Given that the beginning 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 endeavor. Nevertheless, through GST/HST Notice No. 284 Bare Trusts, Nominee Corporations and Joint Ventures the CRA has actually made it clear that it will not allow this practice to continue past the end of the year.
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 registering for a GST/HST account because it is ruled out to be an individual for the functions of the Excise Tax Act. Rather, an individual in a joint endeavor is capable of making an election pursuant to section 273 of the Excise Tax Act to be the operator of the joint endeavor. Such an operator will then sign up and represent the GST/HST on behalf of the joint endeavor.
Individuals of joint ventures that have chosen to use a nominee company for GST/HST functions must ensure that they take the essential actions in order to remain compliant by either calling among the joint venturers as the operator for GST/HST purposes or making sure that the candidate business is an entity that fulfills the CRA s definition of an individual. With 2015 only weeks away, joint venturers who have actually not currently taken the required steps need to call their legal representative to ensure that their joint venture is compliant with the CRA s new position.
The law needs that the operator is a participant in the joint venture. This requirement can be fulfilled when the operator has an ownership interest in or supervisory or functional 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 using a candidate business as an operator does not please the legal requirements under the Excise Tax Act for an operator.
Numerous property joint endeavors are established between joint venturers utilizing nominee corporations to hold the title. In particular situations, these joint ventures have actually elected for such candidate corporations to be the operators of the joint ventures. In these scenarios the candidate corporations not only hold title to the reality, they likewise submit GST/HST returns and remit GST/HST to the CRA on behalf of the joint endeavors.
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