The Canada Revenue Agency (CRA) recently issued a new GST/HST Notice No. 284, “Bare Trusts, Nominee Corporations and Joint Ventures.”
This document reiterates that a joint venture (JV) is not a “person” under the Excise Tax Act, and as such, cannot register and account for GST/HST. However, a GST/HST registered participant in certain joint ventures may be elected by the other participants to be the “operator”, and would account for GST/HST collected on taxable supplies on behalf of the other participants. In addition, the operator would claim any input tax credits (ITCs) on expenses incurred in relation to the JV activities on behalf of the other participants.
The CRA is very clear that the operator must have the authority to operate and manage the JV independent of the other participants, including the power to hire staff on behalf of the JV. Merely completing the GST/HST returns for the JV does not mean the participant is necessarily the operator.
The CRA is allowing a temporary administrative tolerance for reporting periods ending before January 1, 2015, where auditors have been advised not to assess for any GST/HST owing, where an assessment could be raised because the bare trust or nominee corporation is not a participant for purposes of section 273. This is subject to the JV having met other compliance requirements. Furthermore, the CRA will allow this administrative tolerance with the expectation that on a go-forward basis, a joint venture will ensure that a participant, who is a GST/HST registrant, is the operator of the joint venture.
For more details, participants in a joint venture may refer to GST/HST Policy Statement P-106, “Administrative Definition of a 'Participant' in a Joint Venture.”
It should also be noted that in an agency relationship, unless an election is filed, it is generally the principal who is entitled to claim any ITCs. Where a nominee corporation acts as agent in acquiring suppies on behalf of the participants in a JV, it would not be entitled to claim ITCs where the participants to the JV may be eligible to claim ITCs on those supplies.