Lawyers' disbursements

GST/HST Policy Statement P-209R

Date of issue: July 7, 2004
This policy statement replaces P-209, dated October 7, 1998.

Legislative reference: Definition of “consideration” in subsection 123(1) and subsection 153(1) of the Excise Tax Act

National coding system file number(s): 11725-8

Effective date: January 1, 1991 for GST and April 1, 1997 for HST

Note: Please note that the following Policy Statement, although correct at the time of issue, may not have been updated to reflect any subsequent legislative changes.


Table of Contents

Issue and Decision:

Issue

This policy statement addresses the issue of how common lawyers' disbursements are characterized for GST/HST purposes. The phrase “lawyers’ disbursements” refers to any number of expenses that a lawyer may incur in the course of providing legal services, and for which a particular client will subsequently reimburse the lawyer.

Decision

Generally, the Canada Revenue Agency will treat a disbursement described in this policy statement in the manner indicated, unless there is strong evidence to the contrary that it should not be so treated. If in a specific case strong evidence does exist that a contrary treatment should apply to a particular disbursement, then the general position taken in this policy statement will not apply to that disbursement for that specific case and a separate analysis of the facts surrounding the particular disbursement will be completed.

Discussion

The disbursements described in this policy statement are characterized as either “incurred as agent” or “not incurred as agent”. The phrase “incurred as agent” indicates that the disbursement described is generally incurred in a lawyer's capacity as agent for a particular client. As such, no GST/HST is exigible on the subsequent reimbursement by the client. The phrase “not incurred as agent” indicates that the disbursement described is generally incurred otherwise than in a lawyer's capacity as agent for a particular client. As such, GST/HST is exigible on the subsequent reimbursement by the client (to the extent that GST/HST is exigible on the consideration for the service provided by the lawyer to the client). The characterization of each disbursement is based on the application of the principles of agency to a typical transaction involving that disbursement. Policy statement P-182R, Agency was used as the basis for this analysis.

Real property practice area

This practice area involves services related to title searches, execution searches, and the arranging for and the registration of various documents pertaining to interests in, estates in, possession of or ownership of real property. The client is generally a purchaser, a vendor, a lien claimant or a lender in respect of a particular transaction. However, for residential transfers it is not unusual for the same lawyer to represent both the lender and the purchaser.

Common disbursements incurred as agent

Application fees

A fee paid to a municipal or provincial government in respect of the filing of an application requesting a particular license or permit be granted to a client (e.g. subdivision, zoning, development permits, relaxations and building permits).

Registration fees

These are amounts charged for the registration of various documents relating to title on property, including,

1) Transfers of title – a fee paid to either a Land Titles office or a Land Registry office to register on a specific parcel of real property a transfer of title;

2) Encumbrances – a fee paid to either a Land Titles office or a Land Registry office to have an encumbrance, such as a mortgage or lien, registered on a specific parcel of real property;

3) Discharges of claims – a fee paid to either a Land Titles office or a Land Registry office to discharge a particular instrument from a specific parcel of real property; or

4) Changes to claims – a fee paid to either a Land Titles office or a Land Registry office to have postponements and transfers of encumbrances registered on a specific parcel of real property.

Land transfer tax

In practice, many lawyers show the amount of land transfer tax paid in respect of a particular transaction on the client's bill as a disbursement. However, the amount shown may not in fact be an expense incurred by the lawyer but rather may represent a disbursing of the client's funds (in the same manner as the lawyer disburses the payment of the purchase price to the vendor). In other cases, the lawyer has incurred an expense on “behalf” of the client (i.e. has paid the land transfer tax) and seeks reimbursement from the client. Since land transfer taxes are imposed upon the purchaser, usually upon registration of title documents, GST/HST is not exigible regardless of whether the lawyer characterizes the payment as a disbursement or not.

Common disbursements not incurred as agent

Search fees

1) Land titles/provincial search – a request for details regarding the subject land, details regarding the registered owner, prior encumbrances and instruments registered or filed against title or details regarding one or more of the principals in the transaction. This includes a title search (a request for a description of the land and any claims against the land), an encumbrance search (a request for the details of any encumbrances filed against the land), or a name search (a request for details concerning outstanding judgments against specific persons).

2) Municipal search – a request for details concerning various municipal regulations or requirements in relation to the property. It may encompass details on tax arrears, details on the conditions relative to the property, such as outstanding work orders and permits, details of land use/approved zoning, details of health conditions relative to the property, such as outstanding work orders or charges or permit violations, details of electrical conditions relative to the property, such as outstanding work orders, or details of fire safety conditions relative to the property, such as outstanding requirements.

3) Utility search – a request for details concerning various outstanding arrears, liabilities or work orders relative to the property. This may result in a report or a certificate.

