Section 168 - When Tax Payable

Subsection 168(1)

See Also

Club Intrawest v. The Queen, 2016 TCC 149, varied 2017 FCA 151

GST collectible based on invoicing times
varied on other grounds

The Appellant charged annual time share maintenance fees to its individual members in October of each year, but charged its two members who were corporate developers on a monthly basis. In assessing the Appellant for various October reporting periods in respect of GST that the Appellant had not charged on the maintenance fees, CRA included the annual amount of the fees charged to the developers. D’Arcy J found that this method did not comply with s. 168(1).

Locations of other summaries Wordcount
Tax Topics - General Concepts - Agency annual fees charged by non-share corporation to its members were not reimbursements for expenses incurred by it as their agent 377
Tax Topics - Excise Tax Act - Section 142 - Subsection 142(1) - Paragraph 142(1)(d) s. 142(1)(d) only applies to a supply exclusively re real property 632
Tax Topics - Excise Tax Act - Section 123 - Subsection 123(1) - Service payment of condo operating expenses was a service 211
Tax Topics - Excise Tax Act - Section 123 - Subsection 123(1) - Supply single supply of covering all time share operating costs 172
Tax Topics - Excise Tax Act - Section 306.1 - Subsection 306.1(1) objecting to quantum was sufficient particularity 177
Tax Topics - General Concepts - Ownership beneficial owner did not transfer property risk 183
Tax Topics - General Concepts - Evidence foreign law assumed the same 101

Subsection 168(2) - Partial Consideration

Administrative Policy

23 January 2002 Ruling 36706 [rent prepayment accelerates tax payable date]

rent prepayment accelerates tax payable date

Respecting rent prepayments made under a capital lease of equipment to a registered lessor, CRA stated:

Subsection 168(2)...states that where consideration for a taxable supply is paid or becomes due on more than one day, the tax in respect of the supply is payable on each day that is the earlier of the day a part of the consideration is paid and the day that part becomes due and the tax that is payable on each such day shall be calculated on the value of the part of the consideration that is paid or becomes due, as the case may be, on that day. Consequently, tax is payable upon the prepaid rent at the time it is paid and tax becomes payable on the unpaid lease payments as they fall due under the agreement.

GST M 300-6-7 "Partial Payments"

Subsection 168(3) - Supply Completed

Paragraph 168(3)(c)


John Tobin, "Infrastructure and P3 Projects", 2017 Conference Report (Canadian Tax Foundation), 10:1-31

Meaning of substantially complete in the construction industry (p. 10:6)

[T]he term “substantially complete" is therefore an undefined term that should take its meaning from its normal commercial use in the construction industry. The IO [Infrastructure Ontario] template documents essentially define substantial completion as the point when the facility has been completed in accordance with the project agreement and all requirements other than minor deficiencies have been satisfied. As used in the construction industry, it does not mean the time when a building is 90 percent complete, but rather the time when it is fully complete and capable of lawful occupancy, subject to minor deficiencies.

Handling of HST on future due dates if HST has already been paid under s. 168(3)(c) (p. 10:7)

[I]f the substantial completion rule has applied and tax has been remitted by Projectco without having been paid by the proponent, the ETA does not address how to deal with future tax that is collected from the proponent when actual payments are due and paid. This is effectively a prepayment of the HST so that, when a final invoice is rendered, a notation should be made on the invoice indicating that HST has previously been paid under paragraph 168(3)(c)…

Words and Phrases
substantially complete

Sheila Wisner, "P3 Projects – The Real Issues", Canadian GST/HST Monitor, Number 304, January 2014, p. 1

In a typical P3 arrangement, the final construction payment often takes place at the time of "substantial completion". Given the significant dollar values at play (often in the millions and tens of millions) at the point of substantial completion, there is a significant cash flow cost to accelerating the payment of tax, if required under the undue delay rule. For this reason, it is critical to identify when the payment for the construction takes place, and when substantial completion takes place….

Subsection 168(6) - Value Not Ascertainable


Rockport Developments Inc. v. The Queen, 2009 TCC 180

consideration was not ascertained until contractual dispute resolved

The appellants were subcontractors of an affiliated company (“Exelon”) which, in turn, had a contract for the performance of construction work with a third party (“Enbridge”). Angers J found that for purposes s. 168(6) the consideration receivable bhy the appellans for their work did not become ascertainable for so long as a significant contractual dispute with Enbridge was resolved, stating (at para. 51) that:

[A]lthough invoices may have been tendered to Exelon, the exact value of the consideration had not been determined prior to this second [settlement] agreement. The value of the consideration was in dispute from the time the requests for payment were made and the invoices were issued. It was therefore impossible to establish the tax owing until the exact amount of the consideration was ascertained, which is what the settlement agreement did.

