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Federal Tax - GST/HST. 1351231 Ontario Inc. v. Canada (the King)
In 1351231 Ontario Inc. v. Canada (the King) (Fed CA, 2025) the Federal Court of Appeal considered the distinction between 'taxable supplies' and 'exempt supplies', here regarding a condominium purchase:[1] This is an appeal of a decision of the Tax Court of Canada (per D’Arcy J.) cited as 2024 TCC 37. The decision concerns an assessment under the Excise Tax Act, R.S.C. 1985, c. E-15 (GST Act) issued to 1351231 Ontario Inc. (appellant) which determined that GST/HST was collectible on the sale of a condominium unit it owned (Property).
[2] The Tax Court determined that the appellant was properly assessed since the sale was a taxable supply. The sale was not an exempt supply because the Property was not a "“residential complex”", as that term is defined in subsection 123(1) of the GST Act. In reaching the conclusion, the Court found that the Property satisfied a carve out at the end of that definition. In particular, the Court found that:(i) the Property was similar premises to a hotel, a motel, an inn, a boarding house, or a lodging house; and
(ii) all or substantially all of the leases, licences or similar arrangements, under which the Property was supplied, provided, or was expected to provide, for periods of continuous possession or use of less than 60 days. . Bell Telephone Company of Canada v. Canada [input tax credits]
In Bell Telephone Company of Canada v. Canada (Fed CA, 2025) the Federal Court of Appeal dismissed an appeal, here from a Tax Court dismissal of an "appeal from assessments made under the Excise Tax Act" relating to 'excessive input tax credits':[2] Before the TCC, the appellant alleged the Notices of Assessment, which involved the appellant’s July 2010 to December 2012 reporting periods, recaptured an excessive amount of input tax credits. During that time, subsection 236.01(2) of Part IX of the GST Act required a large business, such as the appellant, to recapture a portion of the input tax credits that it claimed in respect of certain specified property and services, including, in relevant part, electricity.
[3] The key question put before the TCC for determining whether excessive input tax credits were recaptured was whether the appellant, when purchasing electricity from local distribution companies (Local Distributors) in Ontario, had purchased a single supply of electricity or multiple supplies of electricity, delivery services, and regulatory services. The appellant is of the view that it had purchased multiple supplies as opposed to a single supply.
[4] The judge applied the test established in O.A. Brown Ltd. v. Canada, [1995] G.S.T.C. 40 (T.C.C) (O.A. Brown)—confirmed by the Supreme Court of Canada in Calgary (City) v. Canada, 2012 SCC 20 (City of Calgary)—to identify the nature of the supply and concluded that the appellant had in fact purchased a single supply of electricity, rather than multiple supplies of electricity, delivery services, and regulatory services. The judge thus dismissed the appeal.
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A. Did the judge err in law by applying the O.A. Brown test to determine the nature of the supply?
[18] At this juncture, and prior to addressing the appellant’s arguments, it is useful to provide some background with respect to the test elaborated by the TCC in O.A. Brown.
[19] O.A. Brown involved O.A. Brown Ltd., which bought and resold livestock for customers and kept the livestock in its possession until delivering the livestock to the client (O.A. Brown at 40-2). O.A. Brown Ltd. itemized various charges on its invoices to clients, including the cost of purchasing the cattle, as well as caring for the cattle before delivering it to customers (O.A. Brown at 40-3). For GST purposes, the TCC was tasked with determining whether those itemized charges were part of the supply of livestock or whether they constituted multiple separate supplies (O.A. Brown at 40-4).
[20] The TCC in O.A. Brown examined English cases to establish the following framework for determining whether a supplier has supplied a single supply or multiple supplies:In deciding this issue, it is first necessary to decide what has been supplied as consideration for the payment made. It is then necessary to consider whether the overall supply comprises one or more than one supply. The test to be distilled from the English authorities is whether, in substance and reality, the alleged separate supply is an integral part, integrant or component of the overall supply. One must examine the true nature of the transaction to determine the tax consequences. ....
