Section 228

Subsection 228(2.1)

Administrative Policy

Technical Information Bulletin B-083R – Financial Services under the HST 23 May 1997

General overview of old (pre-SLFI Reg. 48(10)) rule

Generally, a selected listed financial institution's interim net tax for a reporting period is calculated in the same way as its actual net tax for the period. In calculating the adjustment to net tax relating to the provincial component of the HST payable on its purchases, the selected listed financial institution uses an allocation percentage for each participating province equal to the lesser of its allocation percentage for the current taxation year and its allocation percentage for the immediately preceding taxation year.

Where the interim net tax for the reporting period is a positive amount, the selected listed financial institution must pay that amount on account of its net tax for the period. Where the interim net tax is negative, the selected listed financial institution may claim an interim net tax refund.

Example: A selected listed financial institution that is a monthly filer with a year=end of December 31 calculates its net tax for the month of January 1998. The provincial allocation percentage for January 1998 is equal to the lesser of the selected listed financial institution's percentage for the participating province for the 1997 year and its estimate for the 1998 taxation year. If the interim net tax is a positive amount, the financial institution must pay that amount on or before February 28, 1998. This amount is treated as an amount paid on account of net tax.

Subsection 228(4) - Self-Assessment on Acquisition of Real Property

Administrative Policy

25 February 2016 CBA Roundtable, Q.11

relief usually provided where registrant fails to self-assess tax on purchase of commercial property

A GST-registered person purchases a real estate property and, when it files its return, neglects to report the tax payable under s. 228(4) and claim the offsetting ITC. Does CRA still provide administrative tolerance in this situation? CRA responded:

The tax payable [under s. 228(4)] is not part of the registrant’s net tax calculation. …

The CRA…will generally exercise administrative tolerance if this issue is … reported by the registrant or discovered … on audit. In assessing the tax payable in respect of the supply, the CRA will generally also assess the registrant’s net tax. Pursuant to subsection 296(2) … the Minister must take into account an ITC for a particular reporting period when assessing the net tax for that reporting period even though the time limit for claiming the ITC may have expired.

In the case of a full ITC being offset against the GST/HST payable, there would not be any interest assessed on the assessment.

Administrative tolerance will not be granted where the purchaser is not entitled to claim a full ITC or where the purchaser has already claimed the ITC in a GST/HST return … [nor] where the purchaser was previously assessed under similar circumstances.

Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Section 296 - Subsection 296(2) S. 228(4) assessment technically does not trigger s. 296(2) crediting obligation 139

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 Corporation's 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 221 - Subsection 221(1) tax charged contrary to s. 221(2) did not eliminate s. 228(4) liability 88

18 February 2014 Interpretation 155500

potential recharacterization of Sharia-compliant real estate reverse repo as purchase by Islamic client

FinanceCo will offer a real estate financing product complying with the Islamic principle of declining Musharaka and with Sharia law. FinanceCo would purchase a percentage interest in the "Property" (with the "Purchaser" paying for the other interest) but with the Purchaser entitled to possession (and responsible for all Property expenses such as taxes, insurance, utilities and repairs) and concurrently providing an agreement, secured by a mortgage, to repurchase that interest in instalments, thereby resulting in an agreed upon profit to FinanceCo. On a default, the Purchaser is required to pay the full unpaid balance of FinanceCo's contribution plus the accrued Profit. CRA stated that provided this purchase agreement (the "APS") contained all the relevant terms:

and if the Purchaser is liable under the agreement to pay the consideration for the supply, then the Purchaser is required to pay the GST/HST payable on the supply. Further, if… [FinanceCo] not liable to pay consideration for the supply under that agreement, then [FinanceCo] is not liable to pay the GST/HST should the Purchaser fail to pay tax on the purchase of the Property.

