Provincial Sales Tax Exemption & Refund Regulation, Part 9 - Related Party Asset Transfers

Last updated on August 23, 2021

Division 1 — Definitions and Interpretation

Section 148 – Definitions and Interpretation

PSTERR - SEC.148/Int.

References:

PSTERR: Section 57; Section 77; Section 82; Section 149; Section 150; Section 151; Section 152; Section 153; Section 154; Section 155

PSTR: Section 24

Bulletin PST 210

Interpretation (Issued: 2014/02)

Effective April 1, 2013, B.C. Reg. 97/2013 provides under PSTERR section 148 a definition of related corporation and interpretation rules that apply in PSTERR Part 9.

Subsection 148(1) provides that in PSTERR Part 9 [Related Party Asset Transfers], "related corporation" means a corporation that is related to another corporation within the meaning of PSTERR subsection 148(2).

Subsection 148(2) provides that for the purposes of PSTERR Part 9, a corporation is related to another corporation if

(a) one of them is a wholly owned subsidiary of the other, or

(b) both of them are wholly owned subsidiaries of the same corporation.

Subsection 148(3) provides that for the purposes of PSTERR subsection 148(3) and PSTERR subsection 148(2), a corporation is a wholly owned subsidiary of another corporation if at least 95% of the outstanding shares of each class of the share capital of the first corporation are beneficially owned by one or both of the following:

(a) that other corporation;

(b) a wholly owned subsidiary, or wholly owned subsidiaries, of that other corporation.

Subsection 148(4) provides that subject to PSTERR subsection 148(5), for the purposes of

(a) PSTERR section 151 [tangible personal property transferred to new corporation – wholly owned and controlled],

(b) PSTERR section 152 [tangible personal property transferred to new corporation – not wholly owned and controlled],

(d) PSTERR section 155 [software transferred to new corporation – not wholly owned and controlled],

a person wholly owns and controls a corporation if

(e) the person beneficially owns shares in the corporation, and

(f) at least 95% of the outstanding shares of each class of the share capital of the corporation are beneficially owned by that person or by that person and that person's spouse.

Subsection 148(5) provides that for the purposes of PSTERR sections 151, 152, 154 and 155, a person referred to in PSTERR subsection 148(4) continues to wholly own and control a corporation despite transferring,

(a) without consideration, shares in the corporation to a trustee of a trust whose only beneficiaries are one or more of the following:

(i) the person;

(ii) the person's spouse;

(iii) the person's children, or

(b) with or without consideration, shares in the corporation to a trustee of a trust whose only beneficiaries are the person's spouse or the person and the person's spouse.

Division 2 — Tangible Personal Property Transferred Between Related Parties

Section 149 – Tangible Personal Property Transferred Between Related Corporations

PSTERR - SEC.149/Int.-R.4

References:

Act: Section 1 "boat", "Excise Tax Act", "lease", "sale", "tangible personal property", "use", "vehicle"; Part 3 – Division 2; Part 3 – Division 3; Part 3 – Division 4; Section 51; Part 3 – Division 5; Part 3 – Division 6; Section 59 "taxable conveyance"; Section 60; Section 62; Section 63; Section 64; Section 66; Part 3 – Division 7; Part 3 – Division 11; Section 100; Section 101; Section 102

PSTERR: Section 57; Section 148 "related corporation"; Part 9 – Division 2; Section 151

PSTR: Section 22; Section 24

Bulletin PST 210

Interpretation (Issued: 2014/02)

Effective April 1, 2013, B.C. Reg. 97/2013 provides under PSTERR section 149 exemptions from tax for tangible personal property transferred between related corporations in the specified circumstances.

Subsection 149(1) provides that in PSTERR section 149:

"previous owner", in relation to tangible personal property, means the related corporation referred to in PSTERR paragraph 149(2)(a), 149(2)(b) or 149(2)(c), as applicable;

"transfer date" means the following:

(a) in respect of tangible personal property referred to in PSTERR paragraph 149(2)(a), the date on which the tangible personal property is purchased by the corporation referred to in that paragraph;

(b) in respect of tangible personal property referred to in PSTERR paragraph 149(2)(b), the date on which the tangible personal property was acquired by the corporation referred to in that paragraph;

(c) in respect of tangible personal property referred to in PSTERR paragraph 149(2)(c), the date on which the tangible personal property is received as a gift by the corporation referred to in that paragraph.

Subsection 149(2) provides that subject to PSTERR subsections 149(3), 149(12) and 149(14) to 149(16),

(a) a corporation is exempt from tax imposed under any of the following provisions of the Act in respect of tangible personal property if the corporation purchases the tangible personal property from a related corporation:

(i) Division 2 [Purchases of Tangible Personal Property] of Part 3 [Taxes in Relation to Tangible Personal Property];

(ii) section 60 [tax if conveyance purchased in British Columbia for interjurisdictional use];

(iii) section 66 [adjustment of tax in respect of conveyance];

(iv) section 101 [tax on reusable containers],

(b) a corporation is exempt from tax imposed under any of the following provisions of the Act in respect of tangible personal property if the corporation acquired the tangible personal property from a related corporation:

(i) Division 4 [Tangible Personal Property Brought into British Columbia] of Part 3;

(ii) Division 5 [Property Brought into British Columbia from Outside Canada] of Part 3;

(iii) section 63 [tax if conveyance brought into and used in British Columbia];

(iv) section 64 [tax if change in use of conveyance acquired for resale];

(v) section 66 [adjustment of tax in respect of conveyance], and

(c) a corporation is exempt from tax imposed under section 100 [tax on gift of vehicle, boat or aircraft given in British Columbia] of the Act in respect of a vehicle, boat or aircraft if the corporation receives the vehicle, boat or aircraft as a gift from a related corporation.

Subsection 149(3) provides that the exemptions under PSTERR paragraphs 149(2)(a), 149(2)(b) and 149(2)(c) do not apply to a corporation in respect of tangible personal property unless one or more of the following requirements are met:

(a) subject to PSTERR subsections 149(4) to 149(7), a related corporation of either the corporation or the previous owner of the tangible personal property

(i) paid tax under the Act, the Consumption Tax Rebate and Transition Act or the Social Service Tax Act in respect of the tangible personal property and has not obtained and is not entitled to obtain, under those Acts, a refund of that tax, or

(ii) paid tax, in respect of the tangible personal property, under section 165(2), 212.1 or 218.1 or Division IV.1 of Part IX of the Excise Tax Act, in respect of British Columbia as a participating province under Part IX of that Act, and has not obtained and is not entitled to obtain, under Part IX of that Act, a refund of or a credit or rebate for that tax;

(b) the previous owner of the tangible personal property, before July 1, 1948, acquired in British Columbia, brought or sent into British Columbia or received delivery of in British Columbia the tangible personal property;

(i) the previous owner of the tangible personal property, on or after July 1, 1948 but before July 1, 2010, acquired in British Columbia, brought or sent into British Columbia or received delivery of in British Columbia the tangible personal property, and

(ii) the previous owner of the tangible personal property was not subject to, or was exempt from, tax under the Social Service Tax Act in respect of the acquiring in British Columbia, bringing or sending into British Columbia or receiving of delivery in British Columbia of the tangible personal property;

(d) subject to PSTERR subsection 149(9),

(i) the previous owner of the tangible personal property, on or after July 1, 2010 but before April 1, 2013, acquired in British Columbia, brought or sent into British Columbia or received delivery of in British Columbia the tangible personal property, and

(ii) the previous owner of the tangible personal property would not have been subject to, or would have been exempt from, tax under the Act in respect of the acquiring in British Columbia, bringing or sending into British Columbia or receiving of delivery in British Columbia of the tangible personal property, if the Act and the regulations made under it, as they read on April 1, 2013, had been in force during the period referred to in PSTERR subparagraph 149(3)(d)(i);

(e) subject to PSTERR subsection 149(10),

(i) the previous owner of the tangible personal property, on or after April 1, 2013, acquired in British Columbia, brought or sent into British Columbia or received delivery of in British Columbia the tangible personal property, and

(ii) the previous owner of the tangible personal property was not subject to, or was exempt from, tax under the Act in respect of the acquiring in British Columbia, bringing or sending into British Columbia or receiving of delivery in British Columbia of the tangible personal property;

(f) subject to PSTERR subsection 149(11),

(i) the previous owner of the tangible personal property, before April 1, 2013, acquired the tangible personal property outside British Columbia, and

(ii) the previous owner of the tangible personal property would have been exempt under this Division from tax imposed under the Act in respect of the tangible personal property if

the Act and the regulations made under it, as they read on April 1, 2013, had been in force on the date on which the tangible personal property was acquired, and
the previous owner had purchased the tangible personal property at a sale in British Columbia;

(g) subject to PSTERR subsection 149(11),

(i) the previous owner of the tangible personal property, on or after April 1, 2013, acquired the tangible personal property outside British Columbia, and

(ii) the previous owner of the tangible personal property would have been exempt under this Division from tax imposed under the Act in respect of the tangible personal property if the previous owner had, on the date on which the tangible personal property was acquired, purchased the tangible personal property at a sale in British Columbia.