Words and Phrases

See Also

Revenue and Customs Commissioners v. Findmypast Ltd., [2017] CSIH 59

precise services to be purchased with credits were not yet identified

The European VAT rules had a prepayment rule broadly similar to ETA s. 152(1), which Lord Drummond Young noted (at para. 46) had been interpreted by the European Court of Justice so as to only apply where there is “precise identification of the goods and services that are to be supplied.” He found that this test was not satisfied for a genealogical website, whose customers would purchase credits that could be applied during specified time periods to download historical records (e.g., birth and death records) whose number was determined in accordance with parameters that were subject to change by the site – and with a significant number of the credits never being applied in the periods in question.

Since the prepayment rule did not apply, there was only a taxable supply of services when the credits were applied by downloading particular records rather than at the time of the prior purchase of the credits.

Locations of other summaries Wordcount
Tax Topics - General Concepts - Stare Decisis prior cases reviewed for principles rather than similar facts 96
Tax Topics - Excise Tax Act - Section 123 - Subsection 123(1) - Service supply of genealogical records by website in satisfaction of previously purchased credits was a service 420
Tax Topics - Excise Tax Act - Section 152 - Subsection 152(1) the time of a supply of services was accelerated by prepayment only where the services were precisely identifiable 829

Administrative Policy

8 March 2018 CBA Commodity Taxes Roundtable, Q.4

monthly amounts payable after completion of P3 project are deferred under s. 168(6) if unascertainable

How is s. 168 applied where the project agreements for P3 projects do not specify particular amounts as payable in consideration for the construction service?

After noting that “P3 agreements may provide for monthly service payments that are payable over the course of decades, and that typically include an amount that is consideration for the supply of the construction service” and that, as the agreements often have a payment formula that “often relies on a fixed dollar amount as a base, but then applies one or more variable factors or amounts that cannot be determined until the time the monthly service payment is calculated and becomes payable,” thereby raising the question as to the applicability of s. 168(6), CRA stated:

Generally, paragraph 168(3)(c) would not apply with respect to the part of the monthly service payment that is consideration for the supply of the construction service where that part of the consideration is not ascertainable. …

In other cases, it is possible that the unknown variable factors and amounts have no impact on calculating the part of the monthly service payment that is consideration for the supply of the construction service. Instead, it is possible that said unknown variable factors and amounts may be adjustments to the consideration (or part) or relate to amounts that are not in respect of the supply of the construction service. Generally, if this is the case, the consideration (or part) that is the consideration for the supply of the construction service is ascertainable and that GST/HST is payable on

GST M 300-6-15 "Value Not Ascertainable"

Examples of application of s. 168(6) to variable component of consideration

12. For example, a person makes quilts and sells them to a store for consideration of $50 per quilt plus 10 per cent of the amount for which the store sells the quilt. Under the written agreement between the parties, both amounts will be payable when the store sells the quilt. If a quilt is sold and delivered to the store on March 1 but remains unsold by the store at the end of April, tax will be payable on $50 at that time. However, the tax on the value of the consideration which is the percentage of the sale made by the store cannot be ascertained until the quilt has been sold by the store. Therefore, by virtue of subsection 168(6) of the Act, tax on this amount would be payable when the quilt is sold. ...

18. For example, where the consideration for a commercial building is a fixed amount plus a percentage of the rental income generated by the building over the six months following the transfer of title and ownership is transferred to the recipient on June 11, tax would be payable on the ascertainable amount (the fixed price) on that day. Tax on the balance of the consideration (the rental income) would become payable when the amount became ascertainable.

Subsection 168(7)


Duque v. Canada, 2020 FCA 73

construction lien holdbacks excluded from taxable consideration

Webb JA confirmed that a director who was assessed under ETA s. 323 for failure of the corporation to remit GST can challenge the correctness of the assessment of the corporation for the unpaid GST, even where it had failed to do so. Here, the director was able to establish that the taxable billings assessed by CRA had incorrectly included construction lien holdback amounts, even though ETA s. 168(7) deemed there to be no GST payable on the holdback amounts until they became payable. Webb JA stated (at para. 49):

Subsection 168(7) of the ETA provides that, when an amount is withheld pursuant to the act of a legislature of a province pending full and satisfactory performance of the supply, GST on the holdback amount is payable on the earlier of the day that the holdback amount is paid or the day that the holdback amount is payable.

Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Section 323 - Subsection 323(1) director able to establish that CRA had incorrectly included holdbacks in corporate assessment 182

Subsection 168(8) - Combined Supply

Administrative Policy

GST M 300-6-16 "Combined Supplies"

Operates as a timing rule

11. These rules operate to ensure that tax on the whole consideration for the combined supply is payable on one day. For example, where there is a supply of personal property (e.g., a sale of a dishwasher) as part of a supply-and-install contract and the value of the dishwasher is greater than the value of the installation service, tax will be payable pursuant to the timing rules in respect of supplies by way of sale of tangible personal property.

Subsection 168(9) - Deposits

See Also

Dow & Duggan Log Homes International (1993) Limited v. The Queen, 2019 TCC 280

meaning of deposit adopted

Wong J quoted with approval the comments in Tendances et Concepts as to what was a deposit, but then found that, given the lack of probative documentary evidence provided by the taxpayer, none of the amounts assessed by the Minister had been established to be deposits.

Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Schedules - Schedule VI - Part V - Section 12 CRA does not have the discretion to stipulate the documentary requirements for the s. 12 zero-rating 295

International Hi-tech Industries Inc. v. The Queen, 2018 TCC 240

possible deposits subsequently may have been applied by agreement as payments on account

The auditing firm (“DMCL”) for the appellant (“IHI”) obtained the agreement of IHI, as evidenced by a December 7, 2007 email sent by DMCL to IHI, to fix the audit fee at a level higher than that originally estimated. In the meantime, some payments by IHI (including an initial “retainer” of $25,000) had been made in round figures, without any indication that GST at 6% had been added. About six months later, DMCL prepared an invoice which added GST at the post-2007 rate of 5%.

After noting that essentially noting (at para. 45) that “the Tendances et Concepts case may not carry as much weight now, given that it was based on a previous French version of the ETA, in which arrhes was used as the French equivalent for the English deposit” and that (notwithstanding North Shore Power) IHI’s making of interim payments could have been consistent with their being deposits, Sommerfeldt J stated (at para. 54):

[T]he payment structure set out in [the] email of December 7, 2007 has a broad similarity to the payment structure in North Shore Power. Accordingly, it may be arguable that, by December 11, 2007, the three payments made by IHI to DMCL may have been contractually characterized or recharacterized as payments on account of DMCL’s fee.

Words and Phrases

North Shore Power Group Inc. v. The Queen, 2017 TCC 1, rev'd 2018 FCA 9

"deposit" for work being performed was not a deposit

A supplier (Menova) received substantial down payments (described as “deposits”) respecting its sale of solar array projects, and then became insolvent before earning more than a fraction of the down payments. Menova then issued “credit memos” to the business customer (North Shore) for the value of the unperformed work.

CRA’s position was that the HST included in the credit memos was required to be added back to the net tax of North Shore (thereby effectively reversing the input tax credits previously claimed by North Shore). Before accepting this position, Bocock J first noted that the down payments were not deposits, stating (at para. 24):

There was no payment of earnest money to guarantee the completion of the contracts. The sizeable partial payments were meant to fund the considerable costs connected with the solar panels. The Contracts, although describing the moneys paid as deposits were nonetheless structured as partial payments, half due on execution and the balance due on delivery. …

Words and Phrases
Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Section 232 - Subsection 232(3) HST imposed on a customer through the issuance to it of a credit note by an insolvent supplier 298
Tax Topics - Excise Tax Act - Section 231 - Subsection 231(1) only supplier can claim the credit 186

Tendances et Concepts Inc. c. La Reine, 2011 TCC 141 (Informal Procedure)

down payment not a deposit

The registrant was in the business of manufacturing kitchen and bathroom furniture. Its usual business terms required customers to pay 30% up front, 60% on completion and 10% on delivery. The registrant contended that the 30% payment was a deposit, and therefore exempt from GST collection.

Hogan J. reviewed at length the distinction between a deposit and a down payment in common law, and the related distinction between an arrhes and an accompte in Quebec civil law, and concluded (at paras. 45-46):

In my view, a "deposit" or "arrhes," within the meaning of the Act, is:

  • security for the performance of the contract;
  • retained by the vendor in the case of default by the purchaser, contrary to a down payment;
  • refundable or not;
  • subsequently applied as a reduction of the sale price;
  • an amount on request prior to entering the contract;
  • is akin to a means of withdrawal;
  • is akin to a penalty clause or prepaid liquidated damages; and
  • a set, invariable, minimum amount.

In order to determine whether an amount is a "deposit" or "arrhes" within the meaning of the Act, the following questions must be posed:

  • Does the contract specify the nature of the first payment?
  • Is the amount intended to secure performance of an obligation?
  • Is the amount paid prior to or after the signing of the contract?
  • Does a penalty clause already exist?
  • Has the tax been calculated on the amount requested?
  • Does it represent a relatively small or substantial amount compared to the total value of the contract?
  • Have the parties set any terms respecting exercising their right of withdrawal?

Hogan J. found that the 30% was a down payment. The registrant's contracts had a separate penalty clause for early termination, which were to vary based on the costs the registrant incurred before the termination, and did not stipulate that on breach the deposit represented liquidated damages. Moreover, the registrant collected only 30% of the GST-exclusive contract price, whereas a deposit when forfeited would have been required by s. 182 to include the GST collectible on that amount.

Words and Phrases
down payment deposit

Customs and Excise Commissioners v. Moonrakers Guest House Ltd., [1992] BTC 5077 (Q.B.D.)

Deposits received by a guest house were subject to VAT by virtue of s. 5(1) of the Value Added Tax Act 1983 (which provided that where a person receives a payment in respect of a supply it shall, to the extent of the payment, be treated as taking place at the time the payment is received), based on a finding that the deposit became the property of the guest house at the time of receipt.

Administrative Policy

GST M 300-6-8 "Deposits"