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, 11th floor
320 Queen Street
Ottawa ON K1A 0L5
[Addressee]
Case Number: 198971
Business Number: […]
Dear [Client]:
Subject: GST/HST RULING
Input tax credit entitlements related to […][the Program]
Thank you for your fax of April 18, 2019, concerning the input tax credit entitlements related to […][the Program]. We apologize for the delay in providing this response.
The HST applies in the participating provinces at the following rates: 13% in Ontario; and 15% in New Brunswick, Newfoundland and Labrador, Nova Scotia and Prince Edward Island. The GST applies in the rest of Canada at the rate of 5%.
All legislative references are to the Excise Tax Act (ETA) unless otherwise specified.
STATEMENT OF FACTS
We understand the facts as follows:
1. […][The Corporation] was incorporated under […][relevant federal legislation](Footnote 1) on [mm/dd/yyyy].
2. The purpose of the Corporation is […]
3. The members of the Corporation are: […][Member #1], […].
4. The Corporation operates under a Unanimous Members’ Agreement dated [mm/dd/yyyy].
5. Under article […] of the Unanimous Members’ Agreement, […][Member #1 agrees to pay the Corporation’s expenses].
6. The Corporation contracted with […][X] to provide […][the Program]. […][The related Agreement] was signed [mm/dd/yyyy]. […][The Agreement] contains the following clauses:
[…][Clauses include information about the scope and deliverables provided under the Agreement. It also includes a clause stating the Corporation is the sole payor for performance under the Agreement.]
7. […][Details about the Program]
8. A sample of invoices from [X] was provided. The invoices [each] contain the following information: […][Invoice number; X’s name and address; the name and address of the addressee; the total amount being billed to that addressee; the amount of GST/HST included in the Invoice]
9. [Member #1] paid the above invoices from [X], including those addressed to the Corporation.
10. The Corporation registered for GST/HST purposes on [mm/dd/yyyy].
11. […][Information about Member #1] (Footnote 2).
12. […][More information about Member #1] (Footnote 3), and […].
13. [Member #1] registered for GST/HST purposes on [mm/dd/yyyy].
14. […].
15. You confirmed that there is no agency agreement between any of the parties.
RULING REQUESTED
You would like to know:
1. Is the service supplied by [X] under [the Agreement] a taxable supply?
2. Is [Member #1] entitled to claim input tax credits for the tax payable or paid without becoming payable in respect of supplies acquired for [the Program]?
3. Is the Corporation entitled to claim input tax credits for the tax payable or paid without becoming payable in respect of supplies acquired for [the Program]?
4. Can the Corporation backdate its registration for GST/HST purposes prior to [mm/dd/yyyy]?
We acknowledge your request for rulings on the above matters. However, as noted in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service, a ruling provides the Canada Revenue Agency’s (CRA’s) position on specific provisions of the legislation as these relate to a clearly defined fact situation of a particular person. As the circumstances are such that all of the pertinent facts cannot be established at this time (for example, if the Corporation can backdate its registration), we are unable to rule on these issues. Rather, we are providing general information which we trust will be of assistance.
RULING GIVEN
Based on the facts set out above, we rule that:
1. The service supplied by [X] to the Corporation under [the Agreement] is a single taxable supply. GST/HST should be charged on the sub-total of the invoice.
2. The Corporation is making a taxable supply to [Member #1]. The Corporation must charge GST/HST on the value of the consideration for the supply.
3. [a.] The Corporation may claim as an ITC the tax that became payable or was paid without becoming payable on the supply made by [X] during a reporting period during which the Corporation was a registrant, as it is an input into making taxable supplies for consideration.
3. [b.] [Member #1] is not entitled to input tax credits in respect of supplies made by [X], because [Member #1] is not the recipient of those supplies.
EXPLANATION
Supplies by [X]
Based on […][the Agreement], [X] is providing the Corporation a single supply of a service. As there are no exempting provisions that could apply, the supply is taxable and [X] should be charging GST/HST on the total cost of the service provided to the Corporation.
[…]. Because it is a single supply, tax should be charged on the full amount [i.e. the total cost of the service provided to the Corporation] even if some elements may be exempt of tax if they were supplied separately.
For more information on single and multiple supplies, see GST/HST Policy Statement P-077R2, Single and Multiple Supplies, available on CRA’s website.
Recipient of [X]’s supplies
The recipient of a supply is liable to pay the GST/HST owing on the supply. For GST/HST purposes a recipient includes “where consideration for the supply is payable under an agreement for the supply, the person who is liable under the agreement to pay that consideration”.
Paragraph […] of […][the Agreement] between the Corporation and [X] states that:
[…][The Corporation is the sole payor and will pay the X per the Agreement.]
