Excise Tax Act (R.S.C., 1985, c. E-15)

Allowances and Reimbursements

Marginal note:Travel and other allowances

174 For the purposes of this Part, where

• (a) a person pays an allowance

  • (i) to an employee of the person,

  • (ii) where the person is a partnership, to a member of the partnership, or

  • (iii) where the person is a charity or a public institution, to a volunteer who gives services to the charity or institution

  for

  • (iv) supplies all or substantially all of which are taxable supplies (other than zero-rated supplies) of property or services acquired in Canada by the employee, member or volunteer in relation to activities engaged in by the person, or

  • (v) the use in Canada, in relation to activities engaged in by the person, of a motor vehicle,

• (b) an amount in respect of the allowance is deductible in computing the income of the person for a taxation year of the person for the purposes of the Income Tax Act, or would have been so deductible if the person were a taxpayer under that Act and the activity were a business, and

• (c) in the case of an allowance to which subparagraph 6(1)(b)(v), (vi), (vii) or (vii.1) of that Act would apply

  • (i) if the allowance were a reasonable allowance for the purposes of that subparagraph, and

  • (ii) where the person is a partnership and the allowance is paid to a member of the partnership, if the member were an employee of the partnership, or, where the person is a charity or a public institution and the allowance is paid to a volunteer, if the volunteer were an employee of the charity or institution,

  the person considered, at the time the allowance was paid, that the allowance would be a reasonable allowance for those purposes and it is reasonable for the person to have considered, at that time, that the allowance would be a reasonable allowance for those purposes,

the following rules apply:

• (d) the person is deemed to have received a supply of the property or service,

• (e) any consumption or use of the property or service by the employee, member or volunteer is deemed to be consumption or use by the person and not by the employee, member or volunteer, and

• (f) the person is deemed to have paid, at the time the allowance is paid, tax in respect of the supply equal to the amount determined by the formula

  A × (B/C)

  where

  A

  is the amount of the allowance,

  B

  is

  • (i) in prescribed circumstances relating to a participating province, the percentage determined in prescribed manner, and

  • (ii) in any other case, the rate set out in subsection 165(1), and

  C

  is the total of 100% and the percentage determined for B.

Marginal note:Employee, partner or volunteer reimbursement

• 175 (1) Where an employee of an employer, a member of a partnership or a volunteer who gives services to a charity or public institution acquires or imports property or a service or brings it into a participating province for consumption or use in relation to activities of the employer, partnership, charity or public institution (each of which is referred to in this subsection as the “person”), the employee, member or volunteer paid the tax payable in respect of that acquisition, importation or bringing in and the person pays an amount to the employee, member or volunteer as a reimbursement in respect of the property or service, for the purposes of this Part,

  • (a) the person is deemed to have received a supply of the property or service;

  • (b) any consumption or use of the property or service by the employee, member or volunteer in relation to activities of the person is deemed to be consumption or use by the person and not by the employee, member or volunteer; and

  • (c) the person is deemed to have paid, at the time the reimbursement is paid, tax in respect of the supply equal to the amount determined by the formula

    A × B

    where

    A

    is the tax paid by the employee, member or volunteer in respect of the acquisition, importation or bringing into a particular province of the property or service by the employee, member or volunteer, and

    B

    is the lesser of

    • (i) the percentage of the cost to the employee, member or volunteer of the property or service that is reimbursed, and

    • (ii) the extent (expressed as a percentage) to which the property or service was acquired, imported or brought into the province, as the case may be, by the employee, member or volunteer for consumption or use in relation to activities of the person.

• Marginal note:Exception

  (2) Subsection (1) does not apply to a reimbursement in respect of property or a service acquired, imported or brought into a participating province by a member of a partnership where paragraph 272.1(2)(b) applies to the acquisition, importation or bringing in, as the case may be, and the reimbursement is paid to the member after the member files with the Minister a return of the member under section 238 in which an input tax credit in respect of the property or service is claimed.