4) Miscellaneous searches – a request for details or status from either provincial or federal governments, specific to the property being transferred. Such a search can concern details or status in respect of bankruptcy, workers' compensation, various equipment (i.e. boilers, elevators), labour standards requirements, environmental standards or requirements, airport zoning requirements or claims in relation to personal property situated on the property in question.

Intellectual property practice area

Intellectual property includes various rights, such as patents, trademarks, copyrights, industrial design rights, plant breeders’ rights, and rights to integrated circuit topography. This practice area involves the investigation of, the preparation of, the registration of, the enforcement of or the defence of these rights.

Common disbursements incurred as agent

Application fee

This is a fee that must be paid in order to file an application for registration of an intellectual property. In the case of patents, trademarks and industrial designs this fee only begins the registration process and additional fees are required prior to completion of the registration process. For copyrights, plant breeders' rights and integrated circuit topographies this fee will typically be the only fee necessary to obtain the registration of the right.

Completion fee

This fee is paid when documentation must be filed to complete the filing of a patent or trademark application.

Examination fee

This fee is unique to patents and must be paid in order for the examination and allowance process to continue. It is not unlikely that there may be a considerable lapse in time between the application and the request to continue with examination.

Issuance fee

When the Canadian Intellectual Property Office (CIPO) has completed its examination of an application for the registration of a patent or a trademark, it will inform the applicant of its decision and will set a time limit for payment of this fee. After the fee is paid the client will receive documentation from the CIPO that the registration is complete.

Extension of time/reinstatement fee

A fee paid to extend the time limit for the filing of a particular document or for the paying of a particular fee. It occurs in respect to patents, trademarks and industrial designs (e.g. a fee paid to extend the time limit for paying an issuance fee).

Maintenance fee

An annual fee paid to keep a patent in force.

Formalities fee

A fee paid to record a change in basic information. It is distinct from a reissue or disclaimer fee paid in respect of a patent.

Renewal fee

A fee paid to renew a trademark (every 15 years) or an industrial design (once after 5 years). For trademarks, if the time limit for paying the renewal fee is missed, a six month grace period exists, however the renewal fee is higher.

Request for re-examination fee

A fee paid to have a patent application re-examined.

Reissue/disclaimer fee

A fee paid to change the scope of a patent (distinct from a formalities fee). A disclaimer fee is in respect of a request to reduce the scope of a patent – however, the original patent remains (i.e. patent number is unchanged). A reissue fee can be in respect of either a request to reduce the scope of a patent or to broaden the scope of a patent – however, it results in the existing patent being surrendered and a new patent issued.

Opposition fee

A fee paid to oppose another person's trademark application. The person opposing must be named and becomes actively involved in the matter.

Section 45 Trade-marks Act request fee

A fee paid to CIPO to have them confirm that the holder of a particular trademark is actually using same. The person requesting this confirmation does not need to be named.

Protest/section 34.1 Patent Act fee

A fee paid by a third party wanting to make submissions with respect to a particular patent application. The third party will forward a written submission to CIPO, along with the protest fee. The third party receives nothing from CIPO (the letter is not even acknowledged).

Correction of errors fee

A fee paid to record corrections to clerical errors in a patent application.

Assignment fee

A fee paid to CIPO to record an assignment or transfer of a patent, trademark, copyright or industrial design from the current registered owner to a new owner.

License fee

A fee paid to CIPO to record a license interest in a patent, trademark, copyright or industrial design.

Fees paid to foreign persons and related disbursements

In performing certain duties in respect of intellectual property, a lawyer may need to obtain the services of a non-resident lawyer (or a non-resident patent agent/trademark agent). In such cases the client is made aware of and approves the selection of the non-resident professional. The Canadian lawyer has no professional input on the proceedings undertaken by the non-resident, but acts as a conduit for the information to and from the non-resident. The non-resident will typically bill for both professional services and related disbursements. While ultimately the client is responsible for the non-resident's account, the normal practice is for the non-resident to invoice the Canadian lawyer.

Note that if the Canadian lawyer uses the services of a non-resident professional as an input in making a supply to the client, such disbursements would not be incurred as agent.

Common disbursements not incurred as agent

Search fees

1) Prior art search – prior art refers to the previous disclosure or registration anywhere in the world of a particular invention. Depending on the purpose of the search, such a search may be called a novelty search, an infringement search or a validity search.

2) Section 11 Patent Act inquiry – a fee paid to identify if an application for a patent has been made, but has not yet been made public (i.e. prior to the publication date that is 18 months after an application has been filed).

3) Trademark/industrial design search – a search of either the federal trademark registry or the federal industrial design registry.

