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- News Release 2002-108 - Explanatory Notes -

Proposed Amendments to the Excise Tax Act

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1. (1) Paragraphs 177(1.1)(a) and (b) of the Act are replaced by the following:

(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 the 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.

(2) Section 177 of the Act is amended by adding the following after subsection (1.1):

Billing agent

(1.11) If a registrant acts as agent of a supplier in charging and collecting the 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 that subsection 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.

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.

(3) Subsection (1), to the extent that it replaces paragraph 177(1.1)(a) of the Act, paragraph 177(1.1)(c) of the Act, as enacted by subsection (1), and subsection 177(1.11) of the Act, as enacted by subsection (2), apply to supplies made after ANNOUNCEMENT DATE.

(4) Subsection (1), to the extent that it replaces paragraph 177(1.1)(b) of the Act, applies to supplies made after April 23, 1996 in respect of which an election under subsection 177(1.1) of the Act is made at any time, except that, with respect to any supply made on or before ANNOUNCEMENT DATE in respect of which an election under that subsection was made on or before ANNOUNCEMENT DATE,

(a) subparagraph 177(1.1)(b)(ii) of the Act, as enacted by subsection (1), shall be read as follows:

(ii) a failure to account for or remit the tax,

and

(b) the reference in subparagraph 177(1.1)(b)(iii) of the Act, as enacted by subsection (1), to "section 231 or 232" shall be read as a reference to "section 231".

(5) Subsection 177(1.12) of the Act, as enacted by subsection (2), is deemed to have come into force on ANNOUNCEMENT DATE.

2. (1) Subsection 231(1) of the Act is replaced by the following:

Bad debt - deduction
from net tax

231. (1) If a supplier has made a taxable supply (other than a zero-rated supply) for consideration to a recipient with whom the supplier was dealing at arm's length, it is established that all or a part of the total of the consideration and tax payable in respect of the supply has become a bad debt and the supplier at any time writes off the bad debt in the supplier's books of account, the reporting entity for the supply may, in determining the reporting entity's net tax for the reporting period that includes that time or for a subsequent reporting period, deduct the amount determined by the formula

A x B/C

where

A is the tax in respect of the supply,

B is the total of the consideration, tax and applicable provincial tax remaining unpaid in respect of the supply that was written off at that time as a bad debt, and

C is the total of the consideration, tax and applicable provincial tax in respect of the supply.

Reporting and
remittance conditions

(1.1) A reporting entity is not entitled to deduct an amount under subsection (1) in respect of a supply unless

(a) the tax collectible in respect of the supply is included in determining the amount of net tax reported in the reporting entity's return under this Division for the reporting period in which the tax became collectible; and

(b) all net tax remittable, if any, as reported in that return is remitted.

(2) Subsections 231(3) and (4) of the Act are replaced by the following:

Recovery of bad debt

(3) If all or part of a bad debt in respect of which a person has made a deduction under this section is recovered at any time, the person shall, in determining the person's net tax for the reporting period that includes that time, add the amount determined by the formula

A x B/C

where

A is the amount of the bad debt recovered at that time;

B is the tax in respect of the supply to which the bad debt relates; and

C is the total of the consideration, tax and applicable provincial tax in respect of the supply.

Limitation period

(4) A person may not claim a deduction under this section in respect of a bad debt relating to a supply unless the deduction is claimed in a return under this Division filed within four years after the day on or before which a return of the person was required to be filed for the reporting period in which the supplier has written off the bad debt in its books of account.

Definitions

(5) The definitions in this subsection apply in this section.

"applicable provincial tax"
« french equivalent »

"applicable provincial tax", in respect of a supply, means any amount that can reasonably be attributed to a tax, duty or fee imposed under an Act of the legislature of a province in respect of the supply that is a prescribed tax, duty or fee for the purposes of section 154.

"reporting entity"
« french equivalent »

"reporting entity" for a supply means

(a) if an election has been made under subsection 177(1.1) in respect of the supply, the person who is required, under that subsection, to include the tax collectible in respect of the supply in determining the person's net tax; and

(b) in any other case, the supplier.

(3) Subsection (1) applies to supplies made after April 23, 1996.

