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Excise Tax Act (R.S.C., 1985, c. E-15)

Full Document:  

Act current to 2021-11-17 and last amended on 2021-07-01. Previous Versions

PART IXGoods and Services Tax (continued)

DIVISION IIGoods and Services Tax (continued)

SUBDIVISION CSpecial Cases (continued)

Property Acquired by Insurers on Settlement of Claim

Marginal note:Supply to insurer on settlement of claim

  •  (1) For the purposes of this Part, where at any time after 1990 property of a person is transferred to an insurer in the course of settling an insurance claim, the following rules apply:

    • (a) for the purposes of this Part, the person shall be deemed to have made, and the insurer shall be deemed to have received, at that time, a supply by way of sale of the property;

    • (b) for the purposes of this Part (other than sections 193 and 257), that supply shall be deemed to have been made for no consideration;

    • (c) in the case of a taxable supply of real property, for the purposes of sections 193 and 257, the tax payable in respect of the supply shall be deemed to be equal to tax calculated on the fair market value of the property at that time; and

    • (d) in the case of a supply of real property included in section 9 of Part I of Schedule V, in section 1 of Part V.1 of that Schedule or in section 25 of Part VI of that Schedule, for the purposes of sections 193 and 257, the supply is deemed to be a taxable supply and the tax payable in respect of the supply is deemed to be equal to tax calculated on the fair market value of the property at that time.

  • Marginal note:Supply in commercial activity

    (2) Where at any time an insurer makes a particular supply (other than an exempt supply) of property transferred to the insurer in circumstances in which subsection (1) applies, except where any of subsections (3) to (5) applied at an earlier time in respect of the use of the property by the insurer, the insurer shall be deemed, for the purposes of this Part, to have made the particular supply in the course of a commercial activity of the insurer and anything done by the insurer in the course of, or in connection with, the making of the supply and not in connection with the transfer of the property shall be deemed to have been done in the course of the commercial activity.

  • Marginal note:Use of real property

    (3) For the purposes of this Part, where at any time an insurer to whom real property has been transferred, in circumstances in which subsection (1) applies, begins to use the property otherwise than in the making of a supply of the property, the insurer shall be deemed to have made a supply of the property at that time and, except where the supply is an exempt supply,

    • (a) to have collected, at that time, tax in respect of the supply equal to the amount determined by the formula

      (A/B) × C

      where

      A
      is
      • (i) if the supply is made in a participating province, the total of the rate set out in subsection 165(1) and the tax rate for that province, and

      • (ii) in any other case, the rate set out in subsection 165(1),

      B
      is the total of 100% and the percentage determined for A, and
      C
      is the fair market value of the property at that time; and
    • (b) to have acquired the property and paid that tax at that time.

  • Marginal note:Use of personal property transferred before 1994

    (4) For the purposes of this Part, where an insurer to whom personal property has been transferred from a person before 1994, in circumstances in which subsection (1) applies, begins at a particular time to use the property otherwise than in the making of a supply of the property, the following rules apply:

    • (a) the insurer is deemed to have received, immediately after the particular time, a particular supply by way of sale of the property; and

    • (b) where tax would have been payable had the property been purchased in Canada from the person for consideration at the time it was transferred, the insurer shall be deemed

      • (i) to have made, at the particular time, a taxable supply of the property and to have collected, at the particular time, tax in respect of that supply equal to the amount determined by the formula

        (A/B) × C

        where

        A
        is
        • (A) if the property is situated in a participating province at the particular time, the total of the rate set out in subsection 165(1) and the tax rate for that province, and

        • (B) in any other case, the rate set out in subsection 165(1),

        B
        is the total of 100% and the percentage determined for A, and
        C
        is the fair market value of the property at the time it was transferred, and
      • (ii) to have paid, immediately after the particular time, tax in respect of the particular supply equal to the amount determined under subparagraph (i).

  • Marginal note:Use of personal property transferred after 1993

    (5) For the purposes of this Part, where an insurer to whom personal property has been transferred from a person after 1993, in circumstances in which subsection (1) applies, begins at a particular time to use the property otherwise than in the making of a supply of the property,

    • (a) the insurer is deemed

      • (i) to have received, immediately after the particular time, a supply by way of sale of the property, and

      • (ii) except where

        • (A) that supply is a zero-rated supply, or

        • (B) in the case of property that was, at the time it was transferred, specified tangible personal property having a fair market value in excess of the prescribed amount in respect of the property, tax would not have been payable had the property been purchased in Canada from the person at that time,

        to have paid, immediately after the particular time, all tax payable in respect of that supply, which is deemed to be equal to the amount determined by the formula

        (A/B) × C

        where

        A
        is
        • (A) the rate set out in subsection 165(1) if

          • (I) the property is situated in a participating province at the particular time, it was transferred before the day that is three years after the harmonization date for that province and tax would not have been payable had the property been purchased in Canada from the person at the time it was transferred, or

