Tax & Trade Blog

Determining whether contracts are for the sale of tangible personal property or for provision of services is often of central importance in provinces still levying Provincial Sales Tax (“PST”).  This issue has been the subject of on-going litigation in the context of providing oilfield services to oil and gas exploration companies in British Columbia and Saskatchewan.  A recent case from the British Columbia Court of Appeal (“BCCA”) provides practitioners with increased guidance on how to avoid application of PST on materials used in the provision of oilfield services.  The bottom line still remains:  get advice early and often !

Whether a notice of assessment was mailed or not has important legal consequences for taxpayers.  There is an irrebuttable presumption of receipt of the notice of assessment by a taxpayer once it is mailed by the Minister (S,248(7)(a) of the Income Tax Act (“ITA”)); a notice of objection must be served on the Minister within 90 days of the date on which the notice of assessment was mailed (s.165(1)); upon receipt of a notice objection, the Minister is obliged to reconsider the assessment and vacate, confirm or vary the assessment or reassess and to notify the taxpayer of its decision (s. 165(3)); and the taxpayer may appeal the assessment to the Tax Court of Canada (“TCC”) if the Minister has not vacated or confirmed the assessment or reassessed within 90 days of receiving the notice of objection (s. 169(1)). Parallel provisions are found in the Excise Tax Act.

Input Tax Credits (“ITCs”) are typically not available for “holding companies” that exist solely to hold shares or indebtedness of another company due to the fact that taxpayers are only entitled to ITCs in respect of tax paid on property or services acquired in the course of commercial activities. However, section 186(1) of the Excise Tax Act contains a special rule allowing a company to claim ITCs in respect of expenses “that can reasonably be regarded as having been so acquired for consumption or use in relation to shares of the capital stock, or indebtedness, of another corporation that is at that time related to” the company, in certain instances. 

In Invesco Canada Ltd. v. The Queen (2014 TCC 375), CRA assessed the taxpayer for GST, arising out an arrangement designed to minimize income tax.  Specifically, at issue was a determination of the value of the consideration paid for the supply of management services provided to mutual fund trusts. 

GST/HST rules provide that a notice of objection has to be filed with the Minister within 90 days of the mailing of an assessment (section 301(1.1) of the Excise Tax Act (the “ETA”); the parallel provision in the ITA is section 165(1)).  However, as established in Le sage au piano v. The Queen (2014 TCC 319), the clock may not start ticking on the 90 day period if the CRA has left out important details of the taxpayer’s address on the notice of assessment—extending the previous doctrine from income tax cases that it is insufficient for the CRA to mail a notice of assessment to an incorrect address (The Queen v. 236130 British Columbia Ltd., 2006 FCA 352). The fact that litigation continues in this area also highlights the fact that there is no electronic means of determining whether a notice of assessment has been issued.