Individuals of joint endeavors that have actually elected to utilize a nominee business for GST/HST functions should make sure that they take the required actions in order to stay compliant by either naming one of the joint venturers as the operator for GST/HST purposes or ensuring that the nominee business is an entity that meets the CRA s meaning of a participant. With 2015 just weeks away, joint venturers who have not already taken the required steps should call their attorney to make sure that their joint venture is compliant with the CRA s new position.
Lots of realty joint endeavors are developed between joint venturers utilizing candidate corporations to hold the title. In particular scenarios, these joint ventures have elected for such nominee corporations to be the operators of the joint endeavors. In these scenarios, the nominee corporations not only hold title to the reality, but they also file GST/HST returns and remit GST/HST to the CRA on behalf of the joint ventures.
Because of the inception of the GST in 1991, the CRA has shown administrative tolerance towards the practice of utilizing a candidate corporation to function as the operator to gather and remit GST/HST on behalf of the venture. However, through GST/HST Notice No. 284 Bare Trusts, Nominee Corporations, and Joint Ventures the CRA has made it clear that it will not allow this practice to continue past the end of the year.
The law requires that the operator participates in the joint endeavor. This requirement can be satisfied when the operator has an ownership interest in or supervisory or operational control of the joint endeavor. As candidate corporations are frequently viewed by the tax authorities as simple shells with no authority other than to hold legal title to the genuine estate, the practice of utilizing a nominee business as an operator does not please the legal requirements under the Excise Tax Act for an operator.
Is Your Joint Venture Compliant with the CRA s New Position on GST/HST Reporting Obligations?
On its own, a joint endeavor is incapable of signing up for a GST/HST account due to the fact that it is not thought-about to be an individual for the functions of the Excise Tax Act. Rather, a participant in a joint venture is capable of making an election pursuant to section 273 of the Excise Tax Act to be the operator of the joint venture. Such operators will then register and represent the GST/HST on behalf of the joint venture.
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