Subsection 149(4) provides that for the purposes of PSTERR subparagraph 149(3)(a)(i),

(a) tax under the Act does not include tax under the following provisions of the Act:

(i) Division 3 [Leases of Tangible Personal Property] of Part 3;

(ii) section 62 [tax if leased conveyance used in British Columbia];

(iii) Division 7 [Multijurisdictional Vehicles] of Part 3;

(iv) Division 11 [Energy Products] of Part 3;

(v) section 102 [tax on leased property occasionally supplied with operator], and

(b) tax under the Social Service Tax Act does not include tax under the following provisions of that Act:

(i) Division 2 [Tax in relation to Leases] of Part 2;

(ii) Division 3 [Tax in relation to Multijurisdictional Vehicles] of Part 2;

(iii) Division 9 [Environmental Levies] of Part 2.

Subsection 149(5) provides that the requirement set out in PSTERR paragraph 149(3)(a) is not met if the related corporation referred to in that paragraph

(a) paid tax under the Act or the Social Service Tax Act in respect of a portion of the consideration for the tangible personal property,

(b) paid tax under section 165(2), 212.1 or 218.1 or Division IV.1 of Part IX of the Excise Tax Act, in respect of British Columbia as a participating province under Part IX of that Act, in respect of a portion of the consideration for the tangible personal property, and

(c) obtained or is entitled to obtain, under Part IX of the Excise Tax Act, a refund, credit or rebate in respect of the tax referred to in PSTERR paragraph 149(5)(b).

Subsection 149(6) provides that the requirement set out in PSTERR subparagraph 149(3)(a)(i) is not met if

(a) the related corporation referred to in PSTERR subsection 149(3)(a) paid tax in respect of the tangible personal property only under Division 6 [Conveyances Used Interjurisdictionally] of Part 3 of the Act, and

(b) the previous owner of the tangible personal property did not, at any time, use the tangible personal property in British Columbia.

Subsection 149(7) provides that if the related corporation referred to in PSTERR paragraph 149(3)(a) paid tax in respect of the tangible personal property only under one or both of

(a) section 51 [tangible personal property brought into British Columbia for temporary use] of the Act, and

(b) section 12 [calculation of tax if use in British Columbia temporary] of the Social Service Tax Act,

the requirement set out in PSTERR subparagraph 149(3)(a)(i) is met only if, by operation of subsection 51(6) of the Act, no tax would have been payable under section 51 of the Act by that related corporation in respect of that tangible personal property, if section 51 had applied to that related corporation in respect of that tangible personal property immediately before the transfer date.

Subsection 149(8) provides that the requirement set out in PSTERR paragraph 149(3)(c) is not met if the previous owner of the tangible personal property was not subject to, or was exempt from, tax under the Social Service Tax Act in respect of the tangible personal property because

(a) the previous owner purchased in British Columbia, brought or sent into British Columbia or received delivery of in British Columbia the tangible personal property for resale or lease,

(b) the tangible personal property was used or was to be used for a particular purpose, or

(c) the tangible personal property was to be delivered or transported outside British Columbia, or was, in whole or in part, for use outside British Columbia.

Subsection 149(9) provides that the requirement set out in PSTERR paragraph 149(3)(d) is not met if the previous owner of the tangible personal property would not have been subject to, or would have been exempt from, tax under the Act in respect of the tangible personal property because

(a) the previous owner purchased in British Columbia, brought or sent into British Columbia or received delivery of in British Columbia the tangible personal property for resale or lease,

(b) the tangible personal property was to be used for a particular purpose, or

(c) the tangible personal property was to be delivered or transported outside British Columbia, or was, in whole or in part, for use outside British Columbia.

Subsection 149(10) provides that the requirement set out in PSTERR paragraph 149(3)(e) is not met if the previous owner of the tangible personal property was not subject to, or was exempt from, tax under the Act in respect of the tangible personal property because

(a) the previous owner purchased in British Columbia, brought or sent into British Columbia or received delivery of in British Columbia the tangible personal property for resale or lease,

(b) the tangible personal property was to be used for a particular purpose, or

(c) the tangible personal property was to be delivered or transported outside British Columbia, or was, in whole or in part, for use outside British Columbia.

Subsection 149(11) provides that the requirements set out in PSTERR paragraphs 149(3)(f) and 149(3)(g) are not met if the previous owner of the tangible personal property

(a) did not, at any time, use the tangible personal property in British Columbia, and

(b) acquired the tangible personal property from a person who used the tangible personal property in British Columbia as a taxable conveyance, as defined in section 59 [definitions – conveyances used interjurisdictionally] of the Act.

Subsection 149(12) provides that the exemptions under PSTERR paragraphs 149(2)(a), 149(2)(b) and 149(2)(c) do not apply to a corporation in respect of tangible personal property unless

(a) the corporation and the previous owner of the tangible personal property remain related corporations for a period of at least 8 months after the transfer date, or

(b) all of the following requirements are met:

(i) the corporation and the previous owner of the tangible personal property were related corporations for a period of at least 8 months before the transfer date;

(ii) on or after the transfer date, the previous owner is dissolved or wound up under the Bank Act (Canada), the Business Corporations Act, the Canada Business Corporations Act or the Winding-up and Restructuring Act (Canada);

(iii) the corporation and the previous owner remain related corporations until such time as the previous owner is dissolved or wound up.

Subsection 149(13) provides that PSTERR subsections 149(14) and 149(15) apply to a corporation referred to in PSTERR paragraph 149(2)(a), 149(2)(b) or 149(2)(c) in respect of tangible personal property referred to in that subsection if

(a) the related corporation referred to in PSTERR paragraph 149(3)(a) paid tax in respect of the tangible personal property only under section 60, 63, 64 or 66 of the Act, or

(b) the previous owner of the tangible personal property was exempt under PSTERR Division 2 [Tangible Personal Property Transferred Between Related Parties] of PSTERR Part 9 [Related Party Asset Transfers] from all or a portion of tax imposed under section 60, 63 or 64 of the Act in respect of the tangible personal property.

Subsection 149(14) provides that for the purposes of the exemptions under PSTERR paragraphs 149(2)(a), 149(2)(b) and 149(2)(c), a corporation to whom PSTERR subsection 149(14) applies is exempt from tax imposed under Division 2, 4 or 5 or section 60, 63, 64 or 100 of Part 3 of the Act, as applicable, in respect of the tangible personal property in an amount that is equal to the lesser of

(a) the sum of the following:

(i) the amount of tax the previous owner paid in respect of the tangible personal property under sections 60, 63, 64 and 66 of the Act and for which the previous owner has not obtained and is not entitled to obtain a refund under the Act;

(ii) if the previous owner was exempt under PSTERR Division 2 of PSTERR Part 9 from all or a portion of tax imposed under section 60, 63 or 64 of the Act in respect of the tangible personal property, the amount determined under this paragraph or PSTERR paragraph 151(12)(a) [tangible personal property transferred to new corporation – wholly owned and controlled], as applicable, for the purpose of the previous owner's exemption from tax, and

(b) the amount of tax that, but for PSTERR paragraph 149(2)(a), 149(2)(b) or 149(2)(c), would be payable by the corporation under Division 2, 4 or 5 or section 60, 63, 64 or 100 of Part 3 of the Act, as applicable, in respect of the tangible personal property.