Marginal note:Warrantee reimbursement

175.1 Where

• (a) the beneficiary of a warranty (other than an insurance policy) in respect of the quality, fitness or performance of tangible property acquires or imports property or a service or brings it into a participating province and tax is payable by the beneficiary in respect of the acquisition, importation or bringing in, and

• (b) a registrant pays to the beneficiary, under the terms of the warranty, an amount as a reimbursement in respect of the property or service and therewith provides written indication that a portion of the amount is on account of tax,

the following rules apply:

• (c) the registrant may claim an input tax credit, for the reporting period of the registrant in which the reimbursement is paid, equal to the amount (referred to in this section as the “tax reimbursed”) determined by the formula

  A × B/C

  where

  A

  is the tax payable by the beneficiary,

  B

  is the amount of the reimbursement, and

  C

  is the cost to the beneficiary of the property or service, and

• (d) where the beneficiary is a registrant who was entitled to claim an input tax credit, or a rebate under Division VI, in respect of the property or service, the beneficiary is deemed, for the purposes of this Part, to have made a taxable supply and to have collected, at the time the reimbursement is paid, tax in respect of the supply equal to the amount determined by the formula

  A × B/C

  where

  A

  is the tax reimbursed,

  B

  is the total of the input tax credits and rebates under Division VI that the beneficiary was entitled to claim in respect of the property or service, and

  C

  is the tax payable by the beneficiary in respect of the supply to, or importation by, the beneficiary of the property or service.

Used Returnable Containers

Marginal note:Acquisition of used returnable containers

• 176 (1) Subject to this Division, if

  • (a) a registrant is the recipient of a supply made in Canada by way of sale of used tangible personal property (other than a returnable container as defined in subsection 226(1)) that is a usual covering or container of a class of coverings or containers in which property (other than property the supply of which is a zero-rated supply) is delivered,

  • (b) tax is not payable by the registrant in respect of the supply,

  • (c) the property is acquired for the purpose of consumption, use or supply in the course of commercial activities of the registrant, and

  • (d) the registrant pays consideration for the supply that is not less than the total of

    • (i) the consideration that the registrant charges for supplies by the registrant of used coverings or containers of that class, and

    • (ii) all tax calculated on that consideration,

    for the purposes of this Part, the registrant is deemed (except where section 167 applies to the supply) to have paid, at the time any amount is paid as consideration for the supply, tax in respect of the supply equal to the amount determined by the formula

    (A/B) × C

    where

    A

    is

    • (a) if the supply is made in a participating province, the total of the rate set out in subsection 165(1) and the tax rate for that province, and

    • (b) in any other case, the rate set out in subsection 165(1),

    B

    is the total of 100% and the percentage determined for A, and

    C

    is the amount paid as consideration for the supply.

• Marginal note:Consideration exceeding fair market value

  (2) For the purposes of subsection (1), where a person makes a supply of used tangible personal property to a registrant with whom the person is not dealing at arm’s length for consideration that exceeds the fair market value of the property at the time ownership of the property is transferred to the registrant, the value of the consideration for the supply shall be deemed to be equal to the fair market value of the property at that time.

• (3) to (7) [Repealed, 1997, c. 10, s. 25]

Agents

Marginal note:Supply on behalf of person not required to collect tax

• 177 (1) Where

  • (a) a person (in this subsection referred to as the “principal”) makes a supply (other than an exempt or zero-rated supply) of tangible personal property to a recipient (otherwise than by auction),

  • (b) the principal is not required to collect tax in respect of the supply except as provided in this subsection, and

  • (c) a registrant (in this subsection referred to as the “agent”), in the course of a commercial activity of the agent, acts as agent in making the supply on behalf of the principal,

  the following rules apply:

  • (d) where the principal is a registrant and the property was last used, or acquired for consumption or use, by the principal in an endeavour of the principal, within the meaning of subsection 141.01(1), and the principal and agent jointly elect in writing, the supply of the property to the recipient is deemed to be a taxable supply for the following purposes:

    • (i) all purposes of this Part, other than determining whether the principal may claim an input tax credit in respect of property or services acquired or imported by the principal for consumption or use in making the supply to the recipient, and

    • (ii) the purpose of determining whether the principal may claim an input tax credit in respect of services supplied by the agent relating to the supply of the property to the recipient, and

  • (e) in any other case, the supply of the property to the recipient is deemed, for the purposes of this Part, to be a taxable supply made by the agent and not by the principal and the agent is deemed, for the purposes of this Part other than section 180, not to have made a supply to the principal of services relating to the supply of the property to the recipient.

