The law requires that the operator be an individual in the joint venture. This requirement can be fulfilled when the operator has an ownership interest in or supervisory or functional control of the joint venture. As nominee corporations are often viewed by the tax authorities as mere shells with no authority other than to hold legal title to the genuine estate, the practice of utilizing a nominee company as an operator does not please the legal requirements under the Excise Tax Act for an operator.
Is Your Joint Venture Compliant with the CRA s New Position on GST/HST Reporting Obligations?
By itself, a joint venture is incapable of registering for a GST/HST account due to the fact that it is ruled out to be an individual for the functions of the Excise Tax Act. Instead, a participant in a joint endeavor is capable of making an election pursuant to area 273 of the Excise Tax Act to be the operator of the joint venture. Such an operator will then register and represent the GST/HST on behalf of the joint endeavor.
Individuals of joint endeavors that have actually elected to utilize a nominee business for GST/HST purposes should guarantee that they take the necessary steps in order to stay certified by either naming one of the joint venturers as the operator for GST/HST functions or guaranteeing that the candidate company is an entity that fulfills the CRA s meaning of a participant. With 2015 just weeks away, joint venturers who have not currently taken the required actions need to call their lawyer to guarantee that their joint venture is certified with the CRA s brand-new position.
Because of the beginning of the GST in 1991, the CRA has shown administrative tolerance towards the practice of utilizing a candidate corporation to act as the operator to collect and remit GST/HST on behalf of the endeavor. Through GST/HST Notice No. 284 Bare Trusts, Nominee Corporations and Joint Ventures the CRA has made it clear that it will not permit this practice to continue past the end of the year.
Lots of property joint ventures are developed in between joint venturers utilizing candidate corporations to hold the title. In particular situations, these joint ventures have actually chosen for such nominee corporations to be the operators of the joint endeavors. In these situations the candidate corporations not just hold title to the real estate, they also file GST/HST returns and remit GST/HST to the CRA on behalf of the joint endeavors.
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