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GST Notice 284–Joint Venture Relief … but not Much

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The CRA's treatment of "bare trusts" has been problematic from the first days of the GST.

When the GST was first implemented in January 1991, the CRA was initially advising bare trustees of bare trusts (trusts that operating at the behest of their beneficiaries, and where the trustee has no independent authority other than following express directions of the beneficiaries) that it was the bare trustee that was viewed as the supplier for GST purposes, and the person required to register for GST purposes. This position was changed in mid-1992, when the CRA flipping its position, and now advising that bare trustees were not allowed to register, and that the beneficiaries of these bare trusts were the one's required to register.

In 2014 this issue has morphed into whether or not Joint Ventures – popular in the real property construction industry – can be effectively structured using nominee corporations / bare trusts as the "operators" (and the ones registered and accounting for the GST/HST obligations of the Joint Ventures). CRA, consistent with their 1992 change, has resisted this approach, taking the position that such nominee corporations / bare trusts are not permitted to act as the operator, for basically similar reasons as their approach to bare trusts back in 1992.

GST/HST Notice 284 (released this past week) now clarifies CRA's position that its 1992 position will be continued – meaning that bare trustees will not be permitted to act as operators of joint ventures – but that there will be a limited period of administrative tolerance, where CRA Auditors will not assess GST/HST owing where the nominee corporation/bare trust is listed as the operator of a joint venture. This administrative tolerance is contingent upon full general compliance by the joint venture, and that means that on an going forward basis, these entities will be required to restructure so the nominee/bare trust is no longer the operator of the joint venture. This administrative tolerance is available for periods before January 1, 2015. This may require fairly quick action for annual filers.

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