          • (II) the property is situated in a non-participating province at the particular time, and

        • (B) in any other case, the total of the rate set out in subsection 165(1) and the tax rate for the participating province in which the property is situated at the particular time,

        B
        is the total of 100% and the percentage determined for A, and
        C
        is the fair market value of the property at the time it was transferred; and
    • (b) where tax would have been payable had the property been purchased in Canada from the person at the time it was transferred, the insurer is deemed to have made, at the particular time, a taxable supply of the property and to have collected, at the particular time, all tax payable in respect of that supply, which is deemed to be equal to the amount determined by the formula

      (A/B) × C

      where

      A
      is
      • (i) if the property is situated in a participating province at the particular time, the total of the rate set out in subsection 165(1) and the tax rate for that province, and

      • (ii) in any other case, the rate set out in subsection 165(1),

      B
      is the total of 100% and the percentage determined for A, and
      C
      is the fair market value of the property at the time it was transferred.
  • Marginal note:Sale of personal property

    (6) For the purposes of this Part, where an insurer to whom personal property has been transferred from a person in circumstances in which subsection (1) applies makes at any time a particular taxable supply of the property by way of sale (other than a supply deemed under this Part to have been made), the insurer was not deemed under subsection (4), (5) or (7) to have received a supply of the property at an earlier time and no tax would have been payable by the insurer had the insurer purchased the property from the person in Canada at the time it was transferred, except where

    • (a) the particular supply is made outside Canada or is a zero-rated supply, and

    • (b) the property was transferred to the insurer before 1994 or was, at the time of the transfer, specified tangible personal property having a fair market value in excess of the prescribed amount in respect of the property,

    the insurer shall be deemed

    • (c) to have received a supply by way of sale of the property immediately before that time for consideration equal to the consideration for the particular supply, and

    • (d) except if the supply deemed under paragraph (c) to have been received is a zero-rated supply, to have paid, immediately before that time, all tax payable in respect of the supply deemed to have been received, which is deemed to be equal to the amount determined by the formula

      A - B

      where

      A
      is
      • (i) if

        • (A) the property was last held by the person in a participating province before being transferred to the insurer, the property was so transferred before the day that is three years after the harmonization date for that province and the particular supply is either made outside Canada or is a zero-rated supply, or

        • (B) either the property was last held by the person in a non-participating province before being transferred or the particular supply is a supply (other than a zero-rated supply) made in a non-participating province,

        tax under subsection 165(1) calculated on that consideration, and

      • (ii) in any other case, the total of

        • (A) tax under subsection 165(1) calculated on that consideration, and

        • (B) tax under subsection 165(2) calculated on that consideration at the lesser of the tax rate for the participating province in which the particular supply is made and the tax rate for the participating province in which the property was last held by the person before being transferred, and

      B
      is the total of all amounts each of which is an input tax credit or a rebate under this Part that the insurer was entitled to claim in respect of the property or an improvement thereto.
  • Marginal note:Lease of personal property

    (7) For the purposes of this Part, if, at a particular time, an insurer to whom personal property has been transferred from a person in circumstances in which subsection (1) applies makes a particular taxable supply of the property by way of lease, licence or similar arrangement for the first lease interval (within the meaning of subsection 136.1(1)) in respect of the arrangement, the insurer was not deemed under subsection (4) or (5) to have received a supply of the property at an earlier time and no tax would have been payable had the property been purchased in Canada from the person at the time the property was transferred, except if

    • (a) the particular supply is made outside Canada or is a zero-rated supply, and

    • (b) the property was transferred to the insurer before 1994 or was, at the time it was transferred, specified tangible personal property having a fair market value in excess of the prescribed amount in respect of the property,

    the insurer shall be deemed

    • (c) to have received a supply by way of sale of the property immediately before the particular time, and

    • (d) except if that supply is a zero-rated supply, to have paid, immediately before the particular time, all tax payable in respect of that supply, which is deemed to be equal to

      • (i) if

        • (A) the property was last held by the person in a participating province before being transferred to the insurer, the property was so transferred before the day that is three years after the harmonization date for that province and the particular supply is either made outside Canada or is a zero-rated supply, or

        • (B) either the property was last held by the person in a non-participating province before being transferred or the particular supply is a supply (other than a zero-rated supply) made in a non-participating province,

        tax under subsection 165(1) calculated on the fair market value of the property at the time it was transferred, and

      • (ii) in any other case, the total of

        • (A) tax under subsection 165(1) calculated on that fair market value, and

        • (B) tax under subsection 165(2) calculated on that fair market value at the lesser of the tax rate for the participating province in which the particular supply is made and the tax rate for the participating province in which the property was last held by the person before being transferred.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • 1990, c. 45, s. 12
  • 1993, c. 27, s. 48
  • 1997, c. 10, ss. 34, 178
  • 2000, c. 30, s. 36
  • 2006, c. 4, s. 11
  • 2009, c. 32, s. 11
  • 2017, c. 33, s. 124(F)

Marginal note:Carrying on construction

  •  (1) In this section, a reference to a particular person carrying on construction includes a reference to the particular person engaging another person, by way of acquiring services from the other person, to carry on construction for the particular person.

