Tax Insights: Bare trusts, nominees and joint ventures: Temporary administrative leniency

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Issue 2014-09

A recent Canada Revenue Agency (CRA) announcement grants taxpayers a temporary reprieve for a bare trust or nominee that reports the Goods and Services Tax/Harmonized Sales Tax (GST/HST) on behalf of the members of a joint venture.

Under the general Goods and Services Tax/Harmonized Sales Tax (GST/HST) rules, a joint venture is not a ‘person.’ Therefore, absent a joint venture election, all joint venture participants must account separately for:

  • their prorated share of GST/HST collectible on any sales
  • GST/HST paid on 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, participants in a joint venture can 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
  • 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 that are covered by the election.

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