Section 221

Subsection 221(1) - Collection of Tax

Cases

Rice v. ARQ, 2016 QCCA 666

status Indians were required to collect sales tax on sales to non-Indians

Status (Mohawk) Indians selling gasoline on the Kahnawake Reserve to non-Indian purchasers were not exempted by s. 87 of the Indian Act from the requirement to collect and remit GST, QST and Quebec fuel tax, given that these taxes were designed to be borne by the ultimate purchasers and the retailers’ obligations were merely those of statutory collection agents. (Various constitutional arguments also were rejected by Hesler CJQ.)

Locations of other summaries Wordcount
Tax Topics - Other Legislation/Constitution - Charter (Constitution Act, 1982) - Section 35 - Subsection 35(1) s. 35 did not accord an unfettered right to trade 131
Tax Topics - Other Legislation/Constitution - Charter (Constitution Act, 1982) - Section 25 no unfettered right of Indians to trade 151
Tax Topics - Other Legislation/Constitution - Federal - Indian Act - Section 87 status Indians were required to collect sales tax on sales to non-Indians 283
Tax Topics - Other Legislation/Constitution - Constitution Act, 1867 - Section 91 - Subsection 91(24) statutory verification obligations did not represent an ultra vires administrative burden 157

Administrative Policy

25 February 2016 CBA Roundtable, Q. 13

continued filing of nil returns after non-voluntary registration

A U.S. based company took the position that it was not required to be registered for GST purposes, but after a CRA review, CRA unilaterally registered the company and issued a notice of assessment. The company filed a notice of objection. Will CRA accept the filing of nil returns during the period between the assessment and the final decision (with adjusted returns filed should the assessment be maintained) or must the involuntary registrant remit GST on its supplies? CRA responded:

There is no administrative tolerance to allow a person to disregard the requirements for filing and remitting tax…. Under subsection 221(1)…, every person who makes a taxable supply is generally required to collect any tax that is payable by the recipient of the supply and file a GST/HST return under subsection 238(1)….

Where a person fails to file a return or remit amounts as required by legislation, interest and penalties will be assessed in respect of such failures. In addition, if a person knowingly makes false statements or omissions in a return, penalties described in section 285… may be applicable.

…If a person chooses to file nil returns in situations where tax is required to be collected and remitted, the CRA can apply… the ETA to address non-compliance.

25 February 2014 Memo 155876

tax charged contrary to s. 221(2) did not eliminate s. 228(4) liability

The Corporation, which was registered, purchased a hotel through two unregistered nominees and was charged and paid GST, and claimed an ITC therefor. On audit, CRA adjusted the return to add tax payable under s. 228(4) and told the Corporation to apply under s. 261 for tax paid in error.

After noting that the Corporation was required to self-assess under s. 228(4) and that the sellers were relieved under s. 221(2) of their obligation to collect GST, Headquarters found that the Corporation was eligible for the rebate as tax paid in error.

Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Section 228 - Subsection 228(4) tax charged contrary to s. 221(2) did not eliminate s. 228(4) liability 89

CBAO National Commodity Tax, Customs and Trade Section – 2013 GST/HST Questions for Revenue Canada, Q. 18. ("Pro-rating Remittances of GST/HST")

available with membership password at http://www.cba.org/CBA/sections_NSCTS/main/GST_HST.aspx

On the 15th of the month, Aco sell a commercial rental property, on which it had collected the monthly rents at the beginning of the month, to Bco. After noting that under s. 136.1(1), Aco was required to account for the supply of property made by it, CRA went on to state:

If in fact Bco is making supplies in the half-month period for no consideration payable by the lessee or the recipient, then Bco is not required to collect GST/HST from the lessee or recipient unless the non-arm's length rules under [s.] 155(1).

GST M 500-2 "Returns and Payments"

Listing in Appendices of other amounts required to be collected, amounts required to be added to net tax, and other deductions from net tax.

Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Section 238 - Subsection 238(1) 0

Subsection 221(2) - Exception

See Also

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

unregistered purchaser

As a sale of lots to an unregistered corporate purchaser by a corporate vendor was not exempted under Sched. V, Pt. I, s. 9(2), the vendor was properly assessed for failure to collect GST.

Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Section 152 - Subsection 152(1) - Paragraph 152(1)(b) departure of supplier from its usual prompt invoicing 230
Tax Topics - Excise Tax Act - Regulations - Input Tax Credit Information (GST/HST) Regulations - Section 3 - Paragraph 3(a) - Subparagraph 3(a)(ii) invoice not issued if not sent 220
Tax Topics - Excise Tax Act - Section 169 - Subsection 169(1) no contractual nexus between ITC claimant and supplier 245
Tax Topics - Excise Tax Act - Section 168 - Subsection 168(9) possible deposits subsequently may have been applied by agreement as payments on account 205
Tax Topics - Excise Tax Act - Schedules - Schedule V - Part I - Section 9 - Subsection 9(2) sale by corporation not exempted 28

2252493 Ontario Limited v. The Queen, 2017 TCC 20

no relief from charging HST on a real estate sale where the purchaser’s bare trustee capacity was undisclosed

The agreement of purchase and sale (APS) for the sale of a commercial property by the appellant named a corporation (“Mayling”), which was not registered for HST purposes, as the Buyer. At closing, the appellant was directed to transfer title to a corporation (“840 Holdings”) which was registered for HST purposes (although its registration was subsequently revoked at its request effective before the closing date). The appellant was subsequently advised that 840 Holdings had acquired the property as bare trustee or agent for two equal beneficial owners, who were registered (the “Beneficial Owners”). The Beneficial Owners had self-assessed themselves for the HST on the purchase.

