Jan. 30, 2020 - In our annual Tax Review and Outlook report, we look back at significant developments that shaped the Canadian and U.S. tax landscapes in 2019 and offer our predictions on what to expect in the year ahead. Key Canadian Developments in 2019 Proposed changes to the employee stock option rules...
CRA Imposes Deadline for Eliminating HST/GST Joint Venture Reporting by Nominees
The Canada Revenue Agency has announced that, after 2014, it will no longer tolerate joint venture arrangements in which nominee corporations file HST/GST returns and remit HST/GST for the joint venture.
A joint venture election made for HST or GST purposes permits most purchases and sales made for the account of a qualifying joint venture (such as co-ownership of rental real estate, and various types of joint venture arrangements in the resources sector) to be reported on the HST/GST returns of a qualifying “participant” in the joint venture where the co-venturers have elected for that participant to be the “operator” of the joint venture for HST/GST purposes. There is essentially the same rule for Québec sales tax purposes. Such a “joint venture election” avoids the inconvenience of reporting the joint venture results pro rata in all the HST/GST (or QST) returns of the co-venturers.
It has been common, especially in real estate joint ventures, for nominee or “bare trustee” corporations to be designated as the HST/GST operator. The CRA has indicated in a number of recent interpretations that this practice does not accord with its interpretation of the applicable provision. However, the CRA’s administrative practice has been to generally refrain from assessing the co-venturers for their “share” of the joint venture’s tax remittance obligations, provided that the right amount of tax has been reported and remitted under the nominee returns.
December 2014 Deadline
In light of the CRA announcement that it now is ceasing its “administrative tolerance” of such arrangements after this year, participants in joint ventures which have made the joint venture election should review those arrangements to assess whether they comply with the CRA’s policies – and if they do not, give careful consideration to restructuring those arrangements before 2015.
Jan. 30, 2020 - Review of U.S. Tax Developments in 2019 In 2019, the U.S. tax world continued to be primarily concerned with developing guidance under the monumental Tax Cuts and Jobs Act (TCJA), which was enacted at the end of 2017. Major regulatory projects were proposed beginning in 2018,...