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.
[Addressee]
Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 15th floor
320 Queen Street
Ottawa ON K1A 0L5
Case Number: 130278
December 13, 2011
Dear [Client]:
Subject:
GST/HST INTERPRETATION
Application of the deemed supply rules in section 172.1 to public service bodies
Thank you for your email of November 17, 2010, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to certain supplies made by public service bodies.
HST applies at the rate of 15% in Nova Scotia, 13% in Ontario, New Brunswick, and Newfoundland and Labrador, and 12% in British Columbia. GST applies at the rate of 5% in the remaining provinces and territories.
All legislative references are to the Excise Tax Act (ETA) unless otherwise specified.
We understand that [...] provides tax advice to clients who are both public service bodies and GST/HST registrants. These public service bodies make certain supplies which are exempt supplies pursuant to Parts V.1 and VI of Schedule V to the ETA and claim rebates pursuant to subsection 259(3) of the ETA. Some of these public service bodies have established pension plans for their employees.
In 2010, the ETA was amended to create a new rebate for pension entities of a pension plan. Generally, the new rules have the effect of deeming tax on certain pension-related expenses incurred by employers participating in a pension plan to have been paid by the relevant pension entity. The pension entity is then entitled to claim a rebate equal to 33% of the GST/HST it has actually paid, as well as the GST/HST "eligible amounts" that it is deemed to have paid.
Interpretation Requested
You wish us to confirm whether the direct cost exemption provisions in either section 5.1 of Part V.1 of Schedule V to the ETA, or section 6 of Part VI of Schedule V would "override" the deemed supply rule in subsection 172.1(5), thereby making the deemed taxable supply made pursuant to that subsection an exempt supply.
Interpretation Given
A registrant public service body that is a participating employer of a pension plan may acquire property or services for the purpose of making an exempt supply to a pension entity. In addition to the actual exempt supply of the property or service, the public service body is deemed, pursuant to subsection 172.1(5), to have made a taxable supply of the property or service (referred to as the specified resource) to the pension entity on the last day of the fiscal year of the public service body in which it acquired the specified resource. Notwithstanding that the actual supply of the specified resource may be an exempt supply, for the purposes of subsection 172.1(5), the public service body is deemed to have made a taxable supply of the specified resource or part thereof.
Detailed information about whether a person is a participating employer and when the deemed supply rules in subsection 172.1(5) apply can be found in GST/HST (Draft) Notice 257, GST/HST Rebate for Pension Entities.
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 the general pension rebate provisions discussed in this letter (other than Public Service Bodies and Government provisions), please call me directly at 613-957-8221. 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,
Kathryn Sigetich
Specialty Tax Unit
Financial Institutions and Real Property Division
Excise and GST/HST Rulings Directorate
UNCLASSIFIED
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