Company B transfers its co-ownership interest in a commercial rental property on a rollover basis to Company C, whose sole activity is to hold the property. Erroneously, Company C is not registered at the time of the transfer. However, a joint venture election appointing the other co-owner (Company A) as operator under s. 273 is made. Six months later, it is discovered that Company C was not registered for GST/HST purposes as at the transfer date, so that Company B should have collected the GST/HST on the transfer. Company B and C are part of a group which makes supplies in excess of the small supplier threshold.
a) Can Company C register for GST/HST given that an election under s. 273 deems the supplies made under the agreement to be made by the operator (Company A) and not the participant (Company C)?
b) If Company C can register, is it possible to apply for retroactive registration back to the date of the transfer? ...
d) If an election under s. 273(1) were not made between Company A and Company C, would Company C be entitled to register for GST/HST retroactively back to the transfer date given that it is making supplies by way of lease of commercial property and that it is not a small supplier?
CRA responded:
a) ...If Company C makes a taxable supply in Canada in the course of a commercial activity engaged by it in Canada, otherwise than as a small supplier, it will be required to register for GST/HST purposes. However, as a result of making the joint venture election, Company C will not include consideration from taxable supplies deemed to have been supplied by Company A on its behalf in the course of the joint venture activities when determining if it has exceeded the small supplier threshold under section 148 of the ETA unless Company A is an associate. If Company C is not required to be registered but undertakes an activity that is not part of the joint venture agreement, it may be eligible to voluntarily register if the activity is a commercial activity engaged by it in Canada. b) Retroactive registration back to the date of the transfer of the property would depend on whether Company C was required to be registered at that time under subsection 240(1) of the ETA. If Company C is currently engaged in a commercial activity in Canada as a small supplier it may voluntarily register and the date of registration will generally be the date that we receive the application for registration. d) Generally, if an election under subsection 273(1) of the ETA was not made by Company C and Company A, and Company C was making taxable supplies in Canada of real property by way of lease, then it would have been required to be register under subsection 240(1) of the ETA at the time it first made a taxable supply in Canada otherwise than as a small supplier. It will be a question of fact whether, in this situation, Company C was required to be registered at the time of the transfer of the real property.