| Benefits to
shareholders,
etc.
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(2) For the purposes of this Part, where at
any time a registrant that is a corporation,
partnership, trust, charity, public institution or
non-profit organization appropriates any
property (other than capital property of the
registrant) that was acquired, manufactured or
produced, or any service acquired or
performed, in the course of commercial
activities of the registrant, to or for the benefit
of a shareholder, partner, beneficiary or
member of the registrant or any individual
related to such a shareholder, partner,
beneficiary or member, in any manner
whatever (otherwise than by way of a supply
made for consideration equal to the fair
market value of the property or service), the
registrant is deemed
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(2) Subsection (1) is deemed to have come
into force on January 1, 1997.
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| 1993, c. 27,
s. 40(1);
1994, c. 21,
ss. 126(1)(F),
(2), (3)
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22. (1) Subsection 173(1) of the Act is
replaced by the following:
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| Employee and
shareholder
benefits
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173. (1) Where a registrant makes a supply
(other than an exempt or zero-rated supply) of
property or a service to an individual or a
person related to the individual and
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(a) an amount (in this subsection referred to
as the ``benefit amount'') in respect of the
supply is required under paragraph 6(1)(a),
(e), (k) or (l) or subsection 15(1) of the
Income Tax Act to be included in computing
the individual's income for a taxation year
of the individual, or
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(b) the supply relates to the use or operation
of an automobile and an amount (in this
subsection referred to as a
``reimbursement'') is paid by the individual
or a person related to the individual that
reduces the amount in respect of the supply
that would otherwise be required under
paragraph 6(1)(e), (k) or (l) or subsection
15(1) of that Act to be so included,
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the following rules apply:
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(c) in the case of a supply of property
otherwise than by way of sale, the use made
by the registrant in so providing the
property to the individual or person related
to the individual is deemed, for the purposes
of this Part, to be use in commercial
activities of the registrant and, to the extent
that the registrant acquired or imported the
property for the purpose of making that
supply, the registrant is deemed, for the
purposes of this Part, to have so acquired or
imported the property for use in
commercial activities of the registrant, and
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(d) in any case, except where
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(i) the registrant was, because of section
170, not entitled to claim an input tax
credit in respect of the last acquisition or
importation of the property or service by
the registrant,
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(ii) an election under subsection (2) by
the registrant in respect of the property is
in effect at the beginning of the taxation
year,
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(iii) the registrant is an individual or a
partnership and the property is a
passenger vehicle or aircraft of the
registrant that is not used by the registrant
exclusively in commercial activities of
the registrant, or
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(iv) the registrant is not an individual, a
partnership or a financial institution and
the property is a passenger vehicle or
aircraft of the registrant that is not used
by the registrant primarily in commercial
activities of the registrant,
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for the purpose of determining the net tax of
the registrant,
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(v) the total of the benefit amount and all
reimbursements is deemed to be the total
consideration payable in respect of the
provision during the year of the property
or service to the individual or person
related to the individual,
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(vi) the tax calculated on the total
consideration is deemed to be equal to
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(A) where the benefit amount is an
amount that is or would, if the
individual were an employee of the
registrant and no reimbursements were
paid, be required under paragraph
6(1)(k) or (l) of the Income Tax Act to
be included in computing the
individual's income, the prescribed
percentage of the total consideration,
and
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(B) in any other case, 6/106ths of the
total consideration, and
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(vii) that tax is deemed to have become
collectible, and to have been collected,
by the registrant
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(A) except where clause (B) applies,
on the last day of February of the year
following the taxation year, and
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(B) where the benefit amount is or
would, if no reimbursements were
paid, be required under subsection
15(1) of that Act to be included in
computing the individual's income
and relates to the provision of the
property or service in a taxation year of
the registrant, on the last day of that
taxation year.
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(2) Paragraph 173(3)(a) of the Act is
replaced by the following:
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(a) notwithstanding paragraph (1)(c), the
registrant is deemed to have begun, on that
day, to use the property exclusively in
activities of the registrant that are not
commercial activities and, at all times
thereafter until the registrant next disposes
of or ceases to lease the property, the
registrant is deemed to use the property
exclusively in activities of the registrant
that are not commercial activities;
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(3) Subsection 173(3) of the Act is
amended by striking out the word ``and'' at
the end of paragraph (b), by adding the
word ``and'' at the end of paragraph (c) and
by adding the following after paragraph
(c):
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(d) there shall not be included, in
determining an input tax credit claimed by
the registrant in the return under section 238
for the particular or any subsequent
reporting period, tax calculated on an
amount of consideration, or a value
determined under section 215, that can
reasonably be attributed to
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(i) any property that is acquired or
imported for consumption or use in
operating the vehicle or aircraft in
respect of which the election is made and
that is, or is to be, used or consumed after
that day, or
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(ii) that portion of any service relating to
the operation of that vehicle or aircraft
that is, or is to be, rendered after that day;
and
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(e) where an amount in respect of any tax
referred to in paragraph (d) was included in
determining an input tax credit claimed by
the registrant in a return under section 238
for a reporting period ending before the
particular reporting period, that amount
shall be added in determining the net tax of
the registrant for the particular reporting
period.