Subsection 149(15) provides that subject to PSTERR subsection 149(16), for the purposes of the exemptions under PSTERR paragraphs 149(2)(a) and 149(2)(b), a corporation to whom PSTERR subsection 149(15) applies is exempt from tax imposed under section 66 of the Act in respect of the tangible personal property in an amount that is equal to the lesser of

(a) the difference between the amount determined under PSTERR paragraph 149(14)(a) and the amount determined under PSTERR paragraph 149(14)(b), and

(b) the amount of tax that, but for PSTERR paragraph 149(2)(a) or 149(2)(b), would be payable by the corporation under section 66 of the Act in respect of the tangible personal property.

Subsection 149(16) provides that the exemptions under PSTERR paragraphs 149(2)(a) and 149(2)(b) from tax imposed under section 66 of the Act do not apply to a corporation referred to in PSTERR subsection 149(15) in respect of tangible personal property unless the amount determined under PSTERR paragraph 149(14)(a) exceeds the amount determined under PSTERR paragraph 149(14)(b).

R.1 Transfers Where Tax Paid Tpp Has Been Altered (Issued: 2014/04)

If a corporation purchases TPP, pays tax, and subsequently alters the TPP into a new product, or manufactures the TPP into a new product, the exemption under PSTERR section 149 does not apply because the transferred TPP is a different item than the tax paid TPP that were incorporated into it.

R.2 TPP Originally Received From A Corporation Which Is No Longer Related (Issued: 2014/04)

Transfers between related corporations qualify for exemption under PSTERR section 149 even if the transferor initially acquired the TPP exempt by virtue of a relationship that does not exist at the time of the subsequent transfer.

For example, Corporation A pays PST on its purchase of equipment. Corporation A then transfers the equipment exempt from tax under PSTERR subparagraph 149(3)(a)(i) to its wholly owned subsidiary, Corporation B. The parent/subsidiary relationship between Corporation A and Corporation B is maintained for a period of at least 8 months. The shares of Corporation B are then sold by Corporation A to unrelated Corporation C. Corporation B then transfers the equipment to Corporation C, which is now its parent.

The transfer from Corporation B to Corporation C qualifies for exemption under PSTERR subparagraph 149(3)(e)(i) because Corporation B acquired the equipment exempt from PST, and none of the barriers under PSTERR section 149 apply. However, the relationship between Corporation B and Corporation C must be maintained for a period of at least 8 months after the subsequent transfer (unless PSTERR paragraph 149(12)(b) applies).

R.3 Companies Restored Under The Business Corporations Act (Issued: 2014/04)

Under subsection 364(4) of the Business Corporations Act, "a company that is restored is deemed to have continued in existence as if it had not been dissolved". Therefore, a dissolution and subsequent restoration of a corporation has no bearing in determining whether the relationship requirement under PSTERR paragraph 149(12)(b) has been met in regards to a particular transfer of TPP between related corporations.

R.4 Transfers With Subsequent Amalgamation Of Seller (Issued: 2015/07)

There are three companies: Company A, B, and C. Company A is the parent of Company B and Company B is the parent of Company C. The three companies are all related corporations as that term is defined in section 148.

Company B sells tax paid TTP to Company C. Less than 8 months later, Company A amalgamates with Company B to form Company D. Under the amalgamation, both Company A and Company B continue into Company D. Company D is a related corporation to Company C beyond 8 months from the sale of TPP from Company B to Company C.

In this situation, the 8 month condition in section 149(12) continues to be met because Company D (which is the amalgamation of Company A and B) continues to be related to Company C.

Section 150 – Tangible Personal Property Leased From Related Corporations

PSTERR - SEC.150/Int.-R.1

References:

Act: Section 1 "Excise Tax Act", "lease", "tangible personal property", "use"; Part 3 – Division 3; Section 51; Part 3 – Division 6; Section 62; Part 3 – Division 7; Part 3 – Division 11; Section 102

PSTERR: Section 57; Section 148 "related corporation"

PSTR: Section 24

Bulletin PST 210

Interpretation (Issued: 2014/02)

Effective April 1, 2013, B.C. Reg. 97/2013 provides under PSTERR section 150 an exemption from tax for tangible personal property leased from related corporations in the specified circumstances.

Subsection 150(1) provides that subject to PSTERR subsections 150(2) and 150(9), a corporation is exempt from tax imposed under Division 3 [Leases of Tangible Personal Property] or section 62 [tax if leased conveyance used in British Columbia] of Part 3 [Taxes in Relation to Tangible Personal Property] of the Act, as applicable, in respect of tangible personal property if the corporation, referred to in PSTERR section 150 as the "lessee", leases the tangible personal property from a related corporation, referred to in PSTERR section 150 as the "lessor".

Subsection 150(2) provides that the exemption under PSTERR subsection 150(1) does not apply to a corporation in respect of tangible personal property unless one or more of the following requirements are met:

(a) subject to PSTERR subsections 150(3) to 150(5), a related corporation of either the lessee or the lessor

(b) the lessor, before July 1, 1948, acquired in British Columbia, brought or sent into British Columbia or received delivery of in British Columbia the tangible personal property;

(i) the lessor, on or after July 1, 1948 but before July 1, 2010, acquired in British Columbia, brought or sent into British Columbia or received delivery of in British Columbia the tangible personal property, and

(ii) the lessor was not subject to, or was exempt from, tax under the Social Service Tax Act in respect of the acquiring in British Columbia, bringing or sending into British Columbia or receiving of delivery in British Columbia of the tangible personal property;

(d) subject to PSTERR subsection 150(7),

(i) the lessor, on or after July 1, 2010 but before April 1, 2013, acquired in British Columbia, brought or sent into British Columbia or received delivery of in British Columbia the tangible personal property, and

(ii) the lessor would not have been subject to, or would have been exempt from, tax under the Act in respect of the tangible personal property, if the Act and the regulations made under it, as they read on April 1, 2013, had been in force during the period referred to in PSTERR subparagraph 150(2)(d)(i);

(e) subject to PSTERR subsection 150(8),

(i) the lessor, on or after April 1, 2013, acquired in British Columbia, brought or sent into British Columbia or received delivery of in British Columbia the tangible personal property, and

(ii) the lessor was not subject to, or was exempt from, tax under the Act in respect of the acquiring in British Columbia, bringing or sending into British Columbia or receiving of delivery in British Columbia of the tangible personal property.

Subsection 150(3) provides that for the purposes of PSTERR subparagraph 150(2)(a)(i),

(a) tax under the Act does not include tax under the following provisions of the Act:

(i) Division 3 [Leases of Tangible Personal Property] of Part 3;

(ii) Division 6 [Conveyances Used Interjurisdictionally] of Part 3;

(iii) Division 7 [Multijurisdictional Vehicles] of Part 3;

(iv) Division 11 [Energy Products] of Part 3;

(v) section 102 [tax on leased property occasionally supplied with operator], and

(b) tax under the Social Service Tax Act does not include tax under the following provisions of that Act:

(i) Division 2 [Tax in relation to Leases] of Part 2;

(ii) Division 3 [Tax in relation to Multijurisdictional Vehicles] of Part 2;

(iii) Division 9 [Environmental Levies] of Part 2.

Subsection 150(4) provides that the requirement set out in PSTERR paragraph 150(2)(a) is not met if the related corporation referred to in that paragraph

(a) paid tax under the Act or the Social Service Tax Act in respect of a portion of the consideration for the tangible personal property,

(c) obtained or is entitled to obtain, under Part IX of the Excise Tax Act, a refund, credit or rebate in respect of the tax referred to in PSTERR paragraph 150(4)(b).

Subsection 150(5) provides that if the related corporation referred to in PSTERR paragraph 150(2)(a) paid tax in respect of the tangible personal property only under one or both of

(a) section 51 [tax if tangible personal property brought into British Columbia for temporary use] of the Act, and

(b) section 12 [calculation of tax if use in British Columbia temporary] of the Social Service Tax Act,

the requirement set out in PSTERR subparagraph 150(2)(a)(i) is met only if, by operation of subsection 51(6) of the Act, no tax would have been payable under section 51 of the Act by that related corporation in respect of that tangible personal property, if section 51 had applied to that related corporation in respect of that tangible personal property immediately before the date on which that tangible personal property is leased by the lessee.

