Numerous property joint ventures are developed 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 only 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.hhs
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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 because it is ruled out to be a person for the Excise Tax Act. Rather, a participant in a joint endeavor can make an election according to section 273 of the Excise Tax Act to be the operator of the joint endeavor. Such operators will then register and represent the GST/HST on behalf of the joint venture.
Since the beginning of the GST in 1991, the CRA has revealed administrative tolerance towards the practice of utilizing a nominee corporation to function as the operator to collect and remit GST/HST on behalf of the endeavor. 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 candidate corporations are often 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 company as an operator does not please the legal requirements under the Excise Tax Act for an operator.
Participants of joint ventures that have chosen to use a nominee business for GST/HST purposes need to ensure that they take the needed actions to remain compliant by either naming among the joint venturers as the operator for GST/HST purposes or making sure that the nominee business is an entity that meets the CRA s definition of a participant. With 2015 only weeks away, joint venturers who have not already taken the required steps should contact their lawyer to make sure that their joint endeavor is certified with the CRA s new position.
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