• Marginal note:Election for agent to account for tax

  (1.1) Where a registrant, in the course of a commercial activity of the registrant, acts as agent in making a supply (otherwise than by auction) on behalf of a person who is required to collect tax in respect of the supply otherwise than as a consequence of the application of paragraph (1)(d) and the registrant and the person jointly elect in prescribed form containing prescribed information,

  • (a) the tax collectible in respect of the supply or any amount charged or collected by the registrant on behalf of the person as or on account of tax in respect of the supply is deemed to be collectible, charged or collected, as the case may be, by the registrant, and not by the person, for the purposes of

    • (i) determining the net tax of the registrant and of the person, and

    • (ii) applying sections 222 and 232;

  • (b) the registrant and the person are jointly and severally, or solidarily, liable for all obligations under this Part that arise upon or as a consequence of

    • (i) the tax becoming collectible,

    • (ii) a failure to account for or pay as and when required under this Part an amount of net tax of the registrant, or an amount required under section 230.1 to be paid by the registrant, that is reasonably attributable to the supply,

    • (iii) the registrant claiming, in respect of the supply, an amount as a deduction under section 231 or 232 to which the registrant was not entitled or in excess of the amount to which the registrant was entitled,

    • (iv) a failure to pay as and when required under this Part the amount of any underpayment of net tax by the registrant, or an amount required under section 230.1 to be paid by the registrant, that is reasonably attributable to a claim referred to in subparagraph (iii),

    • (v) a recovery of all or part of a bad debt relating to the supply in respect of which the registrant claimed a deduction under subsection 231(1), or

    • (vi) a failure to account for or pay as and when required under this Part an amount of net tax of the registrant, or an amount required under section 230.1 to be paid by the registrant, that is reasonably attributable to an amount required under subsection 231(3) to be added to the net tax of the registrant in respect of a bad debt referred to in subparagraph (v); and

  • (c) the threshold amounts of the registrant and of the person under subsections 249(1) and (2) shall be determined as if any consideration that became due to the person, or was paid to the person without having become due, in respect of the supply had become due to the registrant, or had been paid to the registrant without having become due, as the case may be, and not to the person.

• Marginal note:Billing agent

  (1.11) If a registrant acts as agent of a supplier in charging and collecting consideration and tax payable in respect of a supply made by the supplier but the registrant does not act as agent in making the supply, the registrant is deemed to have acted as agent of the supplier in making the supply for the purposes of

  • (a) subsection (1.1); and

  • (b) if an election under subsection (1.1) is made in respect of the supply, any other provision that refers to a supply in respect of which an election under that subsection has been made.

• Marginal note:Joint revocation

  (1.12) A registrant and a supplier who have jointly made an election under subsection (1.1) may, in prescribed form containing prescribed information, jointly revoke the election with respect to any supply made on or after the effective date specified in the revocation, and the election is thereby deemed, for the purposes of this Part, not to have been made with respect to that supply.

• Marginal note:Supply by auctioneer

  (1.2) Where a registrant (in this subsection referred to as the “auctioneer”), acting as auctioneer and agent for another person (in this subsection referred to as the “principal”) in the course of a commercial activity of the auctioneer, makes on behalf of the principal a supply by auction of tangible personal property to a recipient, the supply is deemed, for the purposes of this Part, to be a taxable supply made by the auctioneer and not by the principal and the auctioneer is deemed, for the purposes of this Part other than section 180, not to have made a supply to the principal of services relating to the supply of the property to the recipient.

• Marginal note:Exception where election

  (1.3) Where

  • (a) a registrant (in this subsection referred to as the “auctioneer”), on a particular day, makes a particular supply by auction of prescribed property on behalf of another registrant (in this subsection referred to as the “principal”) and, but for subsection (1.2), that supply would be a taxable supply made by the principal,

  • (b) the auctioneer and principal jointly elect in prescribed form containing prescribed information in respect of the particular supply, and

  • (c) all or substantially all of the consideration for supplies made by auction on the particular day by the auctioneer on behalf of the principal is attributable to supplies of prescribed property in respect of which the auctioneer and principal have elected under this subsection,

  subsection (1.2) does not apply to the particular supply or to any supply made by the auctioneer to the principal of services relating to the particular supply.

• (1.4) [Repealed, 1997, c. 10, s. 26]

• Marginal note:Supply for artists, etc.

  (2) For the purposes of this Part other than sections 148 and 249, where a prescribed registrant, acting in the course of a commercial activity, makes a supply on behalf of another person of intangible personal property in respect of a product of an author, performing artist, painter, sculptor or other artist, the following rules apply:

  • (a) the other person shall be deemed not to have made the supply to the recipient;

  • (b) the registrant shall be deemed to have made the supply to the recipient; and

  • (c) the registrant shall be deemed not to have made a supply to the other person of a service in relation to the supply to the recipient.