Subsection 150(6) provides that the requirement set out in PSTERR paragraph 150(2)(c) is not met if the lessor was not subject to, or was exempt from, tax under the Social Service Tax Act in respect of the tangible personal property because

(a) the lessor purchased in British Columbia, brought or sent into British Columbia or received delivery of in British Columbia the tangible personal property for resale or lease,

(b) the tangible personal property was used or was to be used for a particular purpose, or

(c) the tangible personal property was to be delivered or transported outside British Columbia, or was, in whole or in part, for use outside British Columbia.

Subsection 150(7) provides that the requirement set out in PSTERR paragraph 150(2)(d) is not met if the lessor of the tangible personal property would not have been subject to, or would have been exempt from, tax under the Act in respect of the tangible personal property because

(a) the lessor purchased in British Columbia, brought or sent into British Columbia or received delivery of in British Columbia the tangible personal property for resale or lease,

(b) the tangible personal property was to be used for a particular purpose, or

(c) the tangible personal property was to be delivered or transported outside British Columbia, or was, in whole or in part, for use outside British Columbia.

Subsection 150(8) provides that the requirement set out in PSTERR paragraph 150(2)(e) is not met if the lessor of the tangible personal property was not subject to, or was exempt from, tax under the Act in respect of the tangible personal property because

(a) the lessor purchased in British Columbia, brought or sent into British Columbia or received delivery of in British Columbia the tangible personal property for resale or lease,

(b) the tangible personal property was to be used for a particular purpose, or

(c) the tangible personal property was to be delivered or transported outside British Columbia, or was, in whole or in part, for use outside British Columbia.

Subsection 150(9) provides that the exemptions under PSTERR subsection 150(1) do not apply to a corporation in respect of tangible personal property unless the lessee and the lessor continue to be related corporations at the time that, but for the exemption under PSTERR subsection 150(1), tax would be payable under Division 3 [Leases of Tangible Personal Property] or section 62 [tax if leased conveyance used in British Columbia] of Part 3 of the Act, as applicable, in respect of the tangible personal property.

R.1 Leases From A Company To A Limited Partnership -General Partner Is A Related Corporation (Issued: 2014/04)

Under PSTERR section 150, a corporation may lease TPP to a related corporation exempt from tax. Where TPP is leased to a limited partnership, the TPP is considered to be leased to the general partner. Therefore, where a corporation leases TPP to a limited partnership, and the general partner is a related corporation of the lessor, the TPP can be leased exempt of tax, provided all other conditions of the exemption are met.

Section 151 – Tangible Personal Property Transferred To New Coporation – Wholly Owned And Controlled

PSTERR - SEC.151/Int.-R.1

References:

Act: Section 1 "Excise Tax Act", "lease", "tangible personal property", "use"; Part 3 – Division 2; Part 3 – Division 3; Part 3 – Division 4; Section 51; Part 3 – Division 5; Section 60; Section 62; Section 63; Section 64; Section 66; Part 3 – Division 7; Part 3 – Division 11; Section 100; Section 101; Section 102

PSTERR: Section 57; Section 148; Part 9 – Division 2; Section 149; Section 152

PSTR: Section 22; Section 24

Bulletin PST 210

Interpretation (Issued: 2014/02)

Effective April 1, 2013, B.C. Reg. 97/2013 provides under PSTERR section 151 exemptions from tax for tangible personal property transferred to a new corporation from a person who wholly owns and controls that corporation in the specified circumstances.

Subsection 151(1) provides that in PSTERR section 151:

"previous owner", in relation to tangible personal property, means the person referred to in PSTERR paragraph 151(2)(a) or 151(2)(b), as applicable, from whom the corporation referred to in that paragraph purchases or acquired, as applicable, the tangible personal property;

"transfer date" means the following:

(a) in respect of tangible personal property referred to in PSTERR paragraph 151(2)(a), the date on which the tangible personal property is purchased by the corporation referred to in that paragraph;

(b) in respect of tangible personal property referred to in PSTERR paragraph 151(2)(b), the date on which the tangible personal property was acquired by the corporation referred to in that paragraph.

Subsection 151(2) provides that subject to PSTERR subsections 151(3), 151(10) and 151(12) to 151(14),

(a) a corporation is exempt from tax imposed under any of the following provisions of the Act in respect of tangible personal property if the corporation, at any time on or before the date on which the corporation starts to carry on business, purchases the tangible personal property from a person that wholly owns and controls it:

(i) Division 2 [Purchases of Tangible Personal Property] of Part 3 [Taxes In Relation to Tangible Personal Property];

(ii) section 60 [tax if conveyance purchased in British Columbia for interjurisdictional use];

(iii) section 66 [adjustment of tax in respect of conveyance];

(iv) section 101 [tax on reusable containers], and

(b) a corporation is exempt from tax imposed under any of the following provisions of the Act in respect of tangible personal property if the corporation, at any time on or before the date on which the corporation started to carry on business, acquired the tangible personal property from a person that wholly owned and controlled it:

(i) Division 4 [Tangible Personal Property Brought into British Columbia] of Part 3 of the Act;

(ii) Division 5 [Property Brought into British Columbia from Outside Canada] of Part 3;

(iii) section 63 [tax if conveyance brought into and used in British Columbia];

(iv) section 64 [tax if change in use of conveyance acquired for resale];

(v) section 66 [adjustment of tax in respect of conveyance].

Subsection 151(3) provides that the exemptions under PSTERR subsection 151(2)(a) and 151(2)(b) do not apply to a corporation in respect of tangible personal property unless one or more of the following requirements are met:

(a) subject to PSTERR subsections 151(4) to 151(6), the previous owner of the tangible personal property

(d) subject to PSTERR subsection 151(8),

(e) subject to PSTERR subsection 151(9),

Subsection 151(4) provides that for the purposes of PSTERR subparagraph 151(3)(a)(i),

(a) tax under the Act does not include tax under the following provisions of the Act:

(i) Division 3 [Leases of Tangible Personal Property] of Part 3;

(ii) section 62 [tax if leased conveyance used in British Columbia];

(iii) Division 7 [Multijurisdictional Vehicles] of Part 3;

(iv) Division 11 [Energy Products] of Part 3;

(v) section 102 [tax on leased property occasionally supplied with operator], and

(b) tax under the Social Service Tax Act does not include tax under the following provisions of that Act:

(i) Division 2 [Tax in relation to Leases] of Part 2;

(ii) Division 3 [Tax in relation to Multijurisdictional Vehicles] of Part 2;

(iii) Division 9 [Environmental Levies] of Part 2.

Subsection 151(5) provides that the requirement set out in PSTERR paragraph 151(3)(a) is not met if the previous owner of the tangible personal property

(a) paid tax under the Act or the Social Service Tax Act in respect of a portion of the consideration for the tangible personal property,

(c) obtained or is entitled to obtain, under Part IX of the Excise Tax Act, a refund, credit or rebate in respect of the tax referred to in PSTERR paragraph 151(5)(b).

Subsection 151(6) provides that if the previous owner of the tangible personal property paid tax in respect of the tangible personal property only under one or both of

(a) section 51 [tax if tangible personal property brought into British Columbia for temporary use] of the Act, and

(b) section 12 [calculation of tax if use in British Columbia temporary] of the Social Service Tax Act,

the requirement set out in PSTERR subparagraph 151(3)(a)(i) is met only if, by operation of subsection 51(6) of the Act, no tax would have been payable under section 51 of the Act by that previous owner in respect of that tangible personal property, if section 51 had applied to that previous owner in respect of that tangible personal property immediately before the transfer date.

Subsection 151(7) provides that the requirement set out in PSTERR paragraph 151(3)(c) is not met if the previous owner of the tangible personal property was not subject to, or was exempt from, tax under the Social Service Tax Act in respect of the tangible personal property because

(a) the previous owner purchased in British Columbia, brought or sent into British Columbia or received delivery of in British Columbia the tangible personal property for resale or lease,

(b) the tangible personal property was used or was to be used for a particular purpose, or

(c) the tangible personal property was to be delivered or transported outside British Columbia, or was, in whole or in part, for use outside British Columbia.

