Words and Phrases - "joint venture"
River Cree Resort Limited Partnership v. Canada, 2023 FCA 130
The owner and operator of a casino resort (“River Cree”) agreed with the owner of ATMs (“Access Cash”) which, in turn, had access to the Interac payment network of a network operator, that it would make various locations on its resort available for the siting of Access’ ATMS, load those ATMs with its own cash (for the later reporting periods at issue) or with money borrowed by it from Access Cash (for the earlier periods) and provide the utilities, security, routine maintenance and customer support necessary to operate the ATMs.
Webb JA found no reversible error in the Tax Court’s rejection of River Cree’s contention that there was a joint venture between River Cree and Access Cash for the provision of a financial service, given that it was not evident under the terms of their agreement that they intended to associate themselves in such a joint venture.
| Locations of other summaries | Wordcount | |
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| Tax Topics - Excise Tax Act - Section 123 - Subsection 123(1) - Financial Service - Paragraph (a) | a supply to an ATM owner was the location rather than cash loaded onto the ATM | 385 |
Frequently asked questions - Canada emergency wage subsidy (CEWS) CRA Webpage 24 September 2021
[Q.3-9] Pro rata recognition of payroll under a cost-sharing agency arrangement
A cost sharing arrangement (CSA) is generally an agreement under which the participants share certain costs, including the salary or wages that are paid to employees. …
[W]here the CSA represents a type of an agency relationship or a mandate for the employers, each of the separate eligible employers may qualify for the wage subsidy in respect of their portion of eligible remuneration paid to each eligible employee by the agent or the mandatary in respect of a week in a claim period, as long as all of the other eligibility criteria have been met … . Only the actual employer(s) can apply for the wage subsidy in respect of a particular employee … .
Example of arrangement for doctors’ sharing of medical support staff
Example 3-9A
A group of five medical professional corporations dealing at arm’s length, enter into a CSA to share certain costs, including the salary or wages that are paid to eight support employees. The agreement, which is an agency relationship, requires that the participants (the five medical professional corporations) use an entity established for this purpose (the agent) to perform certain tasks, such as paying employees, on each of their behalf. The medical professional corporations are each considered the employer on a proportionately agreed upon basis in respect of the employees. The entity established for this purpose has its own payroll program account to make payroll remittances for all eight support employees.
Given that an agency relationship exists, each medical professional corporation could qualify for the wage subsidy in respect of their portion of eligible remuneration paid to each eligible employee by the agent in respect of a week in a claim period, as long as all of the other eligibility criteria have been met (see Q4). Each corporation would need to obtain their own payroll program account to apply for and receive the wage subsidy.
[Q.3-10]. Can a joint venture qualify for the wage subsidy? New: October 6, 2020
[The] case law, which generally describes a joint venture as a limited business undertaking by two or more parties, in which the parties have a joint property interest in the subject matter of the venture and share control and management of the enterprise. …
A joint venture is not an eligible employer for the purposes of the wage subsidy. However, in certain circumstances, an eligible employer may use the qualifying revenue of a joint venture instead of its own qualifying revenue, in order to determine if it experienced the required reduction in revenue in order to qualify for the wage subsidy (see Q11).
Q13-1. In determining who is an eligible employee, what is the meaning of the phrase, “employed in Canada”?
An employee is “employed in Canada” if they are performing the duties of an office or employment in Canada. Generally, a person exercises the functions of their employment at the place where they are physically present. Thus, when that place is situated outside Canada, that person will not generally be considered as being “employed in Canada”. It is not necessary for an individual to be “employed in Canada” throughout the claim period to be an eligible employee.
[Q. 16] Eligibility of non-resident employee
[E]ligible employee status is determined based on where the individual is employed and not where the individual resides. Generally, a non-resident individual employed in Canada during a claim period will qualify as an eligible employee as long as all other conditions to be an eligible employee are met ... .
Medallion Corporation v. The Queen, 2018 TCC 157
The appellant (“MC”) entered into 10 agreements each entitled “Joint Venture Agreement” (JVA) with corporations with which it did not deal at arm’s length (“Owners”) in which it agreed to provide property management services respecting one or more rental properties of each Owner. The JVAs gave MC the right to negotiate leases and permit occupancy, which it did, and provided that most significant decisions were to be made unanimously by a “Joint Venture Management Committee (JVMC)” comprised of a representative of each of MC and the Owner. MC was entitled to a percentage of the gross revenues that it collected. The Minister assessed on the basis that there was no joint venture between MC and the owners, so that its share of the gross revenues was subject to GST/HST.
After repeating the Williston indicia of a joint venture (quoted in Westcan), Russell J rejected the Crown’s submissions that each of the four italicized tests below were not satisfied:
"A joint property interest in the subject matter of the venture"
…“[P]roperty” [in s. 123(1)] … “includes a right of interest of any kind”. This language would cover MC’s contractual right, pursuant to the JVAs, to lease the subject Properties in its own name. Accordingly, MC and the Owners do have joint property interests in the aforesaid subject matter of the JVs. … (para. 27)
"A right of mutual control or management of the enterprise"
… MC (and each pertinent Owner) has a representative on each JV’s JVMC, and … decisions can only be made “by mutual agreement”… . MC has no say, other than a right to notice, as to any sale of any of the Properties … [but] [a]ny Property sales simply would be outside the purview of “the enterprise of each alleged JC”. (para. 28)
"Expectation of profit, or the presence of 'adventure' as it is sometimes called"
…There is no evidence that MC’s intention … was other than to make a profit though management of the leases of the Properties, in a JV context. …There was no guarantee of profit, and MC did have its share of expenses … to recoup. Income earned annually, less applicable expenses, would be on income account not capital account. (para. 29)
"A right to participate in the profits"
[T]he JVAs in each instance gave MC and the relevant Owner(s) the right to take percentages of the GROI [gross revenue] as specifically agreed and assigned by each JVA. MC and the relevant Owner(s) were separately responsible each for their own expenses. If the Respondent is saying that MC had no ability to share profit from sale of any of the Properties, the answer is that any sale of a Property simply was beyond the scope of the JVs as asserted in this case … . (para. 31)
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| Tax Topics - Excise Tax Act - Section 123 - Subsection 123(1) - Supply | property manager's share of rents in rental JV was not taxable consideration | 371 |
Excise and GST/HST News No. 103, December 2017
Guidelines for distinguishing joint venture from partnership
The guidelines set out in P-171R may be used to help determine the existence of either a joint venture or a partnership arrangement. However, they are not individually decisive and have no legal force. Also, they should be applied and weighed on a case-by-case basis having regard to the substance of the relationship.
