24 July 2007 GST/HST Interpretation 84447 - GST on Assignment Fee

Please note that the following document, although correct at the time of issue, may not represent the current position of the Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence.

Dear XXXXX:

Thank you for your letter XXXXX, your XXXXX and our telephone conversations concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the commission received on the sale of limited partnership units. We apologize for the delay in responding.

All legislative references are to the Excise Tax Act (ETA) and the regulations thereunder, unless otherwise specified.

Interpretation Requested

You would like to know if a limited partnership unit offered for sale under the offering memorandum provided for the purposes of this interpretation is an "interest in a partnership" as referred to in paragraph (d) of the definition of a "financial instrument" in subsection 123(1). If the limited partnership unit is a "financial instrument" as defined in subsection 123(1), you would like to know if the commission received for the sale of the limited partnership unit is consideration for an "arranging for" service as referred to in paragraph (l) of the definition of "financial service" in subsection 123(1).

Interpretation Given

Paragraph (d) of the definition of a "financial service" referred to in subsection 123(1) includes an "interest in a partnership or any right in respect of such an interest." Chapter 17.1 of the GST/HST Memoranda Series indicates that any interest, or any right in respect of an interest, in a partnership is a financial instrument. This interest or right represents a claim, title or legal share of an investment in a partnership and not in the underlying assets of the partnership.

Based on the information provided, we understand that the limited partnership is a valid limited partnership governed by the partnership law of XXXXX. In general, based on the documents provided, if the limited partnership is a valid partnership governed by the partnership laws of XXXXX, a limited partnership unit offered for sale under the offering memorandum is an "interest in a partnership" as referred to in paragraph (d) of the definition of "financial instrument" in subsection 123(1).

Paragraph (d) of the definition of a "financial service" referred to in subsection 123(1) includes the "transfer of ownership" of a "financial instrument." Therefore, the transfer of ownership of a financial instrument that is an interest in a partnership is a supply of a financial service.

The definition of a "financial service" as referred to in paragraph (1) of subsection 123(1) includes "the agreeing to provide, or arranging for" a service referred to in any of paragraphs (a) to (i) of the definition of a "financial service." Therefore, arranging for the transfer of ownership of a financial instrument that is an interest in a partnership is a supply of a financial service.

XXXXX.

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 at (613) 952-1512.

Yours truly,

Manjula Vethanayagam
Corporate Reorganizations Unit
Financial Institutions and Real Property Division
Excise and GST/HST Rulings Directorate

2007/07/10 — RITS 86536 — Elimination of the GST/HST Visitor Rebate Program