GST/HST measures in the Fall Economic Statement

  • December 19, 2023
  • Alan Kenigsberg and Roger Smith

On November 21, 2023, the Honourable Chrystia Freeland, Deputy Prime Minister and Minister of Finance, tabled the Fall Economic Statement 2023. The Statement contains two proposals regarding the GST/HST.

(a) Joint venture election

The Statement announces a new joint venture election to deal with certain commercial activities and indicates that the government is seeking stakeholders’ views and comments on the proposed new joint venture election rules.

It should be noted that the new draft election currently appears to be in addition to the existing joint venture election under the GST/HST rules, rather than replacing it. The government has also asked for comments on transitional considerations for the existing joint venture election rules.

       (i) Background

Under the GST/HST, unlike a partnership, a contractual joint venture is not a person and cannot register for GST/HST on its own account. Without a joint venture election, each participant in the joint venture would have to separately account for their proportionate share of taxes that are collectible and claim their proportionate share of input tax credits. As it is easier for both the CRA and the joint venture participants to administer, the Excise Tax Act currently contains a joint venture election rule. Under this election, generally the operator of the joint venture is entitled to file GST/HST returns as if the joint venture were a person (i.e., it remits all of the tax collected and claims all of the input tax credits). The election is only eligible for certain limited activities.

       (ii) Proposed new joint venture election rules

The government has stated that the purpose of the new joint venture election rules is to “allow more participants in commercial joint ventures access to the simplification benefits of the joint venture election.” The proposed new election does not require that the joint venture activities be eligible activities, but rather requires that all or substantially all of the joint venture activities are commercial activities.

Still, the proposed new rules contain a number of limitations which will limit the number of joint ventures that can take advantage of the election. In particular, the new election only applies to “qualifying participants,” which is defined to include only people who contribute resources for onsumption, use or supply in the course of the joint venture activities, “other than nominal resources,” and that receive an interest “other than a nominal interest.” The “nominal” is not defined for these purposes.

There are a number of additional technical provisions in the new rules such that entities currently engaged in joint ventures should carefully go through the new election language to see how the new proposed joint venture rules will apply to them.

(b) Removal of GST on new co-op rental housing

The government recently introduced a proposal to remove the GST from new purpose-built rental housing projects, such as apartment buildings, student housing and seniors’ residences. The rule would apply to projects that begin construction between September 14, 2023, and the end of 2030, and that complete construction before 2036.

The Statement announces that co-operative housing corporations that provide long-term rental accommodation would also be eligible for this removal of the GST on new rental housing, provided the other conditions have been met. The measure is not intended to apply to co-operative housing corporations where occupants have an ownership or equity interest.

Alan Kenigsberg is a partner and Roger Smith is an associate with Osler.