Is Your Joint Venture Compliant with the CRA s New Position on GST/HST Reporting Obligations?
By itself, a joint venture is incapable of registering for a GST/HST account due to the fact that it is not considered to be a person for the purposes of the Excise Tax Act. Instead, a participant in a joint venture can make an election pursuant to area 273 of the Excise Tax Act to be the operator of the joint venture. Such operators will then register and account for the GST/HST on behalf of the joint venture.
Individuals of joint endeavors that have actually chosen to use a candidate business for GST/HST purposes should guarantee that they take the needed steps in order to remain compliant by either naming among the joint venturers as the operator for GST/HST functions or making sure that the candidate company is an entity that fulfills the CRA s definition of an individual. With 2015 only weeks away, joint venturers who have not already taken the required steps ought to call their legal representative to guarantee that their joint venture is certified with the CRA s new position.
Given that the creation of the GST in 1991, the CRA has revealed administrative tolerance towards the practice of using a nominee corporation to serve as the operator to collect and remit GST/HST on behalf of the venture. Through GST/HST Notice No. 284 Bare Trusts, Nominee Corporations and Joint Ventures the CRA has made it clear that it will not permit this practice to continue past the end of the year.
The law requires that the operator participates in the joint venture. This requirement can be fulfilled when the operator has an ownership interest in or supervisory or operational control of the joint endeavor. As nominee corporations are typically viewed by the tax authorities as mere shells with no authority other than to hold legal title to the genuine estate, the practice of using a nominee business as an operator does not please the legal requirements under the Excise Tax Act for an operator.
Lots of real estates joint ventures are established between joint venturers using candidate corporations to hold the title. In specific circumstances, these joint endeavors have elected for such candidate corporations to be the operators of the joint ventures. In these circumstances the nominee corporations not just hold title to the real estate, they likewise file GST/HST returns and remit GST/HST to the CRA on behalf of the joint endeavors.
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