Subsection 151(8) provides that the requirement set out in PSTERR paragraph 151(3)(d) is not met if the previous owner of the tangible personal property would not have been subject to, or would have been exempt from, tax under the Act in respect of the tangible personal property because

(a) the previous owner purchased in British Columbia, brought or sent into British Columbia or received delivery of in British Columbia the tangible personal property for resale or lease,

(b) the tangible personal property was to be used for a particular purpose, or

(c) the tangible personal property was to be delivered or transported outside British Columbia, or was, in whole or in part, for use outside British Columbia.

Subsection 151(9) provides that the requirement set out in PSTERR paragraph 151(3)(e) is not met if the previous owner of the tangible personal property was not subject to, or was exempt from, tax under the Act in respect of the tangible personal property because

(a) the previous owner purchased in British Columbia, brought or sent into British Columbia or received delivery of in British Columbia the tangible personal property for resale or lease,

(b) the tangible personal property was to be used for a particular purpose, or

(c) the tangible personal property was to be delivered or transported outside British Columbia, or was, in whole or in part, for use outside British Columbia.

Subsection 151(10) provides that the exemptions under PSTERR paragraph 151(2)(a) and 151(2)(b) do not apply to a corporation in respect of the tangible personal property unless the previous owner of the tangible personal property continues to wholly own and control the corporation for a period of at least 8 months after the transfer date.

Subsection 151(11) provides that PSTERR subsections 151(12) and 151(13) apply to a corporation referred to in PSTERR paragraph 151(2)(a) or 151(2)(b) if the previous owner of the tangible personal property referred to in that paragraph

(a) paid tax in respect of the tangible personal property only under section 60, 63, 64 or 66 of the Act, or

(b) was exempt under PSTERR Division 2 [Tangible Personal Property Transferred Between Related Parties] of PSTERR Part 9 [Related Party Asset Transfers] from all or a portion of tax imposed under section 60, 63 or 64 of the Act in respect of the tangible personal property.

Subsection 151(12) provides that for the purposes of the exemptions under PSTERR paragraphs 151(2)(a) and 151(2)(b), a corporation to whom PSTERR subsection 151(12) applies is exempt from tax imposed under Division 2, 4 or 5 or section 60, 63, 64 or 100 [tax on gift of vehicle, boat or aircraft given in British Columbia] of Part 3 of the Act, as applicable, in respect of the tangible personal property in an amount that is equal to the lesser of

(a) the sum of the following:

(ii) if the previous owner was exempt under PSTERR Division 2 of PSTERR Part 9 from all or a portion of tax imposed under section 60, 63 or 64 of the Act in respect of the tangible personal property, the amount determined under this paragraph or PSTERR paragraph 149(14)(a) [tangible personal property transferred between related corporations], as applicable, for the purpose of the previous owner's exemption from tax, and

(b) the amount of tax that, but for PSTERR paragraph 151(2)(a) or 151(2)(b), would be payable by the corporation under Division 2, 4 or 5 or section 60, 63, 64 or 100 of Part 3 of the Act, as applicable, in respect of the tangible personal property.

Subsection 151(13) provides that subject to PSTERR subsection 151(14), for the purposes of the exemptions under PSTERR paragraphs 151(2)(a) and 151(2)(b), a corporation to whom PSTERR subsection 151(13) applies is exempt from tax imposed under section 66 of the Act in respect of the tangible personal property in an amount that is equal to the lesser of

(a) the difference between the amount determined under PSTERR paragraph 151(12)(a) and the amount determined under PSTERR paragraph 151(12)(b), and

(b) the amount of tax that, but for PSTERR paragraph 151(2)(a) or 151(2)(b), would be payable by the corporation under section 66 of the Act in respect of the tangible personal property.

Subsection 151(14) provides that the exemptions under PSTERR paragraphs 151(2)(a) and 151(2)(b) from tax imposed under section 66 of the Act do not apply to a corporation referred to in PSTERR subsection 151(13) in respect of tangible personal property unless the amount determined under PSTERR paragraph 151(12)(a) exceeds the amount determined under PSTERR paragraph 151(12)(b).

R.1 Transfers Cannot Be Made Retroactive (Issued: 2014/04)

A transfer cannot be made retroactive to an earlier date so that it occurs on or before the date on which the purchaser started to carry on business. The date of purchase is the date that the transfer of title to the TPP actually takes legal effect. For example, if the purchaser started to carry on business beginning September 1, 2014, but title to the transferor's TPP is not transferred to the purchaser until November 15, 2014, then the date of purchase is November 15. It cannot be made retroactive to September 1. If the date of transfer is after the date that the purchaser commenced its business operations, the transaction does not qualify for exemption.

Section 152 – Tangible Personal Property Transferred To New Coporation – Not Wholly Owned And Controlled

PSTERR - SEC.152/Int.-R.1

References:

Act: Section 1 "purchase price", "tangible personal property"; Part 3 – Division 2; Part 3 – Division 4; Part 3 – Division 5; Section 60; Section 63; Section 64; Section 66; Section 101

PSTERR: Section 57; Section 148; Part 9 – Division 2; Section 151

PSTR: Section 22; Section 24

Bulletin PST 210

Interpretation (Issued: 2014/02)

Effective April 1, 2013, B.C. Reg. 97/2013 provides under PSTERR section 152 exemptions from tax for tangible personal property transferred to a new corporation from a person who does not wholly own and control that corporation in the specified circumstances.

Subsection 152(1) provides that in PSTERR section 152:

"previous owner", in relation to tangible personal property, means the person referred to in PSTERR paragraph 152(2)(a) or 152(2)(b), as applicable, from whom the corporation referred to in that paragraph purchases or acquired, as applicable, the tangible personal property;

"transfer date" means the following:

(a) in respect of tangible personal property referred to in PSTERR paragraph 152(2)(a), the date on which the tangible personal property is purchased by the corporation referred to in that paragraph;

(b) in respect of tangible personal property referred to in PSTERR paragraph 152(2)(b), the date on which the tangible personal property was acquired by the corporation referred to in that paragraph.

Subsection 152(2) provides that subject to PSTERR subsections 152(3), 152(5) and 152(6),

(i) Division 2 [Purchases of Tangible Personal Property] of Part 3 [Taxes In Relation to Tangible Personal Property];

(ii) section 60 [tax if conveyance purchased in British Columbia for interjurisdictional use];

(iii) section 66 [adjustment of tax in respect of conveyance];

(iv) section 101 [tax on reusable containers], and

(i) Division 4 [Tangible Personal Property Brought into British Columbia] of Part 3 of the Act;

(ii) Division 5 [Property Brought into British Columbia from Outside Canada] of Part 3;

(iii) section 63 [tax if conveyance brought into and used in British Columbia];

(iv) section 64 [tax if change in use of conveyance acquired for resale];

(v) section 66 [adjustment of tax in respect of conveyance].

Subsection 152(3) provides that subject to PSTERR subsections 151(4) to 151(9) [tangible personal property transferred to new corporation – wholly owned and controlled] and PSTERR subsection 152(4), the exemptions under PSTERR paragraphs 152(2)(a) and 152(2)(b) do not apply to a corporation in respect of tangible personal property unless one or more of the requirements set out in PSTERR paragraphs 151(3)(a) to 151(3)(e) are met.

Subsection 152(4) provides that for the purposes of PSTERR subsection 152(3),

(a) a reference in PSTERR subsection 151(3) to paragraphs 151(2)(a) and 151(2)(b) is to be read as a reference to PSTERR paragraphs 152(2)(a) and 152(2)(b),

(b) a reference in PSTERR subsections 151(3) and 151(5) to 151(9) to previous owner is to be read as a reference to previous owner as defined in PSTERR subsection 152(1),

(c) a reference in PSTERR subsections 151(3) and 151(5) to 151(9) to tangible personal property is to be read as a reference to tangible personal property under PSTERR section 152,

(d) for the purposes of PSTERR subparagraph 151(3)(a)(i), tax under the Act does not include tax under section 60, 63, 64 or 66 of the Act,

(e) the requirement set out in PSTERR paragraph 151(3)(d) is not met if the previous owner of the tangible personal property would have been exempt under PSTERR Division 2 [Tangible Personal Property Transferred Between Related Parties] of PSTERR Part 9 [Related Party Asset Transfers] from all or a portion of tax imposed under section 60, 63, 64 or 66 of the Act in respect of the tangible personal property, and

(f) the requirement set out in PSTERR paragraph 151(3)(e) is not met if the previous owner of the tangible personal property was exempt under PSTERR Division 2 of PSTERR Part 9 from all or a portion of tax imposed under section 60, 63, 64 or 66 of the Act in respect of the tangible personal property.

