TEI-Canada Customs and Revenue Agency liaison meeting agenda: excise tax issues

Tax Executive, The, Nov, 1999

Please clarify whether suppliers must verify the legitimacy of the signed statements. If so, please explain the justification for Revenue Canada's position that the verification of the certificates issued by provincial government entities rests with the suppliers that accept these certificates in good faith.

6. The definition of a residential complex excludes a building (or that part of a building) that is a hotel or a motel "if all or substantially all of the leases, licenses or similar arrangements ... provide or are expected to provide for periods of continuous possession or use of less than sixty days."

(a) Where the building contains condominium units -- some of which are provided for periods of less than 60 days -- is the "all or substantially all" test applied on a per-unit basis or are all short-term leased units taken into account for purposes of this calculation?

(b) The receipts and "bed-night" method are both acceptable means of applying the "all or substantially all" test. If the units must be aggregated, how can the owner of a single unit obtain the information required for the computation?

(c) If the units are aggregated for computation purposes, the units as a whole may become a residential complex because an owner may have decided to make long-term rather than short-term supplies. Change-of-use rules will thus apply and have consequences even for persons whose use of the unit does not change. Is this the result we should expect?

7. The allocation rules relating to the use of a building are particularly important in the case of a public sector organization.

(a) To determine the use of a building, are all of the buildings located on a given piece of land considered or is the use established separately for each building?

(b) What constitutes a building? For example, a college builds on its own land a school in 1991, a sports centre in 1994, and an indoor pool in 1999. If the three buildings are physically separate, they constitute three distinct buildings. If, instead, the three buildings are attached side by side, are there still three buildings?

8. In determining the input tax credits of a GST registrant, section 170(1)(b) of the Excise Tax Act excludes supplies acquired "exclusively for the personal consumption, use or enjoyment." Consider the following situation:

   A GST-registered employer transfers an employee from its plant in Montreal
   to the Winnipeg plant. The employer gives the employee a relocation
   allowance, which is based solely on an evaluation made by the employer of
   the cost of moving an employee from one location to another and does not
   confer any economic benefit to the employee.

Does the fact that the allowance is a benefit under section 6 of the Income Tax Act (as stipulated in section 170(1)(b)(ii)) preclude the application of section 170(1)(b) in the case where the relocation allowance is not "exclusively for the personal consumption, use or enjoyment" of the employee? If section 170(1)(b) does not apply, is the registrant deemed to have received a supply of the property or service as stated in section 174 of the ETA?