GST/HST Notice 284 "Bare Trusts, Nominee Corporations and Joint Ventures" February 2014

After noting that "where a nominee corporation is a...registrant that makes taxable supplies as agent on behalf of the participants in a joint venture, the nominee corporation and the participants may jointly elect under subsection 177(1.1)," CRA stated:

[T]he election under subsection 177(1.1) does not result in the agent assuming any rights with respect to input tax credits to which the principal may be entitled to claim. Consequently, even where a nominee corporation acts as agent in acquiring supplies on behalf of the participants in a joint venture, the nominee corporation is not entitled to claim any input tax credits that the participants may be eligible to claim with respect to such supplies.

After noting that a nominee corporation potentially may makes taxable supplies as agent on behalf of the participants in a joint venture, CRA stated:

If the nominee corporation is an agent and makes taxable supplies of its services of acting as an agent to the participants in a joint venture, the nominee corporation may register voluntarily if it is not required to register.

After repeating its position that participants in joint ventures may not elect "for a nominee corporation or bare trust to be the operator of the joint venture where the nominee corporation or bare trust does not have the managerial or operational control," and noting that "where the person does not engage staff to perform any of the operator's duties, it is doubtful that the person would be considered to have the managerial or operational control," CRA stated:

Auditors have been advised not to assess for any GST/HST owing where an assessment could be raised because the bare trust or nominee corporation is not a participant for purposes of section 273. This administrative tolerance is contingent upon confirmation that all returns have been filed, all amounts have been remitted and the joint venture participants are otherwise fully compliant. Further, this administrative tolerance is in place with the understanding that, on a going forward basis, the joint venture will arrange its affairs to ensure that a participant, as defined in GST/HST Policy Statement P-106, who is a GST/HST registrant, is the operator of the joint venture.

This administrative tolerance is available for reporting periods ending before January 1, 2015.

After noting that "a trustee of a bare trust, for example, a nominee corporation, may act as an agent of the participants in a joint venture by performing certain activities on their behalf," CRA stated:

Generally, an agent is considered to be an extension of the principal and makes or acquires supplies on behalf of the principal who for GST/HST purposes is considered to have made or acquired the supplies. Therefore, it is the principal that is generally required to charge and account for the tax on the supplies made by the agent…[and] who is entitled to claim any input tax credits on the supplies acquired by the agent on behalf of the principal.