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(4) Subsections (1) and (2) apply to the
1996 and subsequent taxation years.
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(5) Subsection (3) applies for the purpose
of determining the net tax of a registrant for
reporting periods ending after 1995 except
that paragraph 173(3)(d) of the Act, as
enacted by subsection (3), applies to
property or services acquired or imported
for consumption or use in operating a
vehicle or aircraft in respect of which an
election under subsection 173(2) of the Act
becomes effective before 1996 as if the
election had become effective on January 1,
1996.
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| 1994, c. 9,
s. 9(1)
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23. (1) Subparagraph 174(a)(iii) of the
Act is replaced by the following:
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(iii) where the person is a charity or a
public institution, to a volunteer who
gives services to the charity or institution
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| 1994, c. 9,
s. 9(1)
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(2) Subparagraph 174(c)(ii) of the Act is
replaced by the following:
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(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,
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| 1994, c. 9,
s. 9(1)
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(3) The portion of section 174 of the Act
after paragraph (c) is replaced by the
following:
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the following rules apply:
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(d) the person is deemed to have received a
supply of the property or service,
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(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
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(f) the person is deemed to have paid at the
time the allowance is paid, tax in respect of
the supply equal to the tax fraction of the
allowance.
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(4) Subsections (1) and (2) are deemed to
have come into force on January 1, 1997.
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(5) Subsection (3) is deemed to have come
into force on December 17, 1990 but does
not apply for the purpose of determining
any amount claimed (other than an amount
deemed under paragraph 296(5)(a) of the
Act to have been claimed as a result of an
assessment made after April 23, 1996) in a
return under Division V, or in an
application under Division VI, of Part IX of
the Act that is received by the Minister of
National Revenue before April 23, 1996.
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| 1994, c. 9,
s. 9(1)
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24. (1) Section 175 of the Act is replaced
by the following:
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Employee,
partner or
volunteer
reimburse-
ment
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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 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 or
importation 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,
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(a) the person is deemed to have received a
supply of the property or service;
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(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
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(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
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A x B
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A is the tax paid by the employee, member
or volunteer in respect of the acquisition
or importation of the property or service
by the employee, member or volunteer,
and
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(i) the percentage of the cost to the
employee, member or volunteer of the
property or service that is reimbursed,
and
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(ii) the extent (expressed as a
percentage) to which the property or
service was acquired or imported by
the employee, member or volunteer
for consumption or use in relation to
activities of the person.
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| Exception
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(2) Subsection (1) does not apply to a
reimbursement in respect of property or a
service acquired or imported by a member of
a partnership where paragraph 272.1(2)(b)
applies to the acquisition or importation 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.
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Warrantee
reimburse-
ment
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175.1 Where
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(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 in respect of which tax is payable by
the beneficiary, and
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(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,
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the following rules apply:
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(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
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A x B/C
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A is the tax payable by the beneficiary in
respect of the supply to, or importation
by, the beneficiary of the property or
service,
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B is the amount of the reimbursement, and
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C is the cost to the beneficiary of the
property or service, and
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(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
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A x B/C
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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
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C is the tax payable by the beneficiary in
respect of the supply to, or importation
by, the beneficiary of the property or
service.
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(2) Subsection (1) is deemed to have come
into force on December 17, 1990 except that
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(a) it does not apply for the purpose of
determining any amount claimed (other
than an amount deemed under
paragraph 296(5)(a) of the Act to have
been claimed as a result of an assessment
made after April 23, 1996) in a return
under Division V, or in an application
under Division VI, of Part IX of the Act
that is received by the Minister of
National Revenue before April 23, 1996;
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(b) in applying subsection 175(1) of the
Act, as enacted by subsection (1), before
1997, it shall be read as if no reference
were made to a public institution;
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(c) in applying subsection 175(2) of the
Act, as enacted by subsection (1), on or
before April 23, 1996, the reference in
that subsection to ``paragraph
272.1(2)(b)'' shall be read as a reference
to ``subsection 145(2)''; and
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(d) section 175.1 of the Act, as enacted by
subsection (1), applies only to amounts
reimbursed after April 23, 1996.
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| 1990, c. 45,
s. 12(1)
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24.1 (1) The heading before section 176 of
the Act is replaced by the following:
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