The Corporation is liable to pay the consideration for the supply. Therefore, the Corporation is the recipient of the supplies by [X]. The tax on the supplies made under [the Agreement] is payable by the Corporation.
[Member #1] is not liable to pay the consideration for the supplies by [X] under [the Agreement] and is not the recipient of those supplies for GST/HST purposes.
Supplies by the Corporation
The Corporation is managing [the Program] by contracting [with X] for services. The Corporation’s purpose is […] as stated in its articles of incorporation. The Corporation has done this by contracting with [X] to carry out […][the Program]. The Corporation transacts with […][X] and reports to [Member #1]. Based on the information provided, the Corporation is supplying a “program management service” to [Member #1] for consideration.
The Corporation may be a non-profit organization for GST/HST purposes (see the section “Small supplier” for the definition) and a public service body. Certain supplies by public service bodies are exempt under the provisions of Schedule V. However, there are no sections of Schedule V that would apply to the above supply.
Therefore, the supply of the service supplied by the Corporation is taxable. The Corporation should charge and collect GST/HST on its supplies of program management services to [Member #1].
ITCs available to the Corporation
As the Corporation is the recipient of the supplies by [X], the Corporation may claim as an ITC the tax that became payable or was paid without becoming payable on this supply during a reporting period during which the Corporation was a registrant, provided the requirements to claim ITCs are met.
Based on the information provided, the Corporation was not a registrant (that is, neither registered for GST/HST purposes, nor required to be registered) prior to its date of registration. Therefore, the tax paid on the invoices provided that are dated prior to the date of registration is currently not available to the Corporation as an ITC.
If the Corporation is allowed to backdate its registration (see the Additional Information section), it may be entitled to claim ITCs for tax that became payable or was paid without becoming payable after the Corporation’s new effective date of registration (assuming the other requirements to claim ITCs are met).
See GST/HST Memorandum 8.4, Documentary Requirements for Claiming Input Tax Credits, for more information.
ITCs available to [Member #1]
Generally, a GST/HST registrant is eligible to claim ITCs to recover the GST/HST it pays to the extent that its purchases and expenses are inputs into making taxable supplies for consideration. No ITC is available where a purchase or an expense was incurred for the purpose of making exempt supplies, or for a purpose other than the making of supplies.
[Member #1] cannot claim as an ITC the tax paid on the invoices from [X] because it is not the recipient of the supplies made by [X].
ADDITIONAL INFORMATION
Backdating of registration
It is understood that the Corporation is currently registered for GST/HST. The effective date of registration is [mm/dd/yyyy].
The effective date of a person’s GST/HST registration depends on when they exceed the small supplier threshold (discussed below) or when they began collecting tax on its taxable supplies on a consistent basis.
[…]
Small supplier
In general, every person who makes a taxable supply in Canada in the course of a commercial activity (defined on the next page) engaged in by the person in Canada is required to be registered for the GST/HST, except where the person is a small supplier. A person is a small supplier if their total revenues and those of its associates from taxable supplies are $30,000 or less ($50,000 for public service bodies) in the last four consecutive calendar quarters and in any single calendar quarter.
For purposes of the GST/HST, the Corporation may be a non-profit organization, which is a public service body eligible for the $50,000 small supplier threshold. A non-profit organization is defined to mean “a person (other than an individual, an estate, a trust, a charity, a public institution, a municipality or a government) that was organized and is operated solely for a purpose other than profit, no part of the income of which is payable to, or otherwise available for the personal benefit of, any proprietor, member or shareholder thereof unless the proprietor, member or shareholder is a club, a society or an association the primary purpose and function of which is the promotion of amateur athletics in Canada”.
For GST/HST purposes, the definition of the term “commercial activity” includes the making of taxable supplies in the course of a business but specifically excludes the making of an exempt supply.
For more information, see GST/HST Memorandum 2.2, Small Suppliers, and Guide RC4022 under the heading “Small supplier”.
In accordance with the qualifications and guidelines set out in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service, the Canada Revenue Agency (CRA) is bound by the rulings given in this letter provided that: none of the issues discussed in the rulings are currently under audit, objection, or appeal; no future changes to the ETA, regulations or the CRA’s interpretative policy affect its validity; and all relevant facts and transactions have been fully and accurately disclosed. The interpretations given in this letter, including any additional information, is not a ruling and does not bind the CRA with respect to a particular situation. Future changes to the ETA, regulations, or the CRA's interpretative policy could affect the interpretation(s) or the additional information provided herein.
If you require clarification with respect to any of the issues discussed in this letter, […]. 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,
Desneiges Arbour
Charities and Non-profit Organizations Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate
FOOTNOTES
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2 […].
3 […].
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