Section 225 - Remittance of Tax

Administrative Policy

Excise and GST/HST News - No. 97 17 November 2015

Joint tax adjustment transfer election amounts

Where an investment plan manager that is located outside Quebec and is not an SLFI for either GST/HST or QST purposes filed its GST/HST return(s) with the CRA and included QST amounts that were transferred to it by an SLFI investment plan as a result of a tax adjustment transfer election in its net tax calculation for GST/HST purposes, the plan manager would be required to correct its GST/HST return(s).

Subsection 225(1) - Net Tax

Cases

Canada v. Gastown Actors' Studio Ltd., docket A-663-99 (FCA)

In finding that the respondent was responsible for remitting any GST it had collected with respect to its exempt supply of full-time vocational training, Sharlow J.A. stated:

"... a taxpayer who has in fact collected GST, whether for services that are taxable or for services that are later determined to be exempt supplies, must remit those amounts as liable to be assessed if they are not remitted."

Administrative Policy

8 March 2018 CBA Commodity Tax Roundtable. Q.19

no adoption of ARQ’s fast track procedure for offsetting remittance obligations against ITCs

Under CRA’s previous “fast track” ITC procedure, a registered recipient potentially could obtain an ITC directly from CRA in order to remit the GST/HST to the supplier, without having to wait for its refund. Although CRA suspended this procedure, Revenu Québec accepts “fast track” requests where:

  • the requested refund is over $500,000 of net tax;
  • the GST/HST and QST filing frequency of the recipient and the supplier is monthly;
  • there are no late returns or payments in any tax account respecting the recipient; and
  • there is no agency relationship between the recipient and supplier.

Will CRA reinstate its “fast track” procedures? CRA responded:

The CRA had, until a few years ago, an informal process, however, no requests were received and the service was discontinued. At this time, there is no intention to put in place an administrative policy in respect of “Fast track” procedures for ITCs. In our current risk assessment model, high dollar claims are highlighted and prioritized for screening thus alleviating the need for a supplementary fast track process.

3 April 2017 Interpretation 164742

litigant receiving a court award of costs plus GST/HST is not required to report such tax

CRA considered that as court awards of costs (including any award on a solicitor and client scale) “do not constitute consideration for a taxable supply or a service and do not form part of the consideration paid for the lawyer’s services of the winning party,” that party is not required to account for any GST or HST in computing its net tax for the reporting period in question, even where the award of such costs included a GST or HST amount.

Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Section 123 - Subsection 123(1) - Supply court costs award not consideration for a supply 278
Tax Topics - Excise Tax Act - Section 225 - Subsection 225(3.1) court award of costs plus GST/HST did not affect ability to claim ITCs for legal expenses 189

26 February 2015 CBA Roundtable, Q. 33

ITCs for prior unregistered periods
(full text available with membership password at http://www.cba.org/Sections/Commodity-Tax,-Customs-and-Trade/Resources)

When the taxpayer becomes registered, it generally is entitled to claim input tax credits in its first post-registration return for GST that was previously incurred while it was a registrant (i.e., required to be registered.)

Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Section 169 - Subsection 169(1) ITCs can be claimed for pre-registration periods 167

CBAO National Commodity Tax, Customs and Trade Section – 2013 GST/HST Questions for Revenue Canada, Q. 26.

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

An Ontario purchaser ("Ontario Co") remitted HST to a Quebec supplier ("Quebec Co") on the basis of its view that the place of supply of a purchase of goods was in Ontario, but Quebec Co (which now is insolvent) did not remit the provincial component of the HST on the basis of a view that the place of supply was in Quebec. In noting that Quebec Co is required to remit the HST, CRA noted that s. 222(1) deemed amounts (other than certain amounts in the case of bankruptcy) collected on behalf of HST to be held in trust for the Crown until withdrawn under s. 222(2); and that all amounts collected by Quebec Co on account of HST are required by s. 225(1) to be included in its net tax.

Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Section 169 - Subsection 169(1) no ITC for tax paid in error 88
Tax Topics - Excise Tax Act - Section 222 - Subsection 222(1) deemed trust re HST collected in error 128

CBAO National Commodity Tax, Customs and Trade Section – 2013 GST/HST Questions for Revenue Canada, Q. 36. ("ETA 169/225")

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

An supplier makes an exempt supply for which it bills GST, but the recipient refuses to pay the GST and pays the invoice net of GST. Alternatively, there is no supply and the supplier simply issues a bill in error.

