Navigating Revenue-Sharing Arrangements and GST/HST: Legal Flow of Money in Business Partnerships

• It is important to clarify the direction of revenue and GST/HST flow in revenue-sharing arrangements
• Tax consequences vary depending on the direction, especially if one party is making exempt supplies
• Different scenarios can lead to different GST/HST consequences
• If clinic pays doctor for medical services, it is exempt from HST but can’t claim ITCs
• If doctor pays clinic for use of facilities, it is taxable rent and clinic must charge HST
• Incorrect handling of HST can lead to audit risks and financial consequences
• Contracts, invoicing, legal rights, and actual facts are considered by CRA and Courts to determine flow of money
• Clear and consistent contracts are crucial to avoid confusion and potential tax issues.

Source: dmainc.com

Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.

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