Participants of joint ventures that have actually elected to use a nominee company for GST/HST functions should guarantee that they take the essential steps in order to stay compliant by either naming one of the joint venturers as the operator for GST/HST functions or guaranteeing that the candidate business is an entity that meets the CRA s definition of an individual. With 2015 only weeks away, joint venturers who have actually not currently taken the necessary actions must contact their legal representative to make sure that their joint venture is certified with the CRA s brand-new position.
Considering that the beginning of the GST in 1991, the CRA has shown administrative tolerance towards the practice of using a candidate corporation to serve as the operator to gather and remit GST/HST on behalf of the endeavor. However, through GST/HST Notice No. 284 Bare Trusts, Nominee Corporations, and Joint Ventures the CRA has 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 venture is incapable of registering for a GST/HST account since it is not thought-about to be a person for the purposes of the Excise Tax Act. Rather, a participant 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 venture. Such an operator will then sign up and account for the GST/HST on behalf of the joint venture.
The law requires that the operator be an individual in the joint endeavor. This requirement can be met when the operator has an ownership interest in or supervisory or operational control of the joint endeavor. Nevertheless, as candidate corporations are typically seen by the tax authorities as mere shells with no authority besides to hold legal title to the reality, the practice of utilizing a candidate business as an operator does not please the legal requirements under the Excise Tax Act for an operator.
Many genuine estate joint ventures are established between joint venturers utilizing candidate corporations to hold the title. In certain circumstances, these joint endeavors have chosen for such nominee corporations to be the operators of the joint ventures. In these situations the candidate 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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