[O.A. Brown at 40-6] [21] In O.A. Brown, the TCC found that O.A. Brown Ltd. made a single supply of livestock to its customers (O.A. Brown at 40-8). The fact that the invoice itemized the charges did not mean the charges constituted separate supplies for tax purposes (O.A. Brown at 40-7). Rather, the TCC emphasized the importance of considering the "“true nature of the supply”" and asking whether the alleged separate supply could realistically be omitted from the overall supply (O.A. Brown at 40-7).
[22] In the present case, the appellant submits that the judge erred in law by applying the O.A. Brown test to determine the nature of the taxable supply, in part, because he did not have the benefit of this Court’s decision in Canada v. Dr. Kevin L. Davis Dentistry Professional Corporation, 2023 FCA 76 (Kevin Davis Dentistry), whose consideration would have instructed him to decide the issue using statutory interpretation rather than applying O.A. Brown. Further, argues the appellant, a proper statutory interpretation plainly supports the conclusion that, of the various charges listed on the Local Distributors invoices, only the input tax credits related to the line item of electricity would be subject to recapture. I will now consider these arguments.
[23] First, the appellant’s submission that the judge failed to undertake any statutory interpretation before applying O.A. Brown is mistaken. Indeed, it is clear from a reading of the judge’s decision that, from paragraphs 35-48, the judge considered the relevant statutory and regulatory provisions relating to Ontario’s electricity market and from paragraphs 69-95, the judge further considered the provisions relating to input tax credits and their recapture. In light of the broad definitions contained in the provisions, the judge correctly determined that applying the O.A. Brown test was necessary to dispose of the issue before him. Although the appellant offers its own statutory interpretation to argue that the judge erred in resorting to the application of O.A. Brown, it is not necessary for this Court to consider each element of this proposed statutory interpretation as it fails to identify errors and instead merely advances the appellant’s preferred interpretation.
[24] Second, I am of the view that this case is clearly distinguishable from Kevin Davis Dentistry.
[25] At issue before our Court, in Kevin Davis Dentistry, was whether the TCC had correctly determined that O.A. Brown was not applicable for the purposes of determining the tax treatment of orthodontic services and appliances (Kevin Davis Dentistry at paras. 19-20). Our Court upheld the TCC decision on the basis that the "“[the GST Act] and its Schedules provide for different tax treatment of supplies of orthodontic appliances and orthodontic services.”" (Kevin Davis Dentistry at para. 23). Our Court further held that "“Parliament’s intent must override ""O.A. Brown where legislative intent is clear as it is in the provisions applicable in this case.”" (Emphasis added, Kevin Davis Dentistry at para. 35).
[26] Despite our Court’s reasoning in Kevin Davis Dentistry, the appellant insists that this case is analogous to Kevin Davis Dentistry as the Invoice Regulations separate the supplies of electricity, delivery services, and regulatory services, demonstrating that Ontario intended to treat these as separate supplies. The Recapture Regulations, which allow for the recapture of input tax credits related to electricity, should thus be read in a way that gives effect to the separation of the supplies intended by the Invoice Regulations, argues the appellant, adding that the judge erred in his interpretation and failed to give legal effect to this separation.
[27] I disagree.
[28] In Kevin Davis Dentistry, the GST Act and its Schedules separated the supplies at issue and explicitly stated their intentionally different tax treatments. The same cannot be said in the present circumstances as the Invoice Regulations do not amount to as clear an indicator of Parliament’s intent as the GST Act did in Kevin Davis Dentistry. Further, the intended tax treatment of what would constitute separate supplies in the present circumstances is not outlined in any statute as it was in the GST Act in Kevin Davis Dentistry. The appellant’s argument accordingly fails.
[29] The appellant also submits that the judge erred in applying O.A. Brown as the agreement entered into between the Ontario and federal governments for the harmonization of taxes envisaged that the list of specified property and services subject to input tax credit recapture would not exceed the list provided for in an analogous agreement between the Quebec and federal governments. In support of its contention, the appellant relies on the Quebec Court of Appeal decision Goodyear Canada Inc. c. Québec (Sous-ministre du Revenu), 2002 CanLII 25441 (QC CA) (Goodyear). In that case, and for the purposes of a similar recapture provision, the Quebec Court of Appeal determined that the transportation of gas constituted a separate supply from the supply of the gas itself and the input tax credits related to transportation were not subject to recapture (Goodyear at paras. 10-11). However, Goodyear is distinguishable from the case at bar, as Goodyear involved two separate contracts and two separate considerations paid, thus creating two distinct supplies. In Goodyear, the presence of two contracts and two considerations played a dispositive role (at para. 15).
