Legislative Proposals Relating to New GST/HST Joint Venture Election Rules
Commercial Joint Venture Election
1 (1) The Excise Tax Act is amended by adding the following after section 273:
Marginal note:Definitions
273.01 (1) The following definitions apply in this section.
- excluded supply
excluded supply means a supply described in Subdivision C or D of Division II other than a supply described in section 182. (fourniture exclue)
- exclusive
exclusive means, in respect of the consumption, use or supply of property or a service, all or substantially all of the consumption, use or supply of the property or service. (exclusif)
- joint venture activity
joint venture activity, in respect of a qualifying joint venture, means an activity described in the agreement referred to in the definition qualifying joint venture. (activité de coentreprise)
- qualifying joint venture
qualifying joint venture means a joint venture that is not a person and that operates under an agreement, evidenced in writing, that describes the property that is the subject matter of the joint venture and the activities, obligations and entitlements of the participants and the operator of the joint venture, provided that all or substantially all of the activities described in the agreement are commercial activities. (coentreprise admissible)
- qualifying operator
qualifying operator of a joint venture means a specified person that is resident in Canada, has reporting periods that are fiscal months, is not a bankrupt (as defined in section 2 of the Bankruptcy and Insolvency Act) and
(a) is a qualifying participant in the joint venture; or
(b) is designated as the operator of the joint venture under the joint venture agreement and has the primary responsibility for the operational control over the carrying on of the day-to-day operations of the joint venture. (opérateur admissible)
- qualifying participant
qualifying participant in a joint venture means a specified person that is a participant in the joint venture, that contributes resources (other than nominal resources) for consumption, use or supply in the course of the joint venture activities and, as a consequence of that contribution, obtains an interest (other than a nominal interest) in the property that is the subject matter of the joint venture and a right of mutual control or management of the joint venture. (participant admissible)
- specified person
specified person means a person (other than a public sector body or a listed financial institution) that is registered under Subdivision D of Division V and that meets one of the following conditions:
(a) the person has specified property and has last manufactured, produced, acquired or imported all or substantially all of its specified property for consumption, use or supply exclusively in the course of commercial activities of the person;
(b) the person has no specified property and has made supplies and all or substantially all of the supplies made by the person are taxable supplies; or
(c) the person has no specified property and has not made taxable supplies and it is reasonable to expect that
(i) the person will have specified property within the next 12 months, and
(ii) all or substantially all of the specified property to be manufactured, produced, acquired or imported by the person within the next 12 months will be for consumption, use or supply exclusively in the course of commercial activities of the person. (personne déterminée)
- specified property
specified property of a person means property, other than financial instruments and property having a nominal value, in respect of which the person is not a consumer. (biens déterminés)
Marginal note:Commercial joint venture election
(2) A qualifying operator of a qualifying joint venture may jointly make an election in respect of the qualifying joint venture with a qualifying participant in the qualifying joint venture that becomes effective on a day if no other person has, in the capacity of a qualifying operator, jointly made an election under this subsection in respect of the qualifying joint venture that is in effect on that day.
Marginal note:Effect of election
(3) If a qualifying operator files an election made jointly under subsection (2) by the qualifying operator and a qualifying participant in respect of a qualifying joint venture, the following rules apply:
(a) if, at a time when the election is in effect, the qualifying operator makes on behalf of the qualifying participant a supply (other than an excluded supply) of property or a service in the course of joint venture activities in respect of the qualifying joint venture, section 177 does not apply in respect of the supply and the tax collectible in respect of the supply or any amount charged or collected by the qualifying operator on behalf of the qualifying participant as or on account of tax in respect of the supply is deemed to be collectible, charged or collected, as the case may be, by the qualifying operator, and not by the qualifying participant, for the purposes of
(b) the threshold amounts of the qualifying operator and of the qualifying participant under subsections 249(1) and (2) are to be determined as if any consideration in respect of any supply referred to in paragraph (a) that became due to the qualifying participant, or was paid to the qualifying participant without having become due, had become due to the qualifying operator, or had been paid to the qualifying operator without having become due, as the case may be, and not to the qualifying participant;
(c) if tax is required to be paid by the qualifying participant to the Receiver General under section 219 or 220.09 or subsection 228(4) in respect of property or a service that is acquired or brought into a participating province by the qualifying operator on behalf of the qualifying participant at a time when the election is in effect and if the property or service is to be consumed, used or supplied exclusively in the course of joint venture activities in respect of the qualifying joint venture, then the tax is, despite sections 219 and 220.09 and subsection 228(4), to be paid by the qualifying operator, and not by the qualifying participant, to the Receiver General on or before the day on or before which the qualifying operator’s return for the reporting period in which the tax became payable by the qualifying participant is required to be filed and the tax is to be reported by the qualifying operator, and not by the qualifying participant, in that return;
(d) if the qualifying operator acquires or imports property or a service or brings it into a participating province on behalf of the qualifying participant, if tax in respect of the supply (other than an excluded supply), importation or bringing in becomes payable by the qualifying participant or is paid by the qualifying participant without having become payable at a time when the election is in effect, if the property or service is to be consumed, used or supplied exclusively in the course of joint venture activities in respect of the qualifying joint venture and if the tax is included in determining an input tax credit of the qualifying participant for a reporting period,
(i) the amount of the input tax credit is not to be included in the total for B in the formula set out in subsection 225(1) for any reporting period of the qualifying participant,