  • Marginal note:Performance bonds

    (2) If a person (in this subsection referred to as the “surety”) acting as a surety under a performance bond in respect of a contract for a particular taxable supply of construction services relating to real property situated in Canada carries on the particular construction that is undertaken in full or partial satisfaction of the surety’s obligations under the bond,

    • (a) for the purposes of this Part, other than those described in paragraph (b), if the surety is entitled to receive at any time from the obligee, by reason of carrying on the particular construction, an amount (in this subsection referred to as a “contract payment”) that is not an amount the tax in respect of which was or will be required to be included in determining the net tax of the principal under the bond and is not an amount paid or payable as or on account of either tax under this Part or a tax, duty or fee payable by the obligee that is prescribed for the purposes of section 154,

      • (i) in carrying on the particular construction, the surety is deemed to be making, at the place where the particular supply was made, a taxable supply,

      • (ii) sections 150, 156 and 166 do not apply to that supply, and

      • (iii) the contract payment is deemed to be consideration for that supply;

    • (b) for the purposes of determining the extent to which property or a service is acquired, imported or brought into a participating province by the surety for consumption, use or supply in the course of commercial activities and the extent to which the property or service is consumed, used or supplied by the surety in the course of commercial activities, the carrying on of the particular construction is deemed not to be for the purpose of making a taxable supply and not to be a commercial activity of the surety;

    • (c) despite paragraph (b), if paragraph (a) deems a surety to be making a taxable supply, any property or service (each of which is, in this section, referred to as a “direct input”) that the surety acquires, imports or brings into a participating province for consumption, use or supply exclusively and directly in the course of carrying on the particular construction and not for use as capital property of the surety or in improving capital property of the surety is deemed, for the purposes of this Part other than sections 155 and 156 and Divisions IV and IV.1, to have been acquired, imported or brought in by the surety for consumption, use or supply exclusively in the course of commercial activities of the surety; and

    • (d) the total amount of all input tax credits in respect of direct inputs that the surety is entitled to claim is equal to the lesser of that total determined without reference to this paragraph and

      • (i) if

        • (A) the amount determined by the formula

          A × B

          where

          A
          is
          • (I) if the supply deemed under subparagraph (a)(i) to be made by the surety is made in a participating province, the total of the rate set out in subsection 165(1) and the tax rate for the participating province, and

          • (II) in any other case, the rate set out in subsection 165(1), and

          B
          is the total of all contract payments (other than contract payments that are not in respect of the particular construction)

        exceeds

        • (B) the total of all amounts, each of which would be an input tax credit of the surety in respect of a direct input but for the fact that tax is not payable by the surety in respect of the acquisition, importation or bringing into a participating province of the direct input because of section 150 or 167 or because of the fact that the surety is deemed to have acquired or imported it, or brought it in, for consumption, use or supply exclusively in the course of commercial activities,

        that excess, and

      • (ii) in any other case, zero.

  • Marginal note:Determining credit for construction inputs

    (3) If a person acquires, imports or brings into a participating province property or a service for consumption, use or supply exclusively and directly in the course of carrying on construction that includes the particular construction that is undertaken in full or partial satisfaction of the person’s obligations as a surety under a performance bond and other construction, for the purposes of this section and of determining an input tax credit of the person and the total amount of all input tax credits of the person in respect of direct inputs that the person is entitled to claim,

    • (a) despite section 138, that part (in this subsection referred to as the “particular construction input”) of the property or service that is for consumption, use or supply in the course of carrying on the particular construction and the remaining part (in this subsection referred to as the “additional construction input”) of the property or service are each deemed to be a separate property or service that does not form part of the other;

    • (b) the particular construction input is deemed to have been acquired, imported or brought in, as the case may be, exclusively and directly for use in the course of carrying on the particular construction;

    • (c) the additional construction input is deemed not to have been acquired, imported or brought in, as the case may be, for consumption, use or supply in the course of carrying on the particular construction;

    • (d) the tax payable in respect of the supply, importation or bringing in, as the case may be, of the particular construction input is deemed to be equal to the amount determined by the formula

      A × B

      where

      A
      is the tax payable (in this subsection referred to as the “total tax payable”) by the person in respect of the supply, importation or bringing in, as the case may be, of the property or service, determined without reference to this subsection, and
      B
      is the extent (expressed as a percentage) to which the property or service was acquired, imported or brought in, as the case may be, for consumption, use or supply in the course of carrying on the particular construction; and
    • (e) the tax payable in respect of the additional construction input is deemed to be equal to the difference between the total tax payable and the amount determined under paragraph (d).

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • 2000, c. 30, s. 37
  • 2006, c. 4, s. 12
 
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