[30] In sum, the judge undertook a careful statutory interpretation and correctly determined that the definitions contained within the statute were too broad to assist him in determining the nature of the supply. In doing so, the judge correctly resorted to the appropriate O.A. Brown test, as affirmed by the Supreme Court. I see no error in the judge’s decision in doing so. . Bank of America v. Canada (Attorney General)
In Bank of America v. Canada (Attorney General) (Fed CA, 2025) the Federal Court of Appeal dismissed an appeal, here from a JR of a dismissal of an late-filed application [under Excise Act s.141.02] to become a "qualifying institution", which would allow the applicant to "claim input tax credits above a prescribed rate":[1] Under section 141.02 of the Excise Tax Act, R.S.C. 1985, c. E-15, a financial institution that is a "“qualifying institution”" (or QI) may claim input tax credits above a prescribed rate if the institution applies to the Minister of National Revenue to review its input tax credit allocation methodology and the Minister gives her approval.
[2] A Bank is a QI if it meets a two-part test in its two previous financial years: having an Adjusted Tax Credit Amount that equals or exceeds $500,000.00, and a tax credit rate that equals or exceeds the prescribed rate of 12%: Input Tax Credit Allocation Methods (GST/HST) Regulations, S.O.R./91-45, subsections 3 and 4.
[3] An application under section 141.02(18) of the Act must be filed at least 180 days prior to the start of the fiscal year to which the method will apply, consistent with the pre-approval purpose of the section 141.02(18) regime. Where the deadline is missed, an application may be made for the Minister to exercise her discretion pursuant to section 141.02(19)(b)(ii) to allow a late filing. . Lewis v. Uber Canada Inc.
In Lewis v. Uber Canada Inc. (Ont CA, 2024) the Divisional Court dismissed a class action appeal, here against (apparently) an order striking down a lawsuit to recover GST/HST overpayments (already remitted to the government) from a private party. The court held that statutory administrative processes has "exclusive jurisdiction" over the issue:[1] We dismiss the appeal on the basis identified by the motion judge. She stated, at para. 50:The funds in issue in this case were remitted to the government as GST.
I conclude that it is plain and obvious that s. 312 prohibits the plaintiff’s action. The scheme of the ETA requires the plaintiff to turn to the rebate mechanism contained in s. 261(1) to obtain a rebate of the GST wrongly paid. [2] In reaching this conclusion, the motion judge properly interpreted s. 312 of the Excise Tax Act, R.S.C. 1985, c. E-15 (“ETA”) and applied the law as correctly found by the Federal Court of Appeal in Merchant Law Group v. Canada Revenue Agency, 2010 FCA 184, 321 D.L.R. (4th) 301, which applied this court’s decision in Sorbara v. Canada (Attorney General), 2009 ONCA 506, 98 O.R. (3d) 673. In Sorbara, this court found the ETA “provides a complete statutory framework with respect to a taxpayer’s claim for a rebate of GST paid under Part IX of the Excise Tax Act”: at para. 9. The Federal Court of Appeal concluded that Parliament has given the Tax Court exclusive jurisdiction to deal with claims arising out of, among other things, taxpayers’ claims for rebates of GST paid: Merchant Law Group, at paras. 14-15, citing Sorbara, at paras. 9, 11.
[3] We also agree with the motion judge that s. 224.1 of the ETA, contrary to the appellant’s argument, reinforces s. 312’s intent. We accept the respondents’ argument that s. 224.1 does not provide a “loophole” to s. 312.
