The TCC applied fundamental principles of statutory interpretation to conclude that the supply of police services by the Ontario Provincial Police (“OPP”) to the 407 ETR Concession Company Limited (“407 ETR”) constituted an exempt supply of a “municipal service” under section 21.
In The Great-West Life Assurance Company v The Queen (2016 FCA 316) [“Great-West Life”], the Federal Court of Appeal upheld the TCC’s decision that services related to processing claims for drug benefits were not financial services, and so not exempt from GST/HST.
Section 141.1(3) of the of Excise Tax Act (“ETA”) broadens the scope of what is considered to be in the course of commercial activities to activity done “in connection with” extraordinary transactions such as starting and winding-up commercial activities.The Tax Court of Canada (“TCC”), in Onenergy Inc. v. The Queen (2016 TCC 230), discussed how the section should be interpreted.
The TCC concluded in Rojas (2016 TCC 177) that the taxpayer’s mortgage-related services were exempt from HST as financial services under ETA subsection 123(1) and not taxable as administrative services provided to a brokerage firm.
The taxpayer was a real estate agent and also assisted clients in obtaining mortgages on the properties they wished to purchase. Because she provided mortgage services, Ontario required her to be licensed as a mortgage broker and also to obtain registration under a mortgage brokerage firm’s umbrella.
For years, the CRA has consistently assessed taxpayers for GST/HST and interest in circumstances where although there was technical non-compliance with the rules, there was no true financial impact to the government. Examples of such situations (e.g. so called “wash transactions”) would include the wrong person collecting and remitting the GST/HST in a closely related group, or GST/HST not being collected in circumstances where the recipient would have been entitled to a full Input Tax Credit (“ITC”) in any event.
The practice of demanding interest for monies that the CRA already had in its possession, albeit received from another person, is viewed as patently unfair by many of the taxpayers so assessed. In the recent GST/HST case Gordon v AGC (2016 FC 643), the Federal Court put into issue the fairness of the CRA’s approach, and found that the CRA must consider waiving interest in these circumstances on a case by case basis.
In light of the inherent risks of serving as director of a corporation, business owner-operators may be tempted to appoint their spouse or family member as the sole director of their corporation, despite the fact that that person may be completely uninvolved with or unknowledgeable about the corporation’s operations. This is primarily done with a view to “creditor-proofing”. However, as the Federal Court of Appeal (FCA) decision of Constantin v. The Queen (2013 FCA 233) illustrates, this strategy is far from invincible when it comes to GST/HST remittances.
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.