CBAO National Commodity Tax, Customs and Trade Section – 2013 GST/HST Questions for Revenue Canada, Q. 31.

tolerance where failure to self-assess on real estate acquisition and claim ITC
(full text available with membership password at,-Customs-and-Trade/Resources)

CRA will generally waive any applicable penalty and interest when a person registered for GST/HST: (A) acquires real property by way of sale for consumption, use, or supply (100%) in its commercial activities; (B) fails to self-assess the GST/HST in its return (either because it failed to file one, or filed and did not report the tax); and (C) never claims an ITC in respect of the GST/HST payable. Will CRA generally apply the same administrative tolerance if the reporting period at issue is beyond the (normal) four-year statutory limitation period for claiming an ITC? CRA responded:

Generally CRA will look to the same application of administrative tolerance where the ITC is now statute barred; however, the instances would be looked at on a case by case basis to determine the application since the period for claiming the ITC has expired and the reason for which the self-assessment was not made.

May 1994 Institute of Chartered Accountants of Alberta GST Roundtable, Q. 3

potentially no interest if revenue neutral failure to report

What is the policy on the late filing of GST Form 60 where a real property transaction occurred a number of months earlier and the party omitted to deal with the GST? If a policy of allowing the late filing of the GST Form 60 was followed and a wash transaction penalty was assessed, Revenue Canada would have complete information about the transaction and derive some revenue from the wash transaction penalty. Revenue Canada stated:

Where a registered recipient acquired real property (to which the registrant is entitled to claim full ITCs at the time of acquisition), did not file the GST60—Tax Return for Acquisition of Real Property and did not claim ITCs at that time, Revenue Canada, Excise/GST will consider the transaction to be revenue neutral, or with nil revenue implication. As a consequence, an assessment for GST, penalty, or interest may not be made. Our auditors will, however, advise registrants who do not file these returns that future non-compliance with the filing of the returns will not be tolerated and may result in a technical assessment for penalty and interest.

GST Memorandum (New Series) 19.1

After noting that registrants who are using or supplying the required real estate primarily in the course of commercial activities should report the acquisition on the regular (GST 34) return rather than GST 60, CRA states (at para. 90):

Note that if the recipient pays the tax to the supplier in error, the obligation to self-assess the tax under subsection 228(4) is not relieved.

Example – For example, Developer A, a registrant, takes over a construction project from Developer B, also a registrant, by purchasing the land and the units already under construction. The recipient, Developer A, pays an amount as consideration for the project and another amount that is clearly stated in the sale documents to be the GST/HST paid by the recipient and collected by the supplier, Developer B, in respect of this taxable supply of real property. In this situation, Developer A is till assessable under the provisions of section 296 for tax in respect of the acquisition of the taxable supply of real property, even though an amount was paid as tax to the supplier. In this case, it would be the responsibility of the recipient to recover the tax paid in error to the supplier.

GST M 500-2-6 "Other GST Returns" under "Goods and Services Tax Return for Acquisition of Real Property"

Subsection 228(6)

Administrative Policy

28 February 2019 CBA Roundtable, Q.14

CRA practice is to apply the NRRP rebate at the time of initial audit

Where there is a self-supply by a developer under s. 191 which entitles it to the new residential rental property rebates under ss. 256.2 and 256.21, the rebate claim will generally be filed with the developer’s regular GST/HST return for the reporting period that includes the self-supply. Although s. 228(6) deems the developer’s net tax remittance for the reporting period of the self-supply to have been paid to the extent of the rebate amount claimed, separate CRA offices assess the net tax amount (under s. 296) and the rebate amount (under s. 297), leading to problematic outcomes, e.g., if the rebate assessment is delayed, the developer’s account will show an underpayment of net tax, resulting in potential demands from CRA collection officers. Does CRA intend to modify these practices?