[4] We agree with the respondents that “the Federal Government itself expressly rebutted that theory: it stated, in the amending statute, that it was adding s.224.1 to the ETA to ‘extend the [statutory] protection from civil liability claims ... to agents of the Crown who collect tax,’ not to reduce their protection.” Section 224.1 of the ETA bars actions, even if cast as claims for damages, against persons for the way they calculate, collect, and remit GST if they act in compliance or intended compliance with the ETA. We agree with the motion judge that the appellant’s pleading does not take his claim outside of that statutory bar. . President's Choice Bank v. Canada (the King)
In President's Choice Bank v. Canada (the King) (Fed CA, 2024) the Federal Court of Appeal sets out basics of the GST:[4] Part IX of the Act imposes a tax on most supplies of goods and services (GST): subsections 123(1) definition of "“taxable supply”," 165(1). The GST is a tax on consumption: it is paid by the end consumer. It is also a value-added tax because each business in the supply chain pays GST on the value it adds to the property or service. The mechanism for ensuring the GST operates in this way is the input tax credit (ITC): City of Calgary v. Canada, 2012 SCC 20 at para. 16; Bank of Montreal v. Canada (Attorney General), 2020 FC 1014 at para. 10. . Northbridge Commercial Insurance Corporation v. Canada
In Northbridge Commercial Insurance Corporation v. Canada (Fed CA, 2023) the Federal Court of Appeal reviews GST/HST portions of the Excise Tax Act, and aspects of statutory interpretation - particularly those of 'insurance' and 'risk':[26] The ETA is a highly detailed statute. Part IX of the ETA (the GST provisions) sets out a detailed tax regime in sections 122 to 363.2. In addition, there are 12 schedules (I to X, including II.1 and III.1). Section 2 of Part IX of Schedule VI only applies to financial institutions that issue insurance policies. It does not apply to a person who acquires an insurance policy. Since this section is limited to financial institutions that issue insurance policies, in my view, the word “risks” should be interpreted from the perspective of the insurance companies.
[27] In Canada v. Resman Holdings Ltd., [2000] 3 CTC 442, 2000 CanLII 15312 (FCA) (leave to appeal to the Supreme Court of Canada refused May 24, 2001, 28080), the issue was the interpretation of “accumulation” for the purposes of subsection 66.1(6) of the Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.) (ITA). This Court found that “accumulation”, in the context of the highly detailed statutory provisions of the ITA, was to be given the meaning that would be understood in the industry:[34] The Crown argues that the word "accumulation" was intended to be read in the sense it [sic] which it would be understood in the industry. In my view, that is the correct approach to a word as general as "accumulation" when it is used in the context of highly detailed statutory provisions that are intended to be of use to a particular industry. [28] An insurance policy is a contract of insurance (definition of insurance policy in subsection 123(1) of the ETA). Black’s Law Dictionary, 11th ed., 2019, defines insurance as:1. A contract by which one party (the insurer) undertakes to indemnify another party (the insured) against risk of loss, damage, or liability arising from the occurrence of some specified contingency. • An insured party usu. pays a premium to the insurer in exchange for the insurer's assumption of the insured's risk. Although indemnification provisions are most common in insurance policies, parties to any type of contract may agree on indemnification arrangements. 2. The amount for which someone or something is covered by such an agreement. [29] The Supreme Court of Canada in Somersall v. Friedman, 2002 SCC 59, defined risk in relation to liability insurance as a future event which may result in a loss:[16] The purpose of liability insurance generally is to spread risk among those who, as policyholders, pay premiums for this coverage. Risk was defined by L'Heureux-Dubé J., adopting the language of Malouf J.A., in Frenette v. Metropolitan Life Insurance Co., 1992 CanLII 85 (SCC), [1992] 1 S.C.R. 647, at p. 668, as [TRANSLATION] "a future event, certain or uncertain, which may occasion loss". In University of Saskatchewan v. Fireman's Fund Insurance Co. of Canada (1997), 1997 CanLII 9789 (SK CA), 158 Sask. R. 223 (C.A.), Sherstobitoff J.A., at paras. 33-34, defined risk as "the peril insured against", or "the hazard or chance of misfortune or loss at some time in the future". He noted that "[i]f the misfortune or loss has already occurred, it is no longer a risk, but a certainty." Thus, the insurer crafts a policy which provides the policyholders with protection against a specified risk or future peril in return for the periodic payment of a premium. To provide this protection, the insurer undertakes to be prepared to pay out to the insured up to the maximum quantum of loss that could be suffered were the risk to occur, usually set at some cap. [30] Similarly, as noted by the Tax Court Judge, the definition of “insurance” for the purposes of the Insurance Act, R.S.O. 1990, c. I.8, equates risk with the peril insured against:“insurance” means the undertaking by one person to indemnify another person against loss or liability for loss in respect of a certain risk or peril to which the object of the insurance may be exposed, or to pay a sum of money or other thing of value upon the happening of a certain event, and includes life insurance; [31] The Tax Court Judge also noted that several provinces (Alberta, British Columbia, Manitoba, Newfoundland and Labrador, Nova Scotia, Saskatchewan and Prince Edward Island) also adopt a definition of insurance that is similar to the definition in the Ontario statute.
