Words and Phrases - "nominal"
24 April 2015 Interpretation 166609
In interpreting "property having a nominal value" in para. (c) of "qualifying member," should the value of the property be compared with the value of all the properties that the person acquires (or intends to acquire) so that, for example, a $100,000 item of equipment could have a nominal value for a large manufacturing business that requires $500M of equipment to operate? Also, how is the requirement that the registrant will be making taxable supplies throughout the next 12 months be applied?
Generally, this determination will be made with reference to the value of the property and its significance, relative to the commercial activity in question. For example, whether a $300 computer is of nominal value would depend on its relative value to the commercial activities for which it is acquired. Assuming that a subsequent acquisition of $1 billion in assets is for consumption, use or supply exclusively in the commercial activities of the registrant, it would appear that the computer would be of nominal value. …
The CRA would generally review available documentation such as business plans or input tax credit claims and activities undertaken by the registrant to make taxable supplies such as research and marketing that support the expectation that the registrant will be making taxable supplies throughout the twelve months and that property acquired by the registrant within the twelve months is for use exclusively in its commercial activities.
Where a registrant meeting the conditions of subparagraph (c)(iii)… makes an election and subsequently acquires certain property for consumption, use or supply exclusively in its commercial activities, the registrant may now meet the conditions of subparagraph (c)(i).
British Columbia Transit v. The Queen, [2006] GSTC 103, 2006 TCC 437
After having incurred substantial GST in acquiring a transit system for exempt use, the appellant commenced to lease the system to another municipal transit entity for rent of $1 per year, but with the lessee being obligated to pay municipal taxes imposed on the leased premises (which amounted to around $2 million per year). In finding that this lease represented a supply of the system for consideration other than nominal consideration (so that there was a change of use under ss. 209(2) and 199(3) entitling the appellant to recover the basic tax content of this asset), C Miller J noted that if he accepted the appellant's position that "nominal is trifling or such an amount that it is immaterial whether or not it is paid, the answer is self-evident – several million dollars are not nominal [and] there is no evidence that [the lessee] ever intended not to pay the property taxes" (para. 55), and went on to state (at para. 56) that even "interpreting ‘nominal' on a relative basis, that payment of the property taxes…is not nominal."
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Excise Tax Act - Section 141.01 - Subsection 141.01(3) | lessor required to demonstrate taxable-supply-for-consideration purpose | 148 |
| Tax Topics - Excise Tax Act - Section 153 - Subsection 153(1) | lease consideration not nominal because of property tax obligation | 61 |
| Tax Topics - Excise Tax Act - Section 306.1 - Subsection 306.1(1) | additional reasons can be raised in Notice of Appeal | 248 |