5 September 2000 GST/HST Ruling HQR30466 - Application of GST/HST to Contribution Received from the

Dear XXXXX:

Thank you for your letter of March 8, 2000 (with attachments), concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to funds received by XXXXX XXXXX from the XXXXX.

Statement of Facts

Our understanding of the facts, the transactions, and the purpose of the transactions is as follows:

1) The XXXXX agreed to contribute XXXXX to XXXXX. (i.e., the "Firm").

2) XXXXX XXXXX[.]

3) According to the Contribution Agreement (i.e., the Agreement), XXXXX wishes to make the contribution to the Firm in order to assist it in establishing or improving a business collaboration in XXXXX, as well as to increase the developmental impact of this business collaboration in XXXXX.

4) XXXXX contribution was made under the condition that the firm would use the contribution solely to carry out the activity specified in order to lead or to facilitate the implementation of the Project.

5) XXXXX.

The Firm proposes to carry out a viability study for XXXXX. The viability study will investigate development of a joint venture between the Firm and a XXXXX partner company, XXXXX.

XXXXX would have three broad mandates:

a) To offer applied short term training programs to the public and private sectors;

b) To undertake consulting assignments and project management;

c) To sponsor applied research XXXXX.

6) XXXXX will allocate its contribution for expenses incurred and fully paid for by the Firm towards deliverables identified in XXXXX Agreement in carrying out the activity in accordance with the terms and conditions of the Agreement.

7) The Deliverables identified in XXXXX are: XXXXX.

8) XXXXX shall contribute XXXXX of the total amount of allowable costs for carrying out the activity to a maximum of XXXXX.

9) The Firm's financial participation would amount to XXXXX of the total amount of allowable costs incurred in carrying out the activity, XXXXX. The Firm shall also provide human, material and financial resources necessary to carry out the activity.

10) XXXXX will not make any advance payment. It will allocate its contribution solely for expenses incurred and fully paid by the Firm towards deliverables identified XXXXX of the Agreement.

11) The Firm authorizes XXXXX to compile and publish statistics based on the information contained in the documents comprising the Agreement and arising from its performance.

12) In any instances where the Firm publicizes the activity of the Project, it shall also mention XXXXX participation in carrying out the activity and its support in implementing the Project.

13) The Firm shall facilitate access for XXXXX authorized representatives to the activity site; its premises in Canada and those of its client or partner in XXXXX to evaluate the activity. XXXXX reserves the right to seek such access whenever it deems necessary during the activity and for five years following the final payment of the XXXXX contribution.

14) No provision of the Agreement has the effect of creating a partnership, joint venture or mandate relationship between the XXXXX and the Firm.

15) The Firm agrees to replay the contributions made by XXXXX in respect of the Project if the following circumstances are both present during the effective period of the Project:

a) XXXXX has paid a minimum of XXXXX under one or more contribution agreements to carry out an activity or activities in order to lead or facilitate implementation of the Project; and

b) the Firm, its affiliates or the Firm and its affiliates have realized Project revenue totalling a minimum of XXXXX.

Ruling Requested

Should the Firm charge GST/HST on amounts received from XXXXX in respect of this Project?

Ruling Given

Based on the facts set out above, we rule that amounts paid by XXXXX to the Firm are grants that are not consideration for a supply. Therefore, these payments are not subject to the GST/HST.

This ruling is subject to the general limitations and qualifications outlined in section 1.4 of Chapter 1 of the GST/HST Memoranda Series. We are bound by this ruling provided that none of the above issues is currently under audit, objection, or appeal; that there are no relevant changes in the future to the Excise Tax Act, or to our interpretative policy; and that you have fully described all necessary facts and transactions for which you requested a ruling.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 952-9590.

Yours truly,

Elaine Bonnah
Government Sectors Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate