News of Note
We have translated 6 more CRA interpretations
Email this ContentWe have translated a further 6 translations of CRA interpretations released in March of 2003. Their descriptors and links appear below.
These are additions to our set of 2,539 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 20 1/3 years of releases of such items by the Directorate. These translations are subject to our paywall (applicable after the 5th of each month).
Sindhi – Tax Court of Canada finds that a residence was not “occupied” notwithstanding weekly overnight stays
The appellant agreed in July 2016 to purchase a new home for $413,847, but by the time of the closing in March 2018, he had lost his source of employment income and broken up with his partner. He nonetheless closed with financial assistance from his parents and from a private mortgage. He did not consume any meals at the residence, and only stayed there for approximately two nights per week. The only housekeeping items on the premises were a mattress, sheets and pillows and a table. He eventually sold the residence for $455,000.
Rossiter CJ found that, although the appellant satisfied the requirement under s. 254(2)(b) of the GST/HST new housing rebate rules that, at the time of agreeing to purchase, he had intended to occupy the residence as his primary place of residence, he had not satisfied the requirement under s. 254(2)(g) that he had in fact occupied the residence as a place of residence, stating:
[O]ccupancy is something more than simply having a mattress with a set of sheets and pillowcases and a table on the premises. Although the Appellant did some measure of staying at the premises in question, two nights per week, this certainly could not classify one as occupying the premises.
Rossiter CJ went on to note that the appellant continued to live most of his time with his parents, where he kept most of his personal effects and mailing address. He accepted the “frustrating event” doctrine, but stated:
To invoke frustration, the surrounding circumstances must make the frustrating event unforeseeable, beyond the buyer’s control, and deny the buyer any alternative pathway to having the property be their primary residence … .
That test was not satisfied here.
Before denying the rebate on the above grounds, Rossiter CJ, rejected the Crown’s argument that s. 254(2)(g) required the appellant to have occupied the property as his “primary place of residence” given the telling contrast between the wording of s. 254(b) (referring to a “primary place of residence”) and s. 254(g) (referring only to a “place of residence”.)
Neal Armstrong. Summaries of Sindhi v. The King, 2023 TCC 102 (Informal Procedure) under ETA s. 254(2)(g) and Statutory Interpretation – Consistency.
CRA declines to discuss whether an intra-government “transfer” can be a non-arm’s length supply
A provincial government department constructs a school and then transfers it for nominal consideration to another department within the same government which is a school authority that will use the school primarily in exempt activities, although it is also registered because it engages in commercial activities including the supply of parking spaces.
CRA noted that ETA s. 155 would apply to deem the supply to be made for FMV consideration if this transfer was a supply between persons not dealing with each other at arm’s length, but did not discuss the issue of whether a transfer of property between two departments within the same government could be such a transaction, nor did it discuss whether a transfer within the provincial government can be a supply.
Neal Armstrong. Summary of 23 March 2023 GST/HST Interpretation 245296 under ETA s. 155(1).
CRA indicates that an individual’s taxable capital gain on settling a charitable remainder trust increases the individual’s total gifts limit by 75%, not 100%, thereof
In somewhat general terms, the numerical limit in the s. 118.1 definition of ”total gifts” as to the amount of an individual’s total charitable gifts for a year that will qualify for credit is increased (under Variable B of the definition) by 25% of the individual’s taxable capital gains for the year in respect of gifts made in the year whose eligible amount is included in the charitable gifts total (so that the normal 75%-of-income limitation is increased in this regard to 100%).
An individual settles a charitable remainder trust (CRT) with capital property and gifts the remainder interest in the CRT to a qualified donee that is a registered charity, with the eligible amount of such gift being included in the individual’s “total charitable gifts.” CRA indicated that since the gift was of an equitable interest in the CRT and not of the capital property with which the trust had been settled, the taxable capital gain arising on the settlement of the CRT did not increase Variable B.
Neal Armstrong. Summary of 10 March 2023 External T.I. 2022-0943881E5 under s. 118.1(1) – total gifts – (a)(iii).
