Canada: Important GST/HST Developments From 2018

Sales tax continues to be an important consideration in nearly all transactions and the Canada Revenue Agency (CRA) continues to scrutinize those transactions with a view to extract more revenues for the government coffers. There have been a number of key developments in the GST/HST case law in 2018 that are noteworthy for practitioners in the corporate-commercial space. Below, we have provided a highlight of the relevant cases in our year in review.

Secured creditors have priority over CRA where the bankrupt is a GST/HST debtor

Callidus Capital Corporation v. HMQ (SCC) clarifies that once a borrower files for bankruptcy a secured creditor is not subject to the CRA's deemed trust super-priority with respect to the property of a borrower.1Callidus confirms that, in such cases, the CRA loses its deemed trust and is treated as an unsecured creditor with respect to its claim to unremitted GST/HST. For a detailed summary of Callidus, view our bulletin from November 2018.

Cross-border transactions — RVs sold outside Canada; RV parts inside Canada

The "place of supply" is an important issue in cross-border transactions, as supplies of property and services "made" outside of Canada do not attract GST/HST. Jayco is a timely reminder of the importance of well-drafted agreements that clearly establish the place of supply of goods and services for cross-border transactions.2 Care must be taken to ensure that the parties' intentions regarding the place of supply complies with the applicable sale of goods legislation (both inside and outside of Canada) as it relates to each specific supply.

Jayco, Inc. is a major manufacturer of RVs and related parts for sale with a network of authorized dealers throughout North America, including Canada. In JayCo, Inc. v. R., the Canadian RV dealers purchased RVs and parts from the Jayco, Inc. who delivered the RVs to dealers "ready to ship" at its U.S. factory, then arranged for shipping into Canada.The Tax Court of Canada (TCC) was asked to determine whether the RVs and parts sold to the Canadian dealers took place in Canada or the U.S. If it were the latter, no GST/HST would need to have been charged on the sale. Justice D'Aurey closely examined the various agreements between the parties and the applicable Canadian and U.S. sale of goods law before concluding that the sale of RVs took place in the U.S. pursuant to Indiana's sale of goods law whereas the part sales took place in Canada and were subject to GST/HST.

The CRA's new GST/HST Investment Limited Partnership (ILP) rules

The "investment limited partnership" (ILP) rules were formally introduced by the October 25, 2018 Notice of Ways and Means motion. ILPs rules have a wide application and will subject certain LPs to the byzantine Selected Listed Financial Institution (SLFI) rules under the Excise Tax Act (ETA), which can inadvertently trigger unrecoverable GST/HST if a partner of the ILP provides the ILP with "management or administrative services." For example, if an LP is structured so that the general partner has an active role in the fund's management, you should consider the application of the ILP rules. 

Note that an ILP is broadly defined as either (a) a limited partnership that is, or forms part of an arrangement that is represented as a hedge fund, investment limited partnership, mutual fund, private equity fund, venture capital fund or other similar collective investment vehicle; or (b) a limited partnership that has 50 per cent or more ownership by "listed financial institutions" (for example, a bank, insurer, or investment plan). For a summary of the ILP rules, view our bulletin from September 2017.

Stewardship Ontario, a non-profit organization, undertook commercial activities and was entitled to ITCs

Stewardship Ontario v. R. confirms that as long as a corporation is engaged in an "undertaking of any kind whatever", it is undertaking a business and may be permitted to offset the GST/HST it pays on its inputs by way of claiming input tax credits (ITCs).3

Stewardship Ontario was reassessed by the CRA to disallow its ITC claims on the basis that it was a non-profit organization acting under a statutory arrangement to recycle goods; it was not engaged in commercial activities and could not, therefore, claim ITCs. In Stewardship Ontario v. R., the TCC held that a business is broadly defined in the ETA to include an "undertaking of any kind whatever, whether the activity or undertaking is engaged in for profit [or not]". 

Director liability — one win, two losses

A director of a corporation can be held personally liable for the GST/HST debts of the corporation. There were a trio of cases on director's liability in 2018: Tozer, Le, and Fox.4  In Tozer v. R., the taxpayer was the sole director of two companies that went out of business and bankrupt with unremitted GST. The CRA assessed him personally for the corporation's GST/HST debts; Tozer argued the due diligence defence and that he ceased to be a director more than two years prior to the assessed periods. Of note, the TCC dismissed his appeal and held that a taxpayer continues to be a director upon a company's assignment into bankruptcy and, unless they give up directorship powers, they will continue to be liable under the ETA.  

In Le v. R., the taxpayer successfully appealed a director's liability assessment on the basis that she was neither a je jure director nor a de facto director as she had no notice she was registered as a director and never held herself out as one despite having her name registered as one in the public records. In Fox v. R., the taxpayer was found liable for GST/HST debts of his company for failure to remit GST/HST when the company was in financial difficulty. The court held that a long term intention to finance or sell the business in order to eventually address GST/HST non-remittances does not meet the due diligence defence threshold where the company uses non-remitted GST/HST to keep a company running.

CRA failed to prove that a reassessment was sent when it claimed

A CRA notice of assessment/reassessment is deemed to have been made on the date it was sent by the CRA. It is not uncommon for a taxpayer to claim that they never received the assessment/reassessment or that it was received much later than claimed by the CRA. The date of the assessment/reassessment is crucial as it starts the clock on various elements under the ETA, including when an objection must be filed, which is within 90 days from the date of the assessment being disputed. 

In DaSilva, the CRA claimed it mailed a Notice of Assessment to the taxpayer on January 11, 2013.5 The taxpayer said she received it on August 22, 2016 by a CRA collection officer. The Tax Court reiterated the jurisprudence on when an assessment is mailed and stated when a taxpayer makes a credible claim that an assessment was not mailed or mailed to the wrong address, the minister has the burden of proving the assessment was properly sent. In this case, the CRA failed to discharge its burden to prove that the assessment was mailed when it claimed and the later date was accepted.


Callidus Capital Corporation v Canada, 2018 SCC 47 (Supreme Court of Canada).

Jayco, Inc. v R, 2018 TCC 34 (Tax Court of Canada [General Procedure]).

Stewardship Ontario v R, 2018 TCC 59 (Tax Court of Canada [General Procedure]).

Tozer v R, 2018 TCC 56, (Tax Court of Canada [General Procedure]); Le v R, 2018 TCC 65 (Tax Court of Canada [Informal Procedure]; & Fox v R, 2018 TCC 43 (Tax Court of Canada [Informal Procedure].

DaSilva v The Queen, 2018 CarswellNat 1746, 2018 TCC 74 (Tax Court of Canada [Informal Procedure]).

About BLG

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Topics
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions