What kinds of cases are you looking for?   
< Previous Case Next Case >

GST/HST — ITCs for joint venturer

My client, “Xco”, was a private corporation involved in a joint venture to develop and lease out commercial real property. The other joint venturer was an unrelated company, “Yco”.

Xco and Yco made an “election” under section 273 of the Excise Tax Act to have the Yco be the “operator” and account for all the HST on the property. As a result, Xco did not charge or collect any HST.

Xco provided a substantial amount of work on the project, some of which was done by Xco’s related companies and was billed to Xco, with HST. Xco claimed about $50,000 input tax credits for the HST billed to it; and since it collected no HST, it claimed an net tax refund of this amount — which guaranteed an audit by CRA.

The auditor did not understand that a joint venturer is still engaged in “commercial activity” and entitled to ITCs for costs incurred for the project, even if another joint venturer has elected to report all of the HST. The auditor disallowed the ITCs. At this point Xco came to me for help.

I filed a Notice of Objection, explaining that Xco was still entitled to ITCs for HST it paid on costs relating to the venture, even though another company was remitting the HST collected.

The Appeals Officer agreed with my analysis, and allowed the refund.

Problem solved!

(2023)