14 October 2016 Interpretation 170549

ACo and BCo, which were co-tenants of a property in construction held through a Nominee made a s. 273 election in year X + 2 designating ACo as the operator, and describing the JV activities as being the development and construction of real property. Their co-tenancy agreement was entered into in Year X and their agency agreement with the Nominee was entered into in Year X + 2. The agency agreement provided that the Nominee was the authorized agent of the co-owners for the claiming of input tax credits, and such claims were made for the period of administrative tolerance described in Notice 284.

CRA addressed whether ACo could account for the real estate sales as the designated operator. After first stating that "The CRA will generally apply the criteria expressed in the decision in Westcan Malting ... which provided several indicia for joint ventures," CRA concluded that “The co-tenancy arrangement was, therefore, eligible to make the section 273 election,” Before so concluding, CRA stated:

For the purposes of this discussion we are considering this co-tenancy agreement to be a joint venture at law.

ACo and BCo, which were co-tenants of a property in construction held through a Nominee made a s. 273 election in year X + 2 designating ACo as the operator. At the same time as making this election ACo and BCo also signed an agency agreement in which Nominee was designated as the agent of ACo and BCo and which provided that the Nominee was the authorized agent and representative of ACo and BCo including for the claiming of input tax credits – and the Nominee made such claims prior to the end of the period of administrative tolerance expressed in GST/HST Notice 284.

Before dealing with the ITC claims of the Nominee, CRA stated:

The Nominee is registered for the GST/HST….These comments are based on the understanding that the Nominee is engaged in commercial activities as a result of its agency activities on behalf of ACo and BCo and therefore is correctly registered for the GST/HST.

ACo and BCo, which were co-tenants of a property in construction held through a Nominee, signed an agency agreement in which Nominee was designated as the agent of ACo and BCo and which provided that the Nominee was the authorized agent and representative of ACo and BCo including for the claiming of input tax credits – and the Nominee made such claims prior to the end of the period of administrative tolerance expressed in GST/HST Notice 284. In rejecting this approach, CRA stated:

[I]t is the principal who is entitled to claim any input tax credits on the supplies acquired by the agent on behalf of the principal. … The statement in the agency agreement stating that the Nominee will claim ITCs on inputs purchased in its capacity as agent does not extinguish ACo and BCo’s potential right to claim the ITCs under the ETA, nor does it result in the Nominee being entitled to claim ITCs.

ACo and BCo, which were co-tenants of a property in construction held through a Nominee, signed an agency agreement in which Nominee was designated as the agent of ACo and BCo and which provided that the Nominee was the authorized agent and representative of ACo and BCo including for the claiming of input tax credits – and the Nominee made such claims prior to the end of the period of administrative tolerance expressed in GST/HST Notice 284. In rejecting this approach, CRA stated:

[I]t is the principal who is entitled to claim any input tax credits on the supplies acquired by the agent on behalf of the principal. … The statement in the agency agreement stating that the Nominee will claim ITCs on inputs purchased in its capacity as agent does not extinguish ACo and BCo’s potential right to claim the ITCs under the ETA, nor does it result in the Nominee being entitled to claim ITCs.

Respecting a proposed sale of the property by the Nominee, ACo and BCo would each be required to report their pro rata portion of the GST/HJST collectible on the sale in accordance with the same agency principles.