(4) Subsection (2), to the extent that it replaces subsections 231(3) and (4) of the Act, applies to bad debts relating to supplies made after April 23, 1996 except that the reference to "supplier" in subsection 231(4) of the Act, as enacted by subsection (2), shall be read as a reference to "person" in its application to a deduction claimed by a person under subsection 231(2) of the Act as that subsection read in relation to an account receivable transferred to the person before 2000.

(5) Subsection 231(5) of the Act, as enacted by subsection (2), is deemed to have come into force on April 24, 1996.

(6) Despite subsection 231(4) of the Act, as enacted by subsection (2), if a supplier and a registrant acting as an agent of the supplier have jointly made an election under subsection 177(1.1) of the Act in respect of a supply made before ANNOUNCEMENT DATE and the supplier wrote off a bad debt relating to the supply in the supplier's books of account at any time on or before ANNOUNCEMENT DATE, the registrant may claim a deduction under subsection 231(1) of the Act, as enacted by subsection (1), in respect of the bad debt written off at that time in a return of the registrant under Division V of Part IX of the Act that is filed with the Minister of National Revenue on or before the later of the day that is one year after ANNOUNCEMENT DATE and the day that is four years after the day on or before which the registrant's return under that Division for the registrant's reporting period in which the bad debt was written off is required to be filed.

3. (1) Subsection 256(3) of the Act is replaced by the following:

Application for rebate

(3) A rebate under this section in respect of a residential complex shall not be paid to an individual unless the individual files an application for the rebate on or before

(a) the day (in this subsection referred to as the "due date") that is two years after the earliest of

(i) the day that is two years after the day the complex is first occupied as described in subparagraph (2)(d)(i),

(ii) the day ownership is transferred as described in subparagraph (2)(d)(ii), and

(iii) the day construction or substantial renovation of the complex is substantially completed; or

(b) such day after the due date as the Minister may allow.

(2) Subsection (1) is deemed to have come into force on ANNOUNCEMENT DATE.

4. (1) The portion of the definition "practitioner" in section 1 of Part II of Schedule V to the French version of the Act before paragraph (b), as enacted by subsection 23(1) of the Sales Tax and Excise Tax Amendments Act, 2001, chapter 15 of the Statutes of Canada, 2001, applies to supplies made after 2001.

(2) The portion of the definition "practitioner" in section 1 of Part II of Schedule V to the English version of the Act before paragraph (b) is replaced by the following:

"practitioner", in respect of a supply of optometric, chiropractic, physiotherapy, chiropodic, podiatric, osteopathic, audiological, speech-language pathology, occupational therapy, psychological or dietetic services, means a person who

(a) practises the profession of optometry, chiropractic, physiotherapy, chiropody, podiatry, osteopathy, audiology, speech-language pathology, occupational therapy, psychology or dietetics, as the case may be,

(3) Subsection (2) applies to supplies made after 2001.

5. (1) Paragraph 7(h) of Part II of Schedule V to the French version of the Act, as enacted by subsection 24(1) of the Sales Tax and Excise Tax Amendments Act, 2001, chapter 15 of the Statutes of Canada, 2001, applies to supplies made after 2001.

(2) Paragraph 7(h) of Part II of Schedule V to the English version of the Act is replaced by the following:

(h) speech-language pathology services;

(3) Subsection (2) applies to supplies made after 2001.

Draft Regulations Amending the Streamlined Accounting (GST/HST) Regulations

amendments

1. (1) Paragraph (b) of the description of B in subsection 17(1) of the Streamlined Accounting (GST/HST) Regulations is replaced by the following:

(b) all amounts in respect of supplies (other than specified supplies) that are required under Division V to be added in determining the net tax for the particular reporting period, and

(2) Paragraph (b) of the description of C in subsection 17(1) of the Regulations is replaced by the following:

(b) an amount in respect of a supply (other than a specified supply) that may be deducted by the registrant under Division V in determining the net tax for the particular reporting period and that is claimed in the return under Division V filed by the registrant for the particular reporting period, or

2. (1) Paragraph (b) of the description of C in subsection 21(1) of the Regulations is replaced by the following:

(b) all amounts in respect of specified supplies that may be deducted under Division V in determining the net tax for the particular reporting period and that are claimed in the return under Division V filed by the registrant for the particular reporting period, and

coming into force

3. Sections 1 and 2 apply for the purposes of determining net tax for reporting periods ending after ANNOUNCEMENT DATE.

- News Release 2002-108 - Explanatory Notes -