[32] The critical element of an insurance policy issued by an insurance company is the indemnification against risk of loss, damage or liability. From the perspective of the insurance company, the risk is that a claim will be made by the insured as a result of the occurrence of an insurable event and payment of that claim will have to be made. For Northbridge, the risk was that a claim (or claims) would be made by its customers arising as a result of accidents involving its customers’ vehicles. The risk to Northbridge was not the vehicle, per se, but rather that the vehicle would be involved in an accident (or other insurable event), which would result in a claim.
[33] The use of “risks” within the phrase “risks that are ordinarily situated outside Canada” when viewed from the perspective of insurance companies does not, in my view, alter the interpretation of risks as the perils or the events which would give rise to a claim. The Tax Court Judge acknowledged in paragraph 37 of his reasons that “‘ordinarily situated’ means usually, commonly or customarily situated”. . Northbridge Commercial Insurance Corporation v. Canada
In Northbridge Commercial Insurance Corporation v. Canada (Fed CA, 2023) the Federal Court of Appeal considered GST/HST tax interpretation, here the 'zero-rated' concept under Excise Tax Act (ETA):[41] The general rules related to exports and the purpose behind making exported goods and services zero-rated are set out in the August 1989 Goods & Services Tax Technical Paper issued by the Department of Finance:Consistent with the principle that the tax should only apply to consumption in Canada, exports of goods and services will be zero-rated (see Section 2.6). This will ensure that exports are completely relieved of GST. [page 54]
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As with all other goods and services, financial services provided to nonresidents will be zero-rated. This will ensure that Canadian firms providing financial services remain competitive on world markets.
The rules for financial services will primarily affect a specific group of registrants—such as banks, trust companies, insurers, financial co-operatives and investment dealers—since the vast majority of financial services are provided by these institutions. In addition to exempt financial services, these institutions will normally make taxable and zero-rated supplies. Accordingly, under the general GST rules, they will have to allocate their inputs in order to determine their input tax credit entitlements. The tax paid on their purchases will be eligible for input tax credits to the extent they are for use in making a taxable or zero-rated supply. … [page 141]
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The location of the supply of insurance services will be determined by the location of the risk. The insurance of foreign risks by a resident insurer will be considered to be an exported service, and as such, will be zero-rated. Accordingly, input tax credits will be allowed for purchases to the extent they are reasonably allocable to the supply of these zero-rated services. [page 148] [42] In general, exported goods and services are to be “relieved of GST”. This is accomplished by providing that no tax is payable on the supply of such goods or services and the exporter is entitled to recover any GST paid on any goods or services acquired for the purpose of making such supply. . Northbridge Commercial Insurance Corporation v. Canada
In Northbridge Commercial Insurance Corporation v. Canada (Fed CA, 2023) the Federal Court of Appeal considered the GST/HST status of a 'financial instrument', here an insurance policy [under Excise Tax Act]. These quotes consider the distinction between "exempt supplies and zero-rated supplies":[15] An insurance policy is a financial instrument (paragraph (c) of the definition of financial instrument in subsection 123(1) of the ETA). The issuance of a financial instrument is a financial service (paragraph (d) of the definition of financial service in subsection 123(1) of the ETA). The supply of a financial service is an exempt supply for the purposes of the ETA, unless it is included in Part IX of Schedule VI (section 1 of Part VII of Schedule V).