Subsection 152(5) provides that the exemptions under PSTERR paragraphs 152(2)(a) and 152(2)(b) do not apply to a corporation in respect of tangible personal property unless all of the following requirements are met:

(a) the consideration for the purchase or acquisition of the tangible personal property by the corporation is the issue or transfer of shares in that corporation to the previous owner of the tangible personal property;

(b) the date on which the shares are issued or transferred to the previous owner is not more than 30 days after the transfer date;

(c) the previous owner beneficially owns and holds legal title to all of the shares so acquired for a period of at least 8 months after the transfer date.

Subsection 152(6) provides that for the purposes of the exemptions under PSTERR paragraphs 152(2)(a) and 152(2)(b),

(a) if the fair market value of the shares referred to in PSTERR paragraph 152(5)(a) is equal to or greater than the fair market value of the tangible personal property, the corporation is exempt from tax imposed under Divisions 2, 4 and 5 and sections 60, 63, 64, 66 and 101 of Part 3 of the Act in respect of the tangible personal property, and

(b) if the fair market value of the shares referred to in PSTERR paragraph 152(5)(a) is less than the fair market value of the tangible personal property, the corporation is exempt from tax imposed under Divisions 2, 4, and 5 and sections 60, 63, 64, 66 and 101 of Part 3 of the Act in respect of the tangible personal property to the extent necessary to reduce the tax payable under the applicable Division or section to an amount that is equal to the amount of tax that would be payable under the applicable Division or section if the purchase price of the tangible personal property were equal to the difference between the fair market value of the tangible personal property and the fair market value of the shares issued or transferred.

R.1 Transfers Of Equipment With An Outstanding Loan (Issued: 2014/04)

Under PSTERR section 152, to qualify for a full exemption, the person transferring TPP (the transferor) must receive shares at least equal to the actual fair market value of the TPP transferred.

If an outstanding loan exists against the equipment and the transferor receives shares equal to only the net equity of the equipment, tax is payable by the new corporation on the difference between the actual fair market value of the equipment and the value of the shares received.

Division 3 — Software Transferred Between Related Parties

Section 153 – Software Transferred Between Related Corporations

PSTERR - SEC.153/Int.

References:

Act: Section 1 "electronic device", "Excise Tax Act", "use"; Part 4; Section 105; Section 106; Section 107; Section 108; Section 113

PSTERR: Section 1 "Part 4 software"; Section 57; Section 148 "related corporation"; Part 9 – Division 3; Section 154

PSTR: Section 24; Section 30

Bulletin PST 210

Interpretation (Issued: 2014/02)

Effective April 1, 2013, B.C. Reg. 97/2013 provides under PSTERR section 153 exemptions from tax for Part 4 software transferred between related corporations in the specified circumstances.

Subsection 153(1) provides that in PSTERR section 153:

"previous owner", in relation to Part 4 software, means the related corporation referred to in PSTERR paragraph 153(2)(a) or 153(2)(b), as applicable;

"transfer date" means the following:

(a) in respect of Part 4 software referred to in PSTERR paragraph 153(2)(a), the date on which the Part 4 software is purchased by the corporation referred to in that paragraph;

(b) in respect of Part 4 software referred to in PSTERR paragraph 153(2)(b), the date on which the Part 4 software was purchased by the corporation referred to in that paragraph.

Subsection 153(2) provides that subject to PSTERR subsections 153(3), 153(8) and 153(10) to 153(12),

(a) if section 105 [tax on software] or subparagraph 107(1)(b)(i) [tax on purchase of software for business use on devices in and outside British Columbia] of the Act applies to a corporation in relation to Part 4 software, the corporation is exempt from tax imposed under section 105, section 107 and section 108 [adjustment of tax under section 107] of the Act in relation to the Part 4 software, if the corporation purchases the Part 4 software from a related corporation, and

(b) if section 106 [tax on use of software on device in British Columbia] or subparagraph 107(1)(b)(ii) [tax on business use of software on devices in and outside British Columbia] of the Act applies to a corporation in relation to Part 4 software, the corporation is exempt from tax imposed under sections 106 to 108 of the Act in relation to the Part 4 software, if the corporation purchased the Part 4 software from a related corporation.

Subsection 153(3) provides that the exemptions under PSTERR paragraphs 153(2)(a) and 153(2)(b) do not apply to a corporation in respect of Part 4 software unless one or more of the following requirements are met:

(a) subject to PSTERR subsection 153(4), a related corporation of either the corporation or the previous owner of the Part 4 software

(i) paid tax under the Social Service Tax Act, other than Division 2 of Part 2 of that Act, in respect of the Part 4 software and has not obtained and is not entitled to obtain, under that Act, a refund of that tax;

(ii) paid tax, in respect of the Part 4 software, under section 165(2), 212.1 or 218.1 or Division IV.1 of Part IX of the Excise Tax Act, in respect of British Columbia as a participating province under Part IX of that Act, and has not obtained and is not entitled to obtain, under Part IX of that Act, a refund of or a credit or rebate for that tax, or

(iii) paid tax under Part 4 [Taxes in Relation to Software] of the Act in respect of the Part 4 software and has not obtained and is not entitled to obtain, under the Act, a refund of that tax;

(b) subject to PSTERR subsection 153(5),

(i) the previous owner of the Part 4 software, before July 1, 2010, acquired in British Columbia, brought or sent into British Columbia or received delivery of in British Columbia the Part 4 software, and

(ii) the previous owner was not subject to, or was exempt from, tax under the Social Service Tax Act in respect of the acquiring in British Columbia, bringing or sending into British Columbia or receiving of delivery in British Columbia of the Part 4 software;

(i) the

previous owner of the Part 4 software, on or after July 1, 2010 but before April 1, 2013, purchased the Part 4 software in British Columbia for use on or with an electronic device ordinarily situated in British Columbia, or
previous owner of the Part 4 software purchased the Part 4 software and, on or after July 1, 2010 but before April 1, 2013, the Part 4 software was used on or with an electronic device ordinarily situated in British Columbia, and

(ii) the previous owner would have been exempt from tax imposed under section 105, 106 or 107 of the Act in respect of the purchase or use of the Part 4 software if the Act and the regulations made under it, as they read on April 1, 2013, had been in force during the period referred to in PSTERR subparagraph 153(3)(c)(i);

(d) subject to PSTERR subsection 153(7),

(i) the

previous owner of the Part 4 software, after April 1, 2013, purchased in British Columbia the Part 4 software for use on or with an electronic device ordinarily situated in British Columbia, or
previous owner of the Part 4 software purchased the Part 4 software and, after April 1, 2013, the Part 4 software was used on or with an electronic device ordinarily situated in British Columbia, and

(ii) the previous owner was exempt from tax imposed under section 105, 106 or 107 of the Act in respect of the purchase or use of the Part 4 software.

Subsection 153(4) provides that the requirement set out in PSTERR paragraph 153(3)(a) is not met if the related corporation referred to in that paragraph

(a) paid tax under the Act or the Social Service Tax Act in respect of a portion of the consideration for the Part 4 software,

(c) obtained or is entitled to obtain, under Part IX of the Excise Tax Act, a refund, credit or rebate in respect of the tax referred to in PSTERR paragraph 153(4)(b).

Subsection 153(5) provides that the requirement set out in PSTERR paragraph 153(3)(b) is not met if the previous owner of the Part 4 software was not subject to, or was exempt from, tax under the Social Service Tax Act in respect of the Part 4 software because

(a) the previous owner purchased in British Columbia, brought or sent into British Columbia or received delivery of in British Columbia the Part 4 software for resale, or

(b) the Part 4 software was used or was to be used for a particular purpose.