Business law practice area

This practice area involves many aspects of law affecting the administration of various business enterprises (e.g. corporations, partnerships, etc.). For example, this area includes facilitating complex business transactions such as corporate purchases and sales (e.g. the purchase or sale of an existing business or the purchase, sale or lease of various assets and rights), incorporations, dissolutions, reorganizations, capital acquisitions (e.g. share issues, bond issues or other securities issues) and occasionally, insolvencies. In addition, it involves the regular filing of various documents and returns (e.g. preparing and registering security documents, change statements and releases relating to encumbrances on personal property; preparing and filing documents/returns with corporate, securities, personal property and other government registries).

The common disbursements discussed under the real property practice area should be referenced when a particular transaction involves real property.

Common disbursements incurred as agent

Government fees to create and maintain an entity

Fees or expenses incurred in the process of incorporating, registering and maintaining the status of particular legal relationships (such as a company, partnership, society or association). For example, such fees include:

  • basic fee to incorporate
  • basic fee to register
  • basic fee to amalgamate
  • fee to dissolve a status
  • fee to continue a status
  • basic fee to restore previous status
  • basic fee to convert from one status to another
  • fee to reserve or approve a name
  • fee for name change
  • fee to file an annual return or any other document
  • fee to alter constitution, by-laws, memorandum, or rules
  • fee for the issuance/certification of a document relative to any of the above (but not including a fee for a copy of a previously issued document)
  • fee paid by a particular entity to obtain occupational title protection
  • fee for expedited service in respect of any of the above.

It is important to note that some of the fees described above may be represented in some jurisdictions as more than one transaction (i.e. more then one fee). If in substance they are the same, the treatment of the individual transactions would follow the treatment of the single transaction as described. For example, in British Columbia the voluntary dissolution of a company requires both a fee for the filing of an ordinary resolution and of an affidavit. However, the dissolution cannot proceed without the payment of both fees. Both these fees would be covered by a “fee to dissolve a status”.

Miscellaneous registration fees

These are amounts charged for the registration of various documents, such as:

  • service fees for approvals, waivers, certificates, extensions, renewals
  • fees to transfer title
  • fees to register, change and discharge encumbrances
  • fees for rights, licenses and permits to use, occupy, operate and sell property and shares.

Fines, penalties and taxes

This disbursement occurs when a client is assessed or is subject to a particular fine, penalty, or an amount of tax but the lawyer pays the amount on behalf of the client and subsequently seeks reimbursement from the client. Note that the comments concerning land transfer tax (in the real property practice area section) may also apply to the payment of other taxes for the client.

Common disbursements not incurred as agent

Search fees

1) Title and encumbrance searches – a request for details from a federal or provincial body, including related commissions and agencies, in respect of a particular individual, business organization, or property (e.g. a search of a personal property registry). Includes a title search (a request for a description of specific property and any claims against that property), an encumbrance search (a request for the details of any encumbrances filed against a specific individual, business entity or property) or a name search (a request for all details in respect of a specific individual or business entity).

2) Municipal search – a request for details concerning various municipal responsibilities in respect of a particular individual, business entity or property. Such a request may ask for details on tax arrears, details concerning a specific property (such as outstanding work orders and permits), details of compliance (including land use and zoning), details of health conditions relative to a particular property (such as outstanding work orders, charges or permit violations), details of electrical conditions relative to a specific property (such as outstanding work orders) or details of fire safety conditions relative to a specific property (such as outstanding requirements).

3) Miscellaneous searches – a request for details/status from a federal or provincial body, including related commissions and agencies, in respect of a particular individual, business entity or property (except for title and encumbrance searches included in category 1). Such a request may ask for details/status in respect of corporations, partnerships, societies, securities commission filings, personal property, bankruptcy, workers' compensation, unemployment insurance, Canada Pension Plan, taxation, various equipment at specific properties (e.g. boilers, elevators), labour standards requirements, environmental standards or requirements, airport zoning requirements or numerous other matters.

Civil litigation practice area

This practice area involves the conduct of legal proceedings and the facilitating of a resolution of these proceedings through the court process (the reference to the “court(s)” includes other adjudicative bodies such as tribunals). Although disputes are often resolved without the parties appearing in court, the process of resolution is still a legal process that requires various fees be paid to the court throughout the process. In fact, many of the documents referenced in the discussion of this practice area are documents filed by one party with another party, however, these documents must flow through the court along with the payment of the applicable fees.

Common disbursements incurred as agent

Court fee to start a legal proceeding

In many cases, a legal proceeding against another person is commenced when an originating process is filed with the court by the plaintiff and the appropriate court fee is paid. The court then assigns a number to the case and the notice is forwarded to the defendant (either by the plaintiff or an agent of the plaintiff – generally a process server). The document that launches a proceeding can be called by different names (e.g. Originating Notice, Statement of Claim, Notice of Originating Application or Divorce Petition). All jurisdictions impose a fee for the filing of such documents with the court.

