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

Marginal note:Rate change — variation of agreement

274.1 If

• (a) at any time before July 1, 2006, a supplier and a recipient enter into an agreement for a taxable supply of property or a service,

• (b) the supplier and the recipient at a later time either directly or indirectly

  • (i) vary or alter the agreement for the supply, or

  • (ii) terminate the agreement and enter into one or more new agreements with each other or with other persons and under one or more of those agreements the supplier supplies, and the recipient receives, one or more supplies that includes all or substantially all the property or service referred to in paragraph (a),

• (c) the supplier, the recipient and, where applicable, the other persons are not dealing with each other at arm’s length at the time the agreement is entered into or at the later time,

• (d) tax under subsection 165(1) or section 218 in respect of the supply referred to in paragraph (a) would have been calculated at the rate of 7% on all or part of the value of the consideration for the supply attributable to the property or service in the absence of the variation, alteration or termination of the agreement,

• (e) tax under subsection 165(1) or section 218 in respect of the supply made under the varied or altered agreement or made under any of the new agreements would, in the absence of this section, be calculated at the rate of 6% on any part of the value of the consideration for the supply, attributable to any part of the property or service, on which tax, in respect of the supply referred to in paragraph (a), was initially calculated at the rate of 7%, and

• (f) the variation or alteration of the agreement or the entering into of the new agreements may not reasonably be considered for both the supplier and the recipient to have been undertaken or arranged primarily for bona fide purposes other than to benefit in any manner from the rate change,

the following rule applies

• (g) tax under subsection 165(1) or section 218 in respect of the supply made under the varied or altered agreement or made under any of the new agreements shall be calculated at the rate of 7% on any part of the value of the consideration, referred to in paragraph (e), attributable to any part of the property or service.

Marginal note:Variation of agreement — 2008 rate reduction

274.11 If

• (a) at any time before January 1, 2008, a supplier and a recipient enter into an agreement for a taxable supply of property or a service,

• (b) the supplier and the recipient at a later time either directly or indirectly

  • (i) vary or alter the agreement for the supply, or

  • (ii) terminate the agreement and enter into one or more new agreements with each other or with other persons and under one or more of those agreements the supplier supplies, and the recipient receives, one or more supplies that includes all or substantially all the property or service referred to in paragraph (a),

• (c) the supplier, the recipient and, where applicable, the other persons are not dealing with each other at arm’s length at the time the agreement is entered into or at the later time,

• (d) tax under subsection 165(1) or section 218 in respect of the supply referred to in paragraph (a) would have been calculated at the rate of 6% or 7%, as the case may be, on all or part of the value of the consideration for the supply attributable to the property or service in the absence of the variation, alteration or termination of the agreement,

• (e) tax under subsection 165(1) or section 218 in respect of the supply made under the varied or altered agreement or made under any of the new agreements would, in the absence of this section, be calculated at the rate of 5% on any part of the value of the consideration for the supply, attributable to any part of the property or service, on which tax, in respect of the supply referred to in paragraph (a), was initially calculated at the rate of 6% or 7%, as the case may be, and

• (f) the variation or alteration of the agreement or the entering into of the new agreements may not reasonably be considered for both the supplier and the recipient to have been undertaken or arranged primarily for bona fide purposes other than to benefit in any manner from the rate change,

the following rule applies

• (g) tax under subsection 165(1) or section 218 in respect of the supply made under the varied or altered agreement or made under any of the new agreements shall be calculated at the rate at which tax would have been calculated under paragraph (d) on any part of the value of the consideration, referred to in paragraph (e), attributable to any part of the property or service.