CRA indicated that as s. 225(1) "requires every person to include in its net tax calculation all amounts that became collectible," such GST was required to be included in its net tax remittance in both examples.

Subsection 225(3.1)

Administrative Policy

3 April 2017 Interpretation 164742

court award of costs plus GST/HST did not affect ability to claim ITCs for legal expenses

A registered corporation, in a judgment for infringement of its copyright, was awarded costs on a solicitor and client scale plus GST/HST thereon. Should any GST or HST be included in its net tax calculation under s. 225(1)(a)?

In providing its interpretation that “subsection 225(3.1) does not apply to the solicitor-client costs awarded by the Court as this amount was not otherwise rebated, refunded or remitted to the Corporation, or otherwise recovered by the Corporation under the ETA or other Act of Parliament,” CRA stated:.

[L]egal fees were paid by the Corporation in the course of a lawsuit launched under the Copyright Act to protect its copyright. Therefore, the Corporation is entitled to claim an ITC in relation to the GST/HST paid or payable on the fees incurred since it was the recipient of these legal services, to the extent that they were acquired for consumption, use or supply in the course of the Corporation's commercial activities. The awarding of costs by the Court does not change the recipient of the legal services, and the restrictions to ITC entitlement under subsection 225(3.1) do not apply in this case.

Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Section 123 - Subsection 123(1) - Supply court costs award not consideration for a supply 278
Tax Topics - Excise Tax Act - Section 225 - Subsection 225(1) litigant receiving a court award of costs plus GST/HST is not required to report such tax 82

Subsection 225(4) - Limitation

Paragraph 225(4)(b)

See Also

International Hi Tech Industries Inc. v. The Queen, 2018 TCC 107 (Informal Procedure)

timely but invalid claiming of ITCs by parent did not now permit sub to claim them after 4 years

The appellant (IHI) claimed input tax credits (ITCs), principally respecting three invoices from law firms that it paid in 2008 and 2009. The parent of IHI (“Garmeco”) had claimed ITCs for such invoices on a timely basis on the apparent advice of a CRA officer, but in Garmeco Canada International Consulting Engineers Ltd. v. The Queen, 2015 TCC 194, Miller J concluded that the ITCs were not validly claimable by Garmeco, in reasons which (IHI now submitted) indicated that such ITCs should have been claimed by IHI . Within 30 days of that judgment, on September 10, 2015, IHI submitted its claim for the ITCs.

In finding that such claim was barred by the four year limitation period s. 225(4)(b), Russell J stated (at paras 11 and 14):

… [E]ven on the basis that Garmeco did unequivocally state that IHI would have been the proper claimant, that would not mean that IHI now can point to the Garmeco decision and require the Minister to credit it with the claimed ITCs. …

… [T]he wording of paragraph 225(4)(b)… is drafted very restrictively … making clear that it is “the person” who is claiming the ITCs, and not any other person, including a person who had previously claimed, who must abide by the statutory four year limitation.

Locations of other summaries Wordcount
Tax Topics - General Concepts - Estoppel errant advice of a CRA official does not change Act’s application 253

Chew Estate v. The Queen, [2013] GSTC 52, 2013 TCC 89 (Informal Procedure)

The registrant, who had a quarterly GST reporting period, had acquired a property for personal use, but converted it to commercial use (for short-term rentals) in the second quarter of 2005. The Minister denied his claim at the end of 2009 for an input tax credit on the basis that the four-year limitations period in s. 225(4)(b) had commenced on 1 July 2005.

VA Miller J dismissed the registrant's appeal. She stated (at para. 15):

According to paragraph 225(4)(b) of the ETA, ITCs must be claimed by a registrant in a return filed by the registrant on or before the due date of the return for the last reporting period that ends within four years after the end of the reporting period in which the ITC could have first been claimed. Mr. Chew filed his GST returns on a quarterly basis. Therefore he was required to claim an ITC with respect to the first significant change in use of the Unit before July 1, 2009. This he failed to do.