In finding that the recipient of the supply of the property was Mayling, so that the appellant was liable for failure to have charged HST given Mayling’s unregistered status, Bocock J stated (at paras 32, 34, 36-37):

… Factually, neither of the purported agent or bare trustee nor principal or Beneficial Owner existed when the APS was executed. …

At law, Mayling was not relieved of its obligations under the APS by any identifiable document. ...

…[C]ases where a bare trust or agency have been found to exist, and are interpreted by CRA to exist, require some documentary or evidential disclosure of the various parties to the supplier at the time of supply. …

…[N]one of…the alleged Beneficial Owners and principals, nor 840 Holdings, the alleged trustee or agent, executed the APS, was described in such capacity to the Appellant or was reliably described in other contemporaneous collateral documents as such. …

Bocock J concluded (at para 40):

Mayling remained the purchaser until closing and, as such, obligated to pay the consideration. … Therefore both the ETA and APS required the Appellant to collect and remit the HST. It did not.

Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Section 123 - Subsection 123(1) - Recipient named purchaser rather than alleged beneficial purchasers was the recipient of real estate sale 116

Franklin Estates Inc. v. The Queen, [1994] GSTC 64 (TCC)

Bonner TCJ found that where by virtue of s. 221(2)(b) a vendor of real estate was not required to collect GST from the appellant, the vendor was not the Crown's agent to receive the tax and, therefore, payment by the purchaser of GST to the vendor did not relieve the purchaser of its obligation to remit the same amount of cash by virtue of s. 228(4).

Lubbock Fine & Co. v Commissioners of Customs and Excise, [1993] EUECJ C-63/92, [1994] 3 All ER 705

tenant's surrender of leasehold qualified as a letting of immovable property
Quoted with approval in 11634-2

A U.K. firm of chartered accountants received a lump sum from its landlord in consideration for surrendering the residue of a lease to the landlord. In finding that the surrender came within a VAT exemption for the “letting of immovable property,” the Court stated (at paras. 8-10):

The essence of the first question put by the national court is whether the term "letting of immovable property" used in Article 13B(b) of the Sixth Directive to define an exempt transaction covers the case where a tenant, for consideration, surrenders his lease and returns the immovable property to his immediate landlord.

Where a given transaction, such as the letting of immovable property, which would be taxed on the basis of the rents paid, falls within the scope of an exemption provided for by the Sixth Directive, a change in the contractual relationship, such as termination of the lease for consideration, must also be regarded as falling within the scope of that exemption.

Consequently, the reply to be given to the national court is that the term "letting of immovable property" used in Article 13B(b) of the Sixth Directive to define an exempt transaction covers the case where a tenant surrenders his lease and returns the immovable property to his immediate landlord.

Administrative Policy

23 March 2017 CBA Commodity Taxes Roundtable, Q.20

s. 221(2) exclusion can apply to an interest in a purchase agreement

Mr. X has agreed to purchase a newly-constructed home from its builder and is subsequently paid $100,000 by the builder for the purchase agreement’s cancellation, does s. 221(2) apply to relieve the builder from having to pay GST/HST on the $100,000 if Mr. X is registered? After first noting that Mr. X would not be a builder if he had agreed to purchase the new residence for his own personal use (in which case, the question would be moot), CRA went on to state::

If Mr. X, however, is considered to be a builder in his own right (for example, at the time of entering into the agreement of purchase and sale, he did so for the primary purpose of selling the interest or the house itself), tax would be payable by the Vendor calculated on the value of consideration ($100,000) for the supply. If Mr. X is a non-resident or is resident by reason only of subsection 132(2), or the Vendor in the scenario is GST/HST registered, pursuant to paragraph 221(2)(a) or (b) respectively, Mr. X would be relieved of his obligation to collect the tax payable.

Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Schedules - Schedule V - Part I - Section 2 no GST/HST should be charged on a cancellation fee paid by a new home builder to the purchaser 298
Tax Topics - Excise Tax Act - Section 123 - Subsection 123(1) - Builder individual is a builder on assignment of new house purchase contract if original purpose was to resell house 123
Tax Topics - Excise Tax Act - Section 123 - Subsection 123(1) - Real Property purchase contract was real property 106

Interpretation Revenu Québec TVQ. 16-30/R1 "Nominee Agreements" 9 December 2011

7. A nominee who fails to disclose, to the supplier of an immovable, the fact that the nominee is a mandatary is acting in the nominee's own name and becomes personally bound to the supplier to pay the consideration for the supply (article 2157 C.C.Q.). The nominee thus becomes a recipient of the supply, within the meaning of section 1 of the AQST, along with the mandator (article 2160 C.C.Q.).

31 October 2011 Ruling Case No. 136392

The granting of easements in consideration for a single lump sum payment was ruled to be a supply of real property by way of sale even though under the governing law the easements could not be granted for an unlimited term.

3 November 2009 HQ Letter No. 109447

the surrender of a lease to the landlord qualified as a demise of real property, so that s. 221(2)(b) and 228(4) applied to the consideration therefor paid by the landlord.

Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Section 123 - Subsection 123(1) - Sale surrender of leasehold interest was sale of real property 29

GST/HST Memorandum 19.5 “Land and Associated Real Property” October 2001

Option grant a sale of real property

66. …[A] person may grant another person an option to purchase or lease property. The granting of such rights gives the grantee an equitable interest in the property. The consideration paid for the actual grant of the interest may be considered as being in respect of the sale of the interest but only to the extent such consideration is not paid for the actual use of the underlying property.