Tax memo: Joint ventures and partnerships: GST/HST and issues for real estate industry

View this page in: Français

Memo No. 2012-42

This Tax memo highlights certain Goods and Services Tax/Harmonized Sales Tax (GST/HST) and Workplace Safety and Insurance Board (WSIB) issues relevant to those in the real estate and construction industries:

  • some GST/HST issues real estate joint ventures and partnerships encounter;
  • issues related to the use of bare trustees in the real estate sector; and
  • an Ontario WSIB coverage change, effective January 1, 2013, relevant to employers in the construction industry.

Under the general GST/HST rules, a joint venture is not a “person.” Therefore, unless a joint venture election is in place, all participants in a joint venture must account separately for their prorated share of the GST/HST collectible on any sales, as well as the GST/HST paid on the joint venture purchases.

The joint venture election under the Excise Tax Act provides flexibility in the reporting of the GST/HST for certain prescribed joint ventures. For GST/HST purposes, the participants in a joint venture may elect one of the following to be the “operator” of the joint venture:

  • a member that contributed resources and takes a share of revenue or losses; or
  • a manager of the joint venture.

The election is particularly helpful when there is a single operator and the other participants are not directly involved in day-to-day operations.

The elected joint venture operator is responsible for accounting for the GST/HST on all sales made by participants through the joint venture and will claim allowable input tax credits for tax paid on expenses and other outlays made through the joint venture. However, the operator and the participants remain jointly and severally liable for the collection and remittance of GST/HST for the joint venture operations.

Participants will still be permitted to claim input tax credits for tax paid on expenses related to the joint venture that they incur directly (that is, not through the joint venture), to the extent that they would be entitled do so if the election had not been made.