Administrative Policy

19 March 2018 Interpretation 183900

corp potentially could have its registration backdated by 6 years to claim ITCs

A not-for-profit corporation registered for GST/HST purposes effective March 18, 2016, then got this registration backdated somewhat to January 1, 2016 – and then subsequently filed returns for the previous six years (2010 through 2015) and requested that its registration be further backdated to April 1, 2010 in order that it could claim input tax credits for tax paid since April 1, 2010. The Directorate stated:

In order to backdate its registration, [Corporation A] could show it was a registrant during the period in question by proving it was not a small supplier; in other words, it was required to be registered.

The Directorate did not reference any limitation on claiming ITCs from before the four-year period referenced in ETA s. 225(4)(b), and instead stated:

Generally, a person who is registered for the GST/HST is entitled to claim input tax credits for the tax paid or payable by them on inputs that are used, consumed, or supplied in the course of its commercial activities. Where property or a service is consumed or used partly in the course of a person’s commercial activities and partly in its non-commercial activities (less than 90%, but more than 10% in its commercial activities), the person must apportion the GST/HST for the property or service between these two activities.

Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Section 240 - Subsection 240(1) registration potentially could be backdated by over six years in order to claim ITCs 192

Paragraph 225(4)(c)

Cases

National Money Mart Co. v 24 Gold Group Ltd, 2017 ONSC 6373

purchaser was not precluded from ITC claim where vendor had not orginallly charged HST

The plaintiff sold unrefined gold to the defendant (“24 Gold”) during the 24 months ending in mid-2012. After an audit, CRA assessed the plaintiff on June 1, 2015 for its failure to charge and remit HST of $1.6 million on such sales, which CRA collected. The plaintiff invoiced 24 Gold for the $1.6 million on May 31, 2015, and then sued for 24 Gold’s failure to pay.

In rejecting 24 Gold’s submission that ETA s. 225 precluded the plaintiff from suing, Diamond J stated (at paras 13 and 14):

[S]ection 224 of the Excise Tax Act does not contain any time limit within which the plaintiff must bring its legal proceeding. …

Moreover, a close reading of section 225(4)(c) … permits the input tax credit claims to be filed no matter how late the HST may be charged in connection with the subject transaction(s), provided that the HST was not originally charged by the vendor/supplier and the CRA has subsequently assessed the vendor/supplier for that outstanding HST. …

Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Section 224 2-year Ontario limitation period for a claim for unpaid HST starts running only when the supplier pays that tax 243

See Also

NWorks Management Corp. (Globotech Communications) v. Lincourt, 2018 QCCQ 1021

purpose is to permit late recovery and matching ITC

Before concluding that QSTA s. 425 (equivalent to ETA . 223) could be satisfied by an invoice issued by the supplier to the recipient after the time of the supply, Sirois JCQ summarized the wording of QSTA s. 431(3) (equivalent to ETA s. 225(4)(c)), and then stated (at paras. 49-50, TaxInterpretations translation):

Thus, the recipient can, based on the written declaration of the supplier who has been assessed for the amounts, claim an input tax refund for the period in which it pays the tax.

This indicates that the legislator intended to accord to the supplier the ability to recover the tax which it is responsible for tardily remitting as agent of the tax authorities, and to permit the recipient to recover input tax refunds on certain conditions.

Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Section 223 - Subsection 223(1) recipient of supply could be invoiced for QST after the supplier was assessed therefor 319
Tax Topics - Excise Tax Act - Section 224 supplier who failed to charge QST could recover, following assessment, from recipient 146

Administrative Policy

Memorandum 8-1 "General Eligibility Rules" 10 May 2005

Claim independent of s. 225(4)(a) limitations

87. Where the supplier fails to charge tax to a person (including a specified person) before the end of the last reporting period of the person that ends within four years after the end of the particular reporting period in which the tax became payable, the person may be eligible to claim an ITC in the return for the reporting period in which the tax is paid by the person, provided that return is filed by its due date. To be eligible to claim the ITC, the supplier must have disclosed in writing to the person that the Minister has assessed the supplier for that tax and that the person must have paid the tax to the supplier after the end of the last reporting period and before the ITC is claimed by the person.

Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Section 141.01 - Subsection 141.01(2) 199