CRA indicates that the multigenerational home renovation credit rules do not require that the secondary unit be built as a renovation to an existing unit
In the context of an individual constructing a family home with a semi-attached garden suite in which the individual’s parents will live, CRA indicated that there is no requirement, in order for the multigenerational home renovation tax credit to be provided under s. 122.92, that the “secondary unit” (the garden suite) be built and occupied subsequently to the occupancy of the “eligible dwelling” (the main residence), so that, for instance, both could be built and occupied at the same time. However, there remained the requirement that there must be a reasonable expectation that both the “qualifying individual” (i.e., the parents) and the “qualifying relation” (i.e., the individual) will ordinarily inhabit the housing unit (including the secondary unit) within 12 months after the end of the renovation period.
Neal Armstrong. Summary of 13 March 2023 External T.I. 2023-0961401E5 under s. 122.92(1) – qualifying renovation.
CRA illustrates when the services of intermediaries to insurers may be GST/HST exempt
CRA has issued a Notice outlining its position on when services provided by intermediaries to insurers may be exempted as financial services. Examples covered include:
- Example 1: the services of a managing general agent to an insurer of marketing the insurer’s policies through independent sales agents, are exempted “arranging for” services under para. (l) of the financial services definition.
- Example 2: a third-party administrator (“TPA”) designs and handles employee benefit plans, which it markets to employers, with coverage from insurer who pays it a commission which is exempted under para. (l).
- Example 4: this is similar to Example 2 except that the contract with the insurer is split into two contracts, one of them for admin services – but this makes no difference to the result in light of the single-supply doctrine.
- Example 6: a non-licensed insurer covers any major collision or theft loss of new car purchasers who enter into a contract with it – given that it is not a licensed insurer, this contract is not considered to be the provision of an exempt insurance service (although such corporation’s coverage, in turn, from the insurer is exempted). (Under Example 5, there is a better result if the corporation distributes insurance coverage of the insurer to the car customers.)
- Example 7: an insurance claims adjudication and settlement system of the corporation is provided to the insurer on a taxable basis (predominantly admin services).
Neal Armstrong. Summaries of GST/HST Notice 325 Services Provided by Certain Insurance Intermediaries July 2023 under ETA s. 123(1) – financial service – para. (l), para. (d).
Income Tax Severed Letters 26 July 2023
This morning's release of five severed letters from the Income Tax Rulings Directorate is now available for your viewing.
Zeifmans – Federal Court, in not granting an information disclosure order under s. 231.7, effectively reversed an earlier decision where the Court had been misled
Zeifmans, 2021 FC 363, aff’d 2022 FCA 160 concerned the application of the Zeifmans accounting firm for judicial review of a CRA issuance of a requirement letter pursuant to s. 231.2(1) respecting three named individual clients of the firm and all “entities owned, operated, controlled or otherwise connected to [such] individuals” (the “Unnamed Persons.”) The submission of Zeifmans - that judicial authorization should have been obtained pursuant to s. 231.2(3) given that the requirement extended to the Unnamed Persons – was rejected essentially because there was “no evidence in the record that the Unnamed Persons [we]re a current investigation target.”
In this subsequent proceeding, an application of the Minister for a compliance order pursuant to s. 231.7 was dismissed. Of crucial significance was the finding of Pallota J that Unnamed Persons were (and had been at the time of issuing the Requirement) an investigation target, i.e., the lead auditor had effectively admitted in cross examination in these proceedings that the requirement had been issued as part of the CRA audits of all the companies in the group.
Neal Armstrong. Summary of Canada (National Revenue) v. Zeifmans LLP, 2023 FC 1000 under s. 231.7(1).
CRA will accept alternatives to a foreign notice of assessment to evidence the foreign tax liability for foreign tax credit purposes
CRA indicated that when it is reviewing a foreign tax credit claim in a Canadian return, it requires confirmation of the final tax liability to the foreign tax authority.
It indicated that it understands that a notice of assessment, transcript, or other official document from the tax authority, indicating the final foreign tax liability, is not always available, in which case it will generally accept proof of payment of tax, or receipt of refund, from the foreign tax authority. Proof of payment can include bank statements, cancelled cheques, or official receipts, provided that they clearly indicate that the payment was made to (or received from) the applicable tax authority, the amount of the payment, the taxation year to which it relates, and the date of payment.
Neal Armstrong. Summary of 20 June 2023 STEP Roundtable, Q.18 under s. 126(1).
We have translated 6 more CRA interpretations
We have translated a further 6 translations of CRA interpretations released in March of 2003. Their descriptors and links appear below.
These are additions to our set of 2,533 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 20 1/3 years of releases of such items by the Directorate. These translations are subject to our paywall (applicable after the 5th of each month).