Tax & Trade Blog

Non-residents carrying on business in Canada must be cognizant of the potential to be involuntary registered for the GST/HST. 

Subsections 241(1.3) to (1.5) of the ETA (which came into effect in June 2014) empower the CRA to unilaterally register a person who has not registered for GST/HST but, in the CRA’s view, is required to do so. The budget states that these amendments will strengthen GST/HST registration compliance and help the CRA to combat the underground economy.

An undisclosed agency exists if an agent enters into a contract with a third party on behalf of a principal, but does not reveal to the third party either the identity of the principal or the fact that the agent is acting on behalf of any principal.

The CRA's treatment of "bare trusts" has been problematic from the first days of the GST.

When the GST was first implemented in January 1991, the CRA was initially advising bare trustees of bare trusts (trusts that operating at the behest of their beneficiaries, and where the trustee has no independent authority other than following express directions of the beneficiaries) that it was the bare trustee that was viewed as the supplier for GST purposes, and the person required to register for GST purposes. This position was changed in mid-1992, when the CRA flipping its position, and now advising that bare trustees were not allowed to register, and that the beneficiaries of these bare trusts were the one's required to register.

Directors often ask about creditor-proofing personal assets when facing a possible assessments for "Director's Liability" under Canada's income tax and GST legislation. That question usually follows the director's first understanding that the Canada Revenue Agency (CRA) has special powers in both the Income Tax Act (ITA) and the Excise Tax Act (ETA) to assess a director where a corporation leaves behind unpaid income tax or GST debts, and to realize on (seize) a director's personal assets (e.g,, homes, cottages, cars, monetary savings) to satisfy those debts. (These rules are more specifically found in section 227.1 of the ITA and section 323 of the ETA, and is almost identical.)

Also surprising most directors are special rules in the ITA and ETA allowing the CRA to attack transfers of a director's personal assets to non-arm's-length parties (e.g. wives, children, siblings, parents, etc.) where the value paid by the relatives is less than the fair-market value of the property being transferred. (These rules are found in subsection 160(1) of the ITA and section 325 of the ETA, and are also fairly similar.)

The Canada Revenue Agency ("CRA") recently reversed its long standing administrative policy regarding the exempt nature of nursing staffing agencies, taking the position that these services are taxable and not exempt:   see Excise and GST/HST News No. 89 (issued without much fanfare in late Summer 2013).

This effectively decision has effectively reversed the CRA's twenty year old position in GST Memorandum 300-4-2 (Health Care Services, September, 17, 1993) which had previously concluded that these services were all exempt, under section 6 of Part II of Schedule V of the Excise Tax Act.