The law needs that the operator participates in the joint endeavor. This requirement can be fulfilled when the operator has an ownership interest in or managerial or operational control of the joint endeavor. Nevertheless, as candidate corporations are frequently seen by the tax authorities as mere shells with no authority besides to hold legal title to the property, the practice of utilizing a nominee business as an operator does not satisfy the legal requirements under the Excise Tax Act for an operator.
Given that the creation of the GST in 1991, the CRA has actually revealed administrative tolerance towards the practice of using a nominee corporation to function as the operator to collect and remit GST/HST on behalf of the venture. Through GST/HST Notice No. 284 Bare Trusts, Nominee Corporations and Joint Ventures the CRA has actually made it clear that it will not allow this practice to continue past the end of the year.
Lots of realty joint endeavors are developed in between joint venturers utilizing nominee corporations to hold the title. In specific scenarios, these joint ventures have chosen for such nominee corporations to be the operators of the joint endeavors. In these situations the candidate corporations not only hold title to the genuine estate, but they also file GST/HST returns and remit GST/HST to the CRA on behalf of the joint ventures.
Participants of joint ventures that have elected to utilize a candidate business for GST/HST purposes must make sure that they take the essential steps in order to stay compliant by either calling one of the joint venturers as the operator for GST/HST functions or guaranteeing that the nominee company is an entity that fulfills the CRA s definition of a participant. With 2015 just weeks away, joint venturers who have actually not already taken the required steps should call their legal representative to guarantee that their joint venture is compliant with the CRA s brand-new position.
Is Your Joint Venture Compliant with the CRA s New Position on GST/HST Reporting Obligations?
By itself, a joint venture is incapable of signing up for a GST/HST account since it is not thought-about 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 section 273 of the Excise Tax Act to be the operator of the joint endeavor. Such operators will then register and account for the GST/HST on behalf of the joint venture.
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