Administrative Policy
GST Memorandum 300-7 "Value of Supply" under "Non-Arm's Length Supplies"
General synopsis
21. Section 155 of the Act provides that where a supply of property or a service is made, between persons not dealing with each other at arm's length for consideration that is less than the fair market value of the property or service at the time the supply is made or for no consideration and the recipient of the supply is not a registrant who is acquiring the property or service for consumption, use or supply exclusively in the course of commercial activities, then:
(a) if no consideration is paid for the supply, the supply is deemed to be made for consideration, equal to the fair market value of the property or service at that time; and
(b) if consideration is paid for the supply, the value of the consideration is deemed to be equal to the fair market value of the property or service at that time.
22. The above rule does not apply where the recipient of the supply is a registrant who is acquiring the property or service for use, consumption, or supply exclusively in the course of the registrant's commercial activities.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Excise Tax Act - Section 153 - Subsection 153(2) | 146 |
Subsection 155(1)
Administrative Policy
23 March 2023 GST/HST Interpretation 245296 - Supply of real property by a government
A provincial government department (Department B) constructs a school and then transfers it for nominal consideration to another department within the same government (Department A) which is a school authority that will use the school primarily in exempt activities, although it is also registered because it engages in commercial activities including the supply of parking spaces.
CRA noted that s. 155 would apply if this transfer was a supply between persons not dealing with each other at arm’s length, but did not discuss whether a transfer of property between two departments within the same government could be such a transaction, other than to note that the related person rules “generally only speak to persons that are individuals or corporations and are generally contingent on whether one person has a controlling interest in the other person, or a related third party.” Since Department A was registered, it would be required to self-assess itself for the GST/HST on the supply.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Excise Tax Act - Section 126 - Subsection 126(1) | intra-government transaction/ related persons generally are individuals or corporations | 235 |
Subsection 155(2)
Administrative Policy
28 February 2019 CBA Roundtable, Q.3
CRA reportedly indicated in 1991 that, as an administrative concession, it would not apply s. 155(1) to transactions between corporations without share capital that form part of a national religious organization. See Taitz & Millar, ‘‘The GST and National Religious Organizations – Selected Issues”, GST & Commodity Tax (Carswell), Vol. V, No. 3, pp. 21-23 (April 1991), at p. 22., which states in respect of “Intercorporate Transactions” (in part):
… [A]s an administrative concession, Revenue Canada stated that it would not apply the anti-avoidance rule in section 155 to any of the transactions between the various corporations, in order that the transactions could be completed for nil or nominal consideration. This rule would normally apply as the corporations would not be considered to be dealing at arm’s length and the recipient may not be a registrant using the goods exclusively in commercial activity. Alternatively, the Department indicated that if the transactions were carried out at no greater than the “direct cost” to the vendor (as defined in Schedule V, Part VI), GST would not be applicable.
CRA indicated that it “has no administrative concession in place that limits the application of subsection 155(1),” and noted that after 1991, s. 155(2) was enacted, which now provides a detailed code for exceptions to the application of s. 155(1), so that:
For example, if a charity were to make a non-arm’s length supply of real property for no consideration that was exempt by way of section 5 of Part V.I of Schedule V to the ETA, subsection 155(1) would not apply to deem the supply to be made for consideration equal to the fair market value of the property.