Please note that the following document, although correct at the time of issue, may not represent the current position of the Canada Revenue Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence du revenu du Canada.
Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 15th floor
320 Queen Street
Ottawa ON K1A 0L5
[Addressee]
Case Number: 152393
July 12, 2013
Dear [Client]:
Subject: GST/HST INTERPRETATION
Application of section 273 to joint ventures
Thank you for your [correspondence] of [mm/dd], 2013, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to a situation involving two joint ventures.
The HST applies in the participating provinces at the following rates: 13% in Ontario, New Brunswick and Newfoundland and Labrador, 14% in Prince Edward Island (effective April 1, 2013) and 15% in Nova Scotia. The GST applies in the rest of Canada at the rate of 5%.
Effective April 1, 2013, the 12% HST in British Columbia has been replaced by the 5% GST and a provincial sales tax.
All legislative references are to the Excise Tax Act (ETA) unless otherwise specified.
Interpretation Requested
You have asked us to consider the following scenario involving two separate joint ventures and would like confirmation that a joint venture (JV-1) can make an election under section 273.
• Six persons enter into JV-1 to develop real property. JV-1 incurs certain consulting and other expenses related to the development of the real property. It is understood that JV-1 is engaged in activities that qualify for purposes of the Joint Ventures (GST/HST) Regulations (the Regulations).
• No election under section 273 has been made. At present the participants each claim a proportionate share of the input tax credits.
• Subsequently, the participants in JV-1 form a new joint venture (JV-2) relating to the development of real property with a seventh person. It is understood that JV-2 is engaged in activities that qualify for purposes of the Regulations.
• The participants in JV-1 have a 50% interest in JV-2. The participants in JV-2 have appointed an operator for the joint venture and have made an election to account for the GST/HST under section 273.
Interpretation Given
Each joint venture must be separate and distinct in spite of the fact that they may be involved in a related activity. There is no prohibition in the ETA against more than one joint venture engaging in prescribed activities related to the same property. If JV-1 continues to be engaged in a prescribed activity in its own right following the creation of JV-2, JV-1 may be eligible to make an election under subsection 273(1).
As a joint venture is not a person for GST/HST purposes, a joint venture cannot be a GST/HST registrant and, therefore, it cannot be the operator for another joint venture. Subsection 273(1) provides at the outset that the operator must be a GST/HST registrant. As a result, JV-1 cannot be the operator of JV-2. However, there is nothing to preclude those persons involved in one joint venture from participating in another joint venture. In the case at hand the six participants in JV-1 have a combined 50% interest in JV-2. However, when the election under section 273 in respect of JV-2 is entered into, the participants of JV-1 must each sign the election form as a participant in JV-2 as well as the seventh person.
The foregoing comments represent our general views with respect to the subject matter of your request. These comments are not rulings and, in accordance with the guidelines set out in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service, do not bind the Canada Revenue Agency with respect to a particular situation. Future changes to the ETA, regulations, or our interpretative policy could affect this interpretation.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-952-9585. Should you have additional questions on the interpretation and application of GST/HST, please contact a GST/HST Rulings officer at 1-800-959-8287.
Yours truly,
Ben Boboski
Goods Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate
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