[16] No GST is collectible in relation to exempt supplies (section 165 of the ETA and the definitions of taxable supply and commercial activity in subsection 123(1) of the ETA) and no ITCs can be claimed for any GST paid on any goods or services acquired in connection with the making of exempt supplies (section 169 of the ETA and the definition of commercial activity in subsection 123(1) of the ETA).
[17] Part IX of Schedule VI provides that certain supplies of financial services will be zero-rated supplies. No GST is payable by a recipient of a zero-rated supply (subsection 165(3) of the ETA), but since a zero-rated supply is not an exempt supply, to the extent a person is carrying on a business that involves the making of zero-rated supplies (or other taxable supplies), ITCs may be claimed by that person in relation to GST paid to acquire goods and services used in making the zero-rated supplies (or other taxable supplies). The general rule to determine the amount of such ITCs that may be claimed is found in section 169 of the ETA. Section 141.02 of the ETA is also a relevant provision in determining the amount of ITCs that a financial institution may claim.
[18] The distinction between exempt supplies and zero-rated supplies is, therefore, the ability to claim ITCs. In this appeal, the issue is whether Northbridge is entitled to claim any ITCs in relation to the GST it paid for general head office and overhead costs. . River Cree Resort Limited Partnership v. Canada
In River Cree Resort Limited Partnership v. Canada (Fed CA, 2023) the Federal Court of Appeal considered a casino's appeal from the Tax Court, the issue being whether fees for automated teller machines (ATMs) were subject GST. The casino argued (and lost) that the ATM services were "payments for financial services" and thus were 'exempt supplies' (rather than 'taxable supplies') for GST purposes.
. Jayco Inc. v. Canada (Revenue Agency)
In Jayco Inc. v. Canada (Revenue Agency) (Ont CA, 2022) the Court of Appeal summarizes the federal GST/HST tax system:[5] In Quebec (Revenue) v. Caisse populaire Desjardins de Montmagny, 2009 SCC 49, [2009] 3 S.C.R. 286, at para. 10, the court described the operation of the GST/HST:The GST, which was implemented in 1990 by legislation that amended the ETA (S.C. 1990, c. 45), replaced the former federal manufacturers’ sales tax. The GST can be regarded as a value-added tax. It is collected at every stage of the manufacturing and marketing of goods and services and is payable by the recipient, who is regarded as the debtor in respect of the tax liability to the Crown (s. 165 ETA). However, the supplier is responsible for collecting and remitting the tax (s. 221(1) ETA). The supplier is deemed to hold the amounts so collected in trust for Her Majesty (s. 222(1) and (3) ETA) and must periodically file returns and make remittances. In addition, the Act establishes a system under which input credits can be claimed, at each step of the marketing and supply of the good, in respect of the taxes the supplier has had to pay to his or her own suppliers (ss. 141.01 and 169(1) ETA). The ultimate recipient bears the full burden of the tax. [Citation omitted.] . Toronto-Dominion Bank v. Canada
In Toronto-Dominion Bank v. Canada (Fed CA, 2020) the Federal Court of Appeal considered an appeal under the Excise Tax Act [s.221] as to whether a bank, having lent money to a business on the security of real property, was bound by the GST tax trust provisions when the debtor defaulted and the bank realized on their secured interest in the property. The Court of Appeal viewed these GST trust provisions as similar to those applicable to employer source deductions trusts, and - given subsequent amendments to expressly give the government priority over secured interests - held that the seized property was held in trust for the government to the extent of the GST owing - ie. that the trust interest had priority over the bank's secured interest. That conclusion was apparent to the court as a matter of straightforward statutory interpretation.
The bank advanced two main arguments against this conclusion, firstly that the deemed trust required a 'triggering event' to be activated. The court dismissed this on text analysis from the applicable Excise Tax Act [paras 55-58]
Next, the bank argued that they took the secured property unknowing of the trust debt and were thus bona fide purchasers for value, and thus entitled to the property free of the debt claim. The court found that this argument would survive the trust if it was advanced by a party who was not a secured creditor, but not by the bank, who was [paras 72-77].
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