CRA responded:

In cases where a registrant that is required to self-assess under section 191 of the ETA files their new residential rental property rebate (NRRPR) claim with their regular GST/HST return, as noted above, subsection 228(6) of the ETA will apply and offset, on the day the return is filed, any tax remittable by the NRRPR claimed by the registrant. …

Current audit procedures require the auditor to verify the validity of the NRRPR and, if the NRRPR is valid, to send the rebate claim to be keyed into our system and processed with an effective date that is the same as the due date of the registrant’s return. As a result, interest should only apply to the difference between the amount of tax on the self-assessment and the valid NRRPR amount. Furthermore, the NRRPR should not be delayed as it would have been verified by the initial auditor and would not require a second review by our refund integrity or rebate processing programs. However, we are aware of some unintended results that may arise with our existing audit procedures and we will be reviewing these procedures to determine where improvements can be made.

Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Section 296 - Subsection 296(2.1) s. 296(2.1) only applied to rebate which was not claimed 186

8 March 2018 CBA Commodity Tax Roundtable, Q.12

s. 228(6) rather than s. 296(2.1) iapplicable if pre-audit filing showing substantive entitlement to rebates

A non-registered corporation did not self-assess under ETA s. 191(3) on completing the construction of a triplex nor did it claim input tax credits. If it simply lay in the grass and did nothing until CRA discovered this situation on audit, s. 296(2.1), by virtue of requiring CRA, at the time of reassessing the corporation for undeclared GST, to retroactively allow any available but unclaimed rebates, would protect the corporation against any charges for interest (or late-filed return penalty under s. 280.1), provided that the rebate claims for unclaimed ITCs and the s. 256.2 new rental residential property rebate put it in a net refund position. Would the answer change if the corporation did not wait for any audit and sent to CRA, in the same envelope, an s. 191(3) self-assessment filing and documentary support showing the availability of the offsetting rebate claims.

CRA indicated that this would be treated as the equivalent of a late-filed return and late rebate claims under s. 228(6), rather than engaging the s. 296(2.1) audit-to-net-tax rules, so that interest and penalties would apply. The correct procedure for accessing interest penalty and interest relief was to follow and comply with the voluntary disclosure program rules.

Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Section 296 - Subsection 296(2.1) s. 296(2.1) unavailable if taxpayer makes late s. 191(3) self-assessment and provides rebate documentation before audit 228

25 February 2016 CBA Roundtable, Q. 5

rebate claim will show as a remittance deficiency if it is not timely-processed

Does CRA agree that s. 228(6) permits a registrant to net its rebate claim against its net tax remittance obligation, so that there is no deficit in the registrant's remittance of net tax? If so, what can a registrant do when a collections officer demands collection of the deficit? CRA responded:

The amount(s) reported on line 111 of the GST/HST return are protected in the CRA accounting system for a period of time to allow for rebate processing and offset, and avoid collection calls or actions. If a rebate application is not received or processed in that time period, then the protection is removed, a debit balance may result, and the account may end up in collections. In most cases, this would be the result of the rebate being reviewed further in Audit. There should be very few instances where the initial review and assessment is not completed based on current processing standards.

…The CRA will undertake to develop a policy to advise collections officers to suspend collection of these assessments until the CRA confirms or denies the rebate. When contacted by a collections officer, the registrant should make the collections officer aware of the situation as these accounts are not flagged by the CRA’s systems.

Subsection 228(7)


Allan Gelkopf, Zvi Halpern-Shavim, "Five Arbitrary Differences between Corporations and Partnerships for GST/HST Purposes", Sales and Use Tax, Federated Press, Volume XIII, No. 2, 2015, p. 674.

Set-off mechanism not available for partnerships (p. 675)

Subsection 228(7) of the ETA permits a set-off of refunds or rebates under certain circumstances by one person against tax owing by another person. . . .

The Offset of Taxes (GST/HST) Regulations provide that these rules apply in respect of closely related entities. …

One prescribed circumstance for the offset to be available is that "the person who may reduce or offset the tax that is remittable and any other person who may be entitled to a refund or rebate under the Act are corporations." Partnerships do not qualify. …