Section 188 — Excise Tax Act: Prizes

If a commercial activity of a registrant (other than a registrant to whom subsection (5) applies) consists of taking bets or conducting games of chance and, in the course of that activity, the registrant pays an amount of money at any time in a reporting period as a prize or winnings to a bettor or a person playing or participating in the games, for the purpose of determining an input tax credit of the registrant, the registrant shall be deemed to have received at that time a taxable supply of a service for use exclusively in the activity and to have paid, at that time, tax in respect of the supply equal to the amount determined by the formula (A/B) × C where A is if the supply is made in a participating province, the total of the rate set out in subsection 165(1) and the tax rate for that province, and in any other case, the rate set out in subsection 165(1), B is the total of 100% and the percentage determined for A, and C is the amount of money paid as the prize or winnings. Where, in the course of an activity that involves the organization, promotion hosting or other staging of a competitive event, a person gives a prize to a competitor in the event, the giving of the prize shall be deemed, for the purposes of this Part, not to be a supply; the prize shall be deemed, for the purposes of this Part, not to be consideration for a supply by the competitor to the person; and tax payable by the person in respect of any property given as the prize shall not be included in determining any input tax credit of the person for any reporting period. For the purposes of this Part, where a competitor in a competitive event contributes an amount to the prizes to be given to competitors in the event, the contribution shall be deemed not to be consideration for a supply. Subsection (3) does not apply in respect of a contribution that is made as part of a fee or charge paid by a competitor in