(ii) the qualifying operator may deduct a particular amount equal to all or part of the amount of the input tax credit in determining the net tax for a reporting period of the qualifying operator but only to the extent that
(A) the particular amount was not deducted in determining the net tax for a preceding reporting period of the qualifying operator, and
(B) the qualifying participant could have included, in the absence of subparagraph (i), the amount of the input tax credit in the total for B in the formula set out in subsection 225(1) for the same reporting period if the reporting periods of the qualifying participant were identical to the reporting periods of the qualifying operator,
(iii) to the extent that the particular amount is deducted in determining the net tax of the qualifying operator for a reporting period of the qualifying operator, the amount of the input tax credit is deemed for the purposes of this Part (other than this subsection and subsection 225(1)) to have been claimed by the qualifying participant in the last reporting period of the qualifying participant that ended before that time, and
(iv) if the qualifying participant is deemed under subparagraph (iii) to have claimed an amount as an input tax credit and subsequently receives a credit note, or issues a debit note, described in paragraph 232(3)(a) in respect of that amount and if the qualifying participant is required under paragraph 232(3)(c) to add an amount (in this subparagraph referred to as the “adjustment amount”) in determining the net tax of the qualifying participant for a reporting period as a result of having received the credit note, or issued the debit note, as the case may be,
(A) the qualifying operator is required to add an amount equal to the adjustment amount in determining the net tax of the qualifying operator for the reporting period of the qualifying operator in which the credit note is received or the debit note is issued, as the case may be, and
(B) despite paragraph 232(3)(c), the qualifying participant is not required to add the adjustment amount in determining the net tax of the qualifying participant;
(e) if, at a time when the election is in effect, the qualifying operator, on behalf of the qualifying participant and in the course of joint venture activities in respect of the qualifying joint venture, makes or receives a supply, or takes physical possession of tangible personal property to supply a commercial service in respect of the property,
(i) if the qualifying participant is as a result deemed under paragraph 179(1)(d) to make a particular supply, the tax in respect of the particular supply is deemed to be collectible, charged or collected, as the case may be, by the qualifying operator, and not by the qualifying participant, for the purposes of
(ii) if the qualifying participant is as a result deemed under paragraph 180(d) to have paid an amount of tax in respect of a particular supply and if the tax in respect of the particular supply is included in determining an input tax credit of the qualifying participant for a reporting period,
(A) the amount of the input tax credit is not to be included in the total for B in the formula set out in subsection 225(1) for any reporting period of the qualifying participant,
(B) the qualifying operator may deduct a particular amount equal to all or part of the amount of the input tax credit in determining the net tax for a reporting period of the qualifying operator but only to the extent that
(I) the particular amount was not deducted in determining the net tax for a preceding reporting period of the qualifying operator, and
(II) the qualifying participant could have included, in the absence of subparagraph (i), the amount of the input tax credit in the total for B in the formula set out in subsection 225(1) for the same reporting period if the reporting periods of the qualifying participant were identical to the reporting periods of the qualifying operator, and
(C) to the extent that the particular amount is deducted in determining the net tax of the qualifying operator for a reporting period of the qualifying operator, the amount of the input tax credit is deemed for the purposes of this Part other than this subsection and subsection 225(1) to have been claimed by the qualifying participant in the last reporting period of the qualifying participant that ended before that time; and
(f) if a supply of property or a service (other than a supply of real property by way of sale or a supply of property or a service that is not acquired by the recipient of the supply for consumption, use or supply exclusively in the course of commercial activities of the recipient) is made by the qualifying operator to the qualifying participant at a time when the election is in effect and if the property or service is to be used, consumed or supplied by the qualifying participant exclusively in the course of joint venture activities in respect of the qualifying joint venture, the supply is deemed for the purposes of this Part to have been made for no consideration.
Marginal note:Revocation
(4) The persons that jointly made an election under subsection (2) may jointly revoke the election.
Marginal note:Form of election or revocation
(5) An election under subsection (2), and a revocation under subsection (4), made jointly by a qualifying operator and a qualifying participant shall
(a) be made in prescribed form containing prescribed information;
(b) specify the day (in this subsection and subsection (6) referred to as the “effective day”) on which the election or revocation is to become effective; and
(c) be filed by the qualifying operator with the Minister in prescribed manner on or before the day that is the later of
Marginal note:Cessation
(6) An election jointly made under subsection (2) in respect of a joint venture ceases to have effect on the earlier of
Marginal note:Joint and several, or solidary, liability
(7) If a person and another person make, or purport to make, an election under subsection (2) in respect of an agreement between the person and the other person, the person and the other person are jointly and severally, or solidarily, liable for all obligations under this Part that result from activities carried on under the agreement.
(2) Subsection (1) comes into force on the day on which the Act enacting that subsection receives royal assent.
Related Amendments
2 (1) Paragraph 221(2)(a) of the Act is replaced by the following:
(a) the supplier is a non-resident person, or is resident in Canada by reason only of subsection 132(2), and, in the absence of this paragraph, the tax in respect of the supply would not be deemed, under paragraph 273.01(3)(a), to be collectible by a person that is not the supplier;
(2) Subsection (1) comes into force on the day on which the Act enacting that subsection receives royal assent.
3 (1) The definition reporting entity in subsection 231(5) of the Act is amended by striking out “and” at the end of paragraph (a) and by adding the following after paragraph (a):
(a.1) if tax in respect of the supply is deemed, under paragraph 273.01(3)(a) or (e), to be collectible, charged or collected by a person that is not the supplier, the person that is required, under paragraph 273.01(3)(a) or (e), as the case may be, to include that tax in determining the person’s net tax; and
(2) Subsection (1) comes into force on the day on which the Act enacting that subsection receives royal assent.
- Date modified: