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GST — community centre construction

My client was a neighbourhood community centre. It had spent millions of dollars to build a new facility, including hundreds of thousands of dollars of GST. It used the facility for taxable purposes (charging fees that were subject to GST), so it claimed input tax credits (ITCs) to recover all this GST.

A CRA auditor audited the community centre's GST claim, and without discussing the issues simply issued a reassessment denying the ITCs. In the auditor's view, because the municipality owned the property, the community centre was providing the new facility construction to the municipality free of charge, and was not entitled to ITCs.

The client came to me for help. I filed a Notice of Objection for the community centre. However, I was concerned that the Appeals Officer might conclude that the municipality, as owner of the property, was the entity that constructed the facility. In fact, the written arrangements between them stated that the community centre was doing the construction as agent of the municipality.

I therefore worked with the municipality and community centre to apply for a ruling from the CRA to confirm that this was indeed an "agency" relationship. As such, the municipality was entitled to a 100% rebate of the GST paid on the construction. The CRA's Rulings section agreed, and advised the Appeals section accordingly. The community centre was denied its ITCs, but instead the municipality was entitled to a full rebate of the same amount, and could simply pass the rebate back to the community centre.

Problem vanished!

(2012)