Considering that the beginning of the GST in 1991, the CRA has actually shown administrative tolerance towards the practice of using a nominee corporation to serve as the operator to gather 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.
Lots of realty joint endeavors are established between joint venturers utilizing candidate corporations to hold the title. In certain situations, these joint ventures have actually elected for such candidate corporations to be the operators of the joint endeavors. In these circumstances the nominee corporations not just hold title to the reality, they likewise submit GST/HST returns and remit GST/HST to the CRA on behalf of the joint ventures.
The law requires that the operator participates in the joint venture. This requirement can be satisfied when the operator has an ownership interest in or supervisory or operational control of the joint endeavor. As nominee corporations are typically seen 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 candidate company as an operator does not please the legal requirements under the Excise Tax Act for an operator.
Individuals of joint ventures that have actually chosen to use a candidate business for GST/HST functions must guarantee that they take the needed steps in order to stay compliant by either naming one of the joint venturers as the operator for GST/HST functions or making sure that the nominee company 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 necessary actions must call their attorney to guarantee that their joint venture is compliant with the CRA s new position.
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 purposes of the Excise Tax Act. Rather, an individual 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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