Registration of a Partner

Please note that the following Policy Statement, although correct at the time of issue, may not have been updated to reflect any subsequent legislative changes.

GST/HST Policy Statement P-216

Date of Issue

April 8, 1998

Subject

Registration of a partner (other than an individual) not engaged in a commercial activity other than the commercial activity of the partnership.

Legislative Reference(s)

Subsections 272.1(1) and (2) of the Excise Tax Act (the "Act")

National Coding System File Number(s)

11635-8, 11650-8, 11690-14

Effective Date

April 24, 1996

Text

Issues and Decisions

This policy provides the department's interpretation of section 272.1 of the Act with respect to the registration of a partner (other than an individual) whose only commercial activities are those of the partnership, and a partner's ability to claim input tax credits (ITCs).

Registration

The Department will permit a partner (other than an individual) to voluntarily register for GST/HST purposes beginning April 24, 1996, notwithstanding the fact that the partner is not engaged in any commercial activity in Canada other than the commercial activity engaged in by it as a member of the partnership. Once registered, the partner will be subject to the normal obligations and entitlements of a registrant under the Act, including the requirement to collect and remit tax on all taxable supplies.

A corporate partner who was not a registrant before April 24, 1996, will be permitted to voluntarily register retroactively and to claim ITCs for a reporting period beginning on or before April 23, 1996, subject to the statutory time limitations under subsection 225(4) of the Act.

A non-corporate partner (other than an individual) will be permitted to voluntarily register retroactively, but not earlier than April 24, 1996.

Voluntary registration, on a retroactive basis, is provided as an interim measure only in respect of the enactment of section 272.1 of the Act and will be limited to applications for registration received up to 6 months after the date of issuance of this policy statement.

Entitlement to ITCs

A partner's entitlement to ITCs is subject to the restrictions as set out in subsection 272.1(2). Where a member of a partnership (other than an individual) incurs an expenditure in relation to the activities of the partnership and the partner is reimbursed by the partnership, the partner's claim for ITCs will be reduced to the extent of the ITC portion of the reimbursement and the partnership will be entitled to claim an ITC for the GST included in the reimbursement.

A partnership will not be entitled to claim an ITC in respect of an expense reimbursed to a partner where the partner has already claimed an ITC in respect of the same expense by virtue of paragraph 272.1(2)(b).

Corporate Partners registered for GST prior to April 24, 1996

A corporate partner who was registered for GST purposes prior to April 24, 1996, but was not engaged in any commercial activity in Canada other than the commercial activity engaged in by the person as a member of the partnership, may remain registered for the period before April 24, 1996.

Non-Corporate Partners registered for GST prior to April 24, 1996

A non-corporate partner (other than an individual) without independent commercial activity separate and apart from that of the partnership is not eligible for GST/HST registration for any period prior to April 24, 1996. To be eligible for GST/HST registration for any period prior to April 24, 1996, a non-corporate partner must meet the requirements for registration under section 240 of the Act.

SAMPLE RULING

Statement of Facts

1. On January 1, 1993 A Co., a corporation, acquired an interest in a partnership, XYZ Firm.

2. XYZ Firm is engaged in commercial activities in Canada and is registered for GST/HST purposes.

3. A Co. is not engaged in any commercial activity in Canada other than the commercial activity engaged in by it as a member of XYZ Firm.

4. Between January 1, 1993 and April 23, 1996, A Co. acquired or imported certain property and services for consumption, use or supply in the course of the commercial activities of XYZ Firm and paid GST in respect of the property and services.

5. The property and services were not acquired or imported by A Co. on account of the partnership, nor did XYZ Firm reimburse A Co. for the expenses.

6. On January 1, 1997, A Co. makes an application for GST/HST registration with the Department.

Ruling Requested

1. That A Co. may voluntarily register for GST/HST purposes, notwithstanding the fact that it is not engaged in any commercial activity in Canada other than the activity engaged in by A Co. as a member of the partnership.

2. That A Co. will be eligible to claim ITCs in respect of property and services acquired or imported between January 1, 1993 and April 23, 1996, for consumption, use or supply in the course of the commercial activities of XYZ Firm.

Ruling Given

1. A Co. may voluntarily register for GST/HST purposes, notwithstanding the fact that it is not engaged in any commercial activity in Canada other than the activity engaged in by it as a member of the partnership.

2. A Co. may voluntarily register on a retroactive basis provided that A Co.'s application for registration is received by the Department no later than 6 months after the date of issuance of this GST/HST Policy Statement. A Co. will be eligible to claim ITCs for reporting periods that began on or after January 1, 1993, subject to the statutory time limitations under subsection 225(4) of the Excise Tax Act.