Subsection 153(6) provides that the requirement set out in PSTERR paragraph 153(3)(c) is not met if the previous owner of the Part 4 software would have been exempt,

(a) under section 113 [exemptions in relation to software] of the Act, or

(b) because the Part 4 software was to be used for a particular purpose,

from tax imposed under the Act in respect of the Part 4 software.

Subsection 153(7) provides that the requirement set out in PSTERR paragraph 153(3)(d) is not met if the previous owner of the Part 4 software was exempt,

(a) under section 113 of the Act, or

(b) because the Part 4 software was to be used for a particular purpose,

from tax imposed under the Act in respect of the Part 4 software.

Subsection 153(8) provides that the exemptions under PSTERR paragraphs 153(2)(a) and 153(2)(b) do not apply to a corporation in respect of Part 4 software unless

(a) the corporation and the previous owner of the Part 4 software remain related corporations for a period of at least 8 months after the transfer date, or

(b) all of the following requirements are met:

(i) the corporation and the previous owner were related corporations for a period of at least 8 months before the transfer date;

(iii) the corporation and the previous owner remain related corporations until such time as the seller is dissolved or wound up.

Subsection 153(9) provides that PSTERR subsections 153(10) and 153(11) apply to a corporation referred to in PSTERR paragraph 153(2)(a) or 153(2)(b) in respect of Part 4 software referred to in that paragraph if

(a) the related corporation referred to in PSTERR paragraph 153(3)(a) paid tax in respect of the Part 4 software only under section 107 or 108 of the Act, or

(b) the previous owner of the Part 4 software was exempt under Division 3 [Software Transferred Between Related Parties] of PSTERR Part 9 [Related Party Asset Transfers] from all or a portion of tax imposed under section 107 of the Act in respect of the Part 4 software.

Subsection 153(10) provides that for the purposes of the exemptions under PSTERR paragraphs 153(2)(a) and 153(2)(b), a corporation to whom PSTERR subsection 153(10) applies is exempt from tax imposed under section 105, 106 or 107 of the Act, as applicable, in respect of the Part 4 software in an amount that is equal to the lesser of

(a) the sum of the following:

(i) the amount of tax the previous owner paid in respect of the Part 4 software under sections 107 and 108 of the Act and for which the previous owner has not obtained and is not entitled to obtain a refund under the Act;

(ii) if the previous owner was exempt under Division 3 of Part 9 from all or a portion of tax imposed under section 107 of the Act in respect of the Part 4 software, the amount determined under PSTERR paragraph 153(10)(a) or PSTERR paragraph 154(10)(a) [software transferred to new corporation – wholly owned and controlled], as applicable, for the purpose of the previous owner's exemption from tax, and

(b) the amount of tax that, but for PSTERR paragraph 153(2)(a) or 153(2)(b), would be payable by the corporation under section 105, 106 or 107 of the Act, as applicable, in respect of the Part 4 software.

Subsection 153(11) provides that subject to PSTERR subsection 153(12), for the purposes of the exemptions under PSTERR paragraphs 153(2)(a) and 153(2)(b), a corporation to whom PSTERR subsection 153(11) applies is exempt from tax imposed under section 108 of the Act in respect of the Part 4 software in an amount that is equal to the lesser of

(a) the difference between the amount determined under PSTERR paragraph 153(10)(a) and the amount determined under PSTERR paragraph 153(10)(b), and

(b) the amount of tax that, but for PSTERR paragraph 153(2)(a) or 153(2)(b), would be payable by the corporation under section 108 of the Act in respect of the Part 4 software.

Subsection 153(12) provides that the exemptions under PSTERR paragraphs 153(2)(a) and 153(2)(b) from tax imposed under section 108 of the Act do not apply to a corporation referred to in PSTERR subsection 153(11) in respect of Part 4 software unless the amount determined under PSTERR paragraph 153(10)(a) exceeds the amount determined under PSTERR paragraph 153(10)(b).

Section 154 – Software Transferred To New Corporation – Wholly Owned And Controlled

PSTERR - SEC.154/Int.

References:

Act: Section 1 "electronic device", "Excise Tax Act", "use"; Part 4; Section 105; Section 106; Section 107; Section 108; Section 113

PSTERR: Section 1 "Part 4 software"; Section 57; Section 148; Part 9 – Division 3; Section 153; Section 155

PSTR: Section 24; Section 30

Bulletin PST 210

Interpretation (Issued: 2014/02)

Effective April 1, 2013, B.C. Reg. 97/2013 provides under PSTERR section 154 exemptions from tax for Part 4 software transferred to a new corporation from a person who wholly owns and controls that corporation in the specified circumstances.

Subsection 154(1) provides that in PSTERR section 154:

"previous owner", in relation to Part 4 software, means the person referred to in PSTERR paragraph 154(2)(a) or 154(2)(b), as applicable, from whom the corporation referred to in that paragraph purchases the Part 4 software;

"transfer date" means the following:

(a) in respect of Part 4 software referred to in PSTERR paragraph 154(2)(a), the date on which the Part 4 software is purchased by the corporation referred to in that paragraph;

(b) in respect of Part 4 software referred to in PSTERR paragraph 154(2)(b), the date on which the Part 4 software was purchased by the corporation referred to in that paragraph.

Subsection 154(2) provides that subject to PSTERR subsections 154(3), 154(8) and 154(10) to 154(12),

(a) if section 105 [tax on software] or subparagraph 107(1)(b)(i) [tax on business use of software on devices in and outside British Columbia] of the Act applies to a corporation in relation to Part 4 software, the corporation is exempt from tax imposed under section 105, section 107 and section 108 [adjustment of tax under section 107] of the Act in relation to the Part 4 software if the corporation, at any time on or before the date on which the corporation starts to carry on business, purchases the Part 4 software from a person that wholly owns and controls it, and

(b) if section 106 [tax on use of software on device in British Columbia] or subparagraph 107(1)(b)(ii) of the Act applies to a corporation in relation to Part 4 software, the corporation is exempt from tax imposed under sections 106 to 108 of the Act in relation to the Part 4 software if the corporation, at any time on or before the date on which the corporation started to carry on business, purchased the Part 4 software from a person that wholly owned and controlled it.

Subsection 154(3) provides that the exemptions under PSTERR paragraphs 154(2)(a) and 154(2)(b) do not apply to a corporation in respect of Part 4 software unless one or more of the following requirements are met:

(a) subject to PSTERR subsection 154(4), the previous owner of the Part 4 software

(iii) paid tax under Part 4 [Taxes in Relation to Software] of the Act in respect of the Part 4 software and has not obtained and is not entitled to obtain, under the Act, a refund of that tax;

(b) subject to PSTERR subsection 154(5),

(i) the

previous owner of the Part 4 software, on or after July 1, 2010 but before April 1, 2013, purchased the Part 4 software in British Columbia for use on or with an electronic device ordinarily situated in British Columbia, or
previous owner of the Part 4 software purchased the Part 4 software and, on or after July 1, 2010 but before April 1, 2013, the Part 4 software was used on or with an electronic device ordinarily situated in British Columbia, and

(d) subject to PSTERR subsection 154(7),

(i) the

previous owner of the Part 4 software, after April 1, 2013, purchased in British Columbia the Part 4 software for use on or with an electronic device ordinarily situated in British Columbia, or
previous owner of the Part 4 software purchased the Part 4 software and, after April 1, 2013, the Part 4 software was used on or with an electronic device ordinarily situated in British Columbia, and

(ii) the previous owner was exempt from tax imposed under section 105, 106 or 107 of the Act in respect of the purchase or use of the Part 4 software.

Subsection 154(4) provides that the requirement set out in PSTERR paragraph 154(3)(a) is not met if the previous owner of the Part 4 software

(a) paid tax under the Act or the Social Service Tax Act in respect of a portion of the consideration for the Part 4 software,

(c) obtained or is entitled to obtain, under Part IX of the Excise Tax Act, a refund, credit or rebate in respect of the tax referred to in PSTERR paragraph 154(4)(b).

