surcharges are exempt from GST/HST
CRA has published its position that a credit card surcharge (generally, a charge made by the merchant to customers in consideration for agreeing to let them use their credit card rather than another means of payment) will generally be exempted from GST/HST under para. (i) of the financial services definition (which pertains to certain services relating to credit card transactions.)
Neal Armstrong. Summary of GST/HST Info Sheet GI-200, Application of the GST/HST to Credit Card Surcharges, March 2023 under ETA s. 123(1) – financial service - para. (i).
We have translated 7 more CRA interpretations
We have published a translation of a CRA interpretation released last week and a further 6 translations of CRA interpretations released in September and August of 2003. Their descriptors and links appear below.
These are additions to our set of 2,424 full-text translations of French-language Technical Interpretation and Roundtable items (plus some ruling letters) of the Income Tax Rulings Directorate, which covers all of the last 19 2/3 years of releases of such items by the Directorate. These translations are subject to our paywall (applicable after the 5th of each month).