Individuals of joint endeavors that have actually chosen to use a nominee business for GST/HST purposes need to make sure that they take the needed actions in order to stay certified by either calling among the joint venturers as the operator for GST/HST functions or making sure that the candidate business is an entity that satisfies the CRA s meaning of an individual. With 2015 just weeks away, joint venturers who have actually not currently taken the required steps must contact their attorney to guarantee that their joint venture is compliant with the CRA s new position.
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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 not considered to be an individual for the purposes of the Excise Tax Act. Instead, an individual in a joint endeavor is capable of making an election pursuant to area 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.
The law needs that the operator participates in the joint venture. This requirement can be met when the operator has an ownership interest in or supervisory or functional control of the joint endeavor. However, as candidate corporations are frequently seen by the tax authorities as mere shells without any authority besides to hold legal title to the property, the practice of utilizing a nominee company as an operator does not satisfy the legal requirements under the Excise Tax Act for an operator.
Many realty joint endeavors are established between joint venturers utilizing candidate corporations to hold the title. In particular situations, these joint ventures have actually chosen for such candidate corporations to be the operators of the joint ventures. In these scenarios the candidate corporations not just hold title to the genuine estate, they also submit GST/HST returns and remit GST/HST to the CRA on behalf of the joint ventures.
Given that the beginning of the GST in 1991, the CRA has actually shown administrative tolerance towards the practice of using a candidate corporation to act as the operator to gather 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 made it clear that it will not allow this practice to continue past the end of the year.
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