The guidelines relate to the following factors:
- Are there two or more parties?
- What is the intention of the parties?
- Is the arrangement limited to a single undertaking or ad hoc undertaking?
- Is there a right of mutual control or management?
- What is the contribution by each participant?
- Is there joint ownership in the subject matter of the arrangement?
- Is there freedom to dispose of interests in the property?
- Is there the expectation of benefits or the presence of an "adventure"?
- Is there a limitation of liabilities?
- What is the income tax treatment?
- What is the format of the agreement?
GST status of joint venture in Quebec
The joint venture relationship is not recognized in Quebec civil law. Nevertheless, Quebec civil law does not prohibit the formation of a joint venture. Therefore, where an arrangement in Quebec is, according to the common law guidelines outlined above a joint venture and not a partnership, it will generally be regarded as a joint venture for GST/HST purposes.
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| Tax Topics - Excise Tax Act - Schedules - Schedule V - Part II - Section 1 - Institutional Health Care Service | 115 | |
| Tax Topics - Income Tax Act - Section 96 | 85 |
DeWinter v. Consolidated Food Brands Inc. (1998), 43 B.L.R. (2d) 106 (B.C.S.C.)
A terminated sales agent claimed that he was engaged in a joint venture with the company whose products he had been distributing, so that he had a proprietary interest in the territory covered by him for which he was entitled to compensation. In rejecting this claim, Beames J stated (at paras. 30-31):
Williston on Contracts, as quoted in Canlan Investments Corp. v. Gettling (July 18, 1996), Doc. Vancouver C954829 (B.C.S.C.) at para 59, defines the term "joint venture" as follows:
In summary, then, a working definition of joint venture based on the actual judicial decisions may be thus formulated: A joint venture is an association of persons, natural or corporate, who agree by contract to engage in some common, usually ad hoc undertaking for joint profit by combining their respective resources, without however, forming a partnership in the legal sense (of creating that status) or corporation; their agreement also provides for a community of interest among the joint venturers each of whom is both principal and agent as to the others within the scope of the venture over which each venturer exercises some degree of control.
I cannot find on the facts of this case that the plaintiff and the defendant were in a joint venture. The plaintiff was, without question, and by express agreement between the parties, the agent of the defendant. I do not find that the defendant was an agent of the plaintiff in any way. I similarly do not find a "community of interest" between the parties. Further, there was no arrangement for a sharing of profits between the parties, merely a commission sales agreement. Consequently, on this issue, I conclude that the plaintiff must fail… .
Westcan Malting Ltd. v. The Queen, [1998] G.S.T.C. 34
In order that the appellant (“Westcan”) could be assisted in building a malting plant near the Village of Alix, Alberta, the Village received federal and provincial grant money of $3.1 million and agreed with Westcan to pay the grant money to Westcan after Westcan had constructed the effluent facilities for the Village (which, in form, would be responsible for running them.)
In finding that this arrangement did not constitute a joint venture for s. 273 purposes, Teskey J first quoted (at para. 52) from an extended extract from Central Mortgage & Housing Corporation v. Graham, 43 D.L.R. (3d) 686 (N.S.S.C.) including the following passage from Williston on Contracts:
[T]he decisions are in substantial agreement that the following factors must be present:
(a) A contribution by the parties of money, property, effort, knowledge, skill or other asset to a common undertaking;
(b) A joint property interest in the subject matter of the venture;
(c) A right of mutual control or management of the enterprise;
(d) Expectation of profit, or the presence of “adventure”, as it is sometimes called;
(e) A right to participate in the profits;
(f) Most usually, limitation of the objective to a single undertaking or ad hoc enterprise. …
Teskey J then stated (at para. 55):
I do not find there existed the right to participate in profits nor an expectation of profit, from the infrastructure for either party. The benefit accruing to Alix from the infrastructure would not be in the form of profit, but rather a decreased tax rate available to its citizens should the Appellant locate in the municipality. The benefit accruing to the Appellant from the infrastructure is that it gets its water and sewage disposal at cost with very little capital outlay. There does not exist the element that a financial interest is at stake, nor is there an assumption of risk in the overall success or failure of the joint utilities program. I am not convinced that both parties had a joint property interest in the infrastructure necessary to constitute a joint venture.
Laxton v. The Queen, 89 DTC 5327, [1989] 2 CTC 85 (FCA)
In finding that an arrangement styled as a real estate joint venture was not a partnership, and instead was a joint venture that "was a voluntary grouping having no separate legal existence apart from its members" Stone J.A. stated "that a 'joint venture' per se may differ from a 'partnership' has been recognized by the Canadian Courts, and that neither is a legal entity is also plain."
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| Tax Topics - Income Tax Act - Section 3 | management fee received by way of interest-free loan benefit | 119 |