Notice of interlocutory application/motion fee

A fee paid to file a particular document with the court for an intermediate step in an ongoing legal proceeding. Some specific filings have their own fee (these are discussed separately). In general, whenever a party requests the court to order the taking of a particular step in a proceeding (i.e. a motion to dismiss), they must pay this fee.

Filing defence/notice of intent to defend fee

A fee paid to file a defence or to file a notice of intent to defend with the court.

Notice of trial fee

A fee paid to file a request to the court for a trial date in respect of a particular proceeding.

Notice of intent to proceed fee

If a defendant has not responded in respect of a particular proceeding within a set time period (usually six months) and the claimant intends to continue with the particular proceeding, the claimant must file a notice of intent to proceed with the court and pay the applicable fee.

Subpoena/summons to witness fee

A filing fee paid to the court when requesting that a particular person be ordered to appear as a witness in respect of a particular proceeding. The request to the court may list any number of people, but the filing fee paid is per name.

Order fee

A fee paid to get a copy of a decision of the court in respect of a particular proceeding formally recorded by the court. This must precede any further proceeding, such as the issuance of an execution order or a judgment certificate.

Execution order fee

A fee paid to obtain an execution order from the court in respect of a particular proceeding. An execution order is necessary before property can be seized. It is often obtained in conjunction with a judgment certificate.

Judgment certificate fee

A fee paid to obtain a judgment certificate from the court in respect of a particular proceeding. This certificate may be filed with a particular registry (e.g. registry of deeds) to evidence an encumbrance against the subject property. It is often obtained in conjunction with an execution order.

Writ of possession fee

A fee paid to obtain a writ of possession from the court in respect of a particular proceeding. A writ of possession is similar to an execution order and is usually in respect of real property. It orders a change of possession between the named parties.

Writ of seizure and sale fee

A fee paid to obtain a writ of seizure and sale from the court in respect of a particular proceeding. Upon issuance of the writ, the court will order the sheriff to seize the named property and to sell same. The proceeds of the sale are distributed as set out in the writ.

Registration fee

These are amounts charged for the registration of various documents relating to title on property. They can also be referred to as registry filing fees.

Fees paid to foreign persons and related disbursements

In the course of a particular proceeding, the services of a non-resident lawyer may be required. In such cases the client is made aware of and approves the selection of the non-resident lawyer. The Canadian lawyer has no professional input on the proceedings undertaken by the non-resident, but acts as a conduit for the information to and from the non-resident. The non-resident will typically bill for both professional services and related disbursements. Although the non-resident may send the invoice to the Canadian lawyer, the client must be ultimately responsible for the non-resident's account.

Note that if the Canadian lawyer uses the services of a non-resident professional as an input in making a supply to the client, such disbursements would not be incurred as agent.

Common disbursements not incurred as agent

Witness fee

A fee paid to a person who has appeared as a witness for the party at a trial. The amount of this fee may be set by legislation.

Fees for recording services, transcript production or special examiner

A fee paid to have a court reporter attend an examination (i.e. discovery), a fee paid to obtain a copy of the transcript of the examination or a fee paid for the services of a special examiner.

Service of document fee

A fee paid to have a document served on another party by a process server.

Fee for expert report/attendance

A fee paid to have an expert prepare a report in respect of a particular proceeding or to have the expert attend an examination. The expert may also be required to attend other meetings or to appear as a witness in court.

Fee to obtain court transcript

A fee paid to obtain a transcript of court proceeding in respect of a particular proceeding.

Law stamp fee

In some provinces a stamp issued by the provincial law society must, by force of provincial legislation, be affixed to the document filed with the court to start a proceeding (e.g. Originating Notice, Statement of Claim). These stamps can be obtained from the courthouse and can be purchased in bulk. In effect the stamp provides physical evidence that a particular fee per case has been paid to the law society.

Wills and estates practice area

This practice area involves estate planning (e.g. making of wills) and the administration of the estates of deceased persons.

Many of the common disbursements in this practice area are the same as those discussed for the real property, business law and civil litigation practice areas. Accordingly, those sections should be referenced when such disbursements are encountered.

Common disbursements incurred as agent

Probate fee

A fee paid with an application for probate (i.e. judicial certification of the validity of a will and judicial confirmation of the authority of the personal representative). The amount of the fee is calculated by reference to the value of the assets of the estate that is the subject of the probate.

Common disbursements not incurred as agent

Wills search fee

A fee paid to a third party for their services of searching a central registry of wills. The lawyer is provided with a certificate of search.

Birth/death/marriage certificate fee

A fee paid to the agency which issues birth/death/marriage certificates in a particular province in order to obtain a copy of same. The lawyer provides same to third parties (e.g. to verify pension benefits).

General disbursements

The following disbursements are common in any area of practice.

Common disbursements not incurred as agent

  • Telephone charges
  • Photocopy charges
  • Courier costs
  • Costs for travel by the lawyer (or others working on a client's file)
  • Postage