Subsection 154(5) provides that the requirement set out in PSTERR paragraph 154(3)(b) is not met if the previous owner of the Part 4 software was not subject to, or was exempt from, tax under the Social Service Tax Act in respect of the Part 4 software because

(a) the previous owner purchased in British Columbia, brought or sent into British Columbia or received delivery of in British Columbia the Part 4 software for resale, or

(b) the Part 4 software was used or was to be used for a particular purpose.

Subsection 154(6) provides that the requirement set out in PSTERR paragraph 154(3)(c) is not met if the previous owner of the Part 4 software would have been exempt,

(a) under section 113 [exemptions in relation to software] of the Act, or

(b) because the Part 4 software was to be used for a particular purpose,

from tax imposed under the Act in respect of the Part 4 software.

Subsection 154(7) provides that the requirement set out in PSTERR paragraph 154(3)(d) is not met if the previous owner of the Part 4 software was exempt,

(a) under section 113 of the Act, or

(b) because the Part 4 software was to be used for a particular purpose,

from tax imposed under the Act in respect of the Part 4 software.

Subsection 154(8) provides that the exemptions under PSTERR paragraphs 154(2)(a) and 154(2)(b) do not apply to a corporation in respect of Part 4 software unless the previous owner of the Part 4 software continues to wholly own and control the corporation for a period of at least 8 months after the transfer date.

Subsection 154(9) provides that PSTERR subsections 154(10) and 154(11) apply to a corporation referred to in PSTERR paragraph 154(2)(a) or 154(2)(b) if the previous owner of the Part 4 software referred to in that paragraph

(a) paid tax in respect of the Part 4 software only under section 107 or 108 of the Act, or

(b) was exempt under Division 3 [Software Transferred Between Related Parties] of PSTERR Part 9 [Related Party Asset Transfers] from all or a portion of tax imposed under section 107 of the Act in respect of the Part 4 software.

Subsection 154(10) provides that for the purposes of the exemptions under PSTERR paragraphs 154(2)(a) and 154(2)(b), a corporation to whom PSTERR subsection 154(10) applies is exempt from tax imposed under section 105, 106 or 107 of the Act, as applicable, in respect of the Part 4 software in an amount that is equal to the lesser of

(a) the sum of the following:

(ii) if the previous owner was exempt under Division 3 of Part 9 from all or a portion of tax imposed under section 107 of the Act in respect of the Part 4 software, the amount determined under PSTERR paragraph 154(10)(a) or PSTERR paragraph 153(10)(a) [software transferred between related corporations], as applicable, for the purpose of the previous owner's exemption from tax, and

(b) the amount of tax that, but for PSTERR paragraph 154(2)(a) or 154(2)(b), would be payable by the corporation under section 105, 106 or 107 of the Act, as applicable, in respect of the Part 4 software.

Subsection 154(11) provides that subject to PSTERR subsection 154(12), for the purposes of the exemptions under PSTERR paragraphs 154(2)(a) and 154(2)(b), a corporation to whom PSTERR subsection 154(11) applies is exempt from tax imposed under section 108 of the Act in respect of the Part 4 software in an amount that is equal to the lesser of

(a) the difference between the amount determined under PSTERR paragraph 154(10)(a) and the amount determined under PSTERR paragraph 154(10)(b), and

(b) the amount of tax that, but for PSTERR paragraph 154(2)(a) or 154(2)(b), would be payable by the corporation under section 108 of the Act in respect of the Part 4 software.

Subsection 154(12) provides that the exemptions under PSTERR paragraphs 154(2)(a) and 154(2)(b) from tax imposed under section 108 of the Act do not apply to a corporation referred to in PSTERR subsection 154(11) in respect of Part 4 software unless the amount determined under PSTERR paragraph 154(10)(a) exceeds the amount determined under PSTERR paragraph 154(10)(b).

Section 155 – Software Transferred To New Corporation – Not Wholly Owned And Controlled

PSTERR - SEC.155/Int.

References:

Act: Section 1 "purchase price"; Section 105; Section 106; Section 107; Section 108

PSTERR: Section 1 "Part 4 software"; Section 57; Section 148; Part 9 – Division 3; Section 154

PSTR: Section 24; Section 30

Bulletin PST 210

Interpretation (Issued: 2014/02)

Effective April 1, 2013, B.C. Reg. 97/2013 provides under PSTERR section 155 exemptions from tax for Part 4 software transferred to a new corporation from a person who does not wholly own and control that corporation in the specified circumstances.

Subsection 155(1) provides that in PSTERR section 155:

"previous owner", in relation to Part 4 software, means the person referred to in PSTERR paragraph 155(2)(a) or 155(2)(b), as applicable, from whom the corporation referred to in that paragraph purchases the Part 4 software;

"transfer date" means the following:

(a) in respect of Part 4 software referred to in PSTERR paragraph 155(2)(a), the date on which the Part 4 software is purchased by the corporation referred to in that paragraph;

(b) in respect of Part 4 software referred to in PSTERR paragraph 155(2)(b), the date on which the Part 4 software was purchased by the corporation referred to in that paragraph.

Subsection 155(2) provides that subject to PSTERR subsections 155(3), 155(5) and 155(6),

Subsection 155(3) provides that subject to PSTERR subsections 154(4) to 154(7) [software transferred to new corporation – wholly owned and controlled] and PSTERR subsection 155(4), the exemptions under PSTERR paragraphs 155(2)(a) and 155(2)(b) do not apply to a corporation in respect of Part 4 software unless one or more of the requirements set out in PSTERR paragraphs 154(3)(a) to 154(3)(d) are met.

Subsection 155(4) provides that for the purposes of PSTERR subsection 155(3),

(a) a reference in PSTERR subsection 154(3) to paragraphs 154(2)(a) and 154(2)(b) is to be read as a reference to PSTERR paragraphs 155(2)(a) and 155(2)(b),

(b) a reference in PSTERR subsections 154(3) to 154(7) to previous owner is to be read as a reference to previous owner as defined in PSTERR subsection 155(1),

(c) a reference in PSTERR subsections 154(3) to 154(7) to Part 4 software is to be read as a reference to Part 4 software under PSTERR section 155,

(d) for the purposes of PSTERR subparagraph 154(3)(a)(iii), tax under Part 4 [Taxes in Relation to Software] of the Act does not include tax under section 107 or 108 of the Act,

(e) the requirement set out in PSTERR paragraph 154(3)(c) is not met if the previous owner of the Part 4 software would have been exempt under PSTERR Division 3 [Software Transferred Between Related Parties] of PSTERR Part 9 [Related Party Asset Transfers] from all or a portion of tax imposed under section 107 or 108 of the Act in respect of the Part 4 software, and

(f) the requirement set out in PSTERR paragraph 154(3)(d) is not met if the previous owner of the Part 4 software was exempt under PSTERR Division 3 of PSTERR Part 9 from all or a portion of tax imposed under section 107 or 108 of the Act in respect of the Part 4 software.

Subsection 155(5) provides that the exemptions under PSTERR paragraphs 155(2)(a) and 155(2)(b) do not apply to a corporation in respect of Part 4 software unless all of the following requirements are met:

(a) the consideration for the purchase or acquisition of the Part 4 software by the corporation is the issue or transfer of shares in that corporation to the previous owner of the Part 4 software;

(b) the date on which the shares are issued or transferred to the previous owner is not more than 30 days after the transfer date;

(c) the previous owner beneficially owns and holds legal title to all of the shares so acquired for a period of at least 8 months after the transfer date.

Subsection 155(6) provides that for the purposes of the exemptions under PSTERR paragraphs 155(2)(a) and 155(2)(b),

(a) if the fair market value of the shares referred to in PSTERR paragraph 155(5)(a) is equal to or greater than the fair market value of the Part 4 software, the corporation is exempt from tax imposed under sections 105 to 108 of the Act in respect of the Part 4 software, and

(b) if the fair market value of the shares referred to in PSTERR paragraph 155(5)(a) is less than the fair market value of the Part 4 software, the corporation is exempt from tax imposed under sections 105 to 108 of the Act in respect of the Part 4 software to the extent necessary to reduce the tax payable under those sections to an amount that is equal to the amount of tax that would be payable under those sections if the purchase price of the Part 4 software were equal to the difference between the fair market value of the Part 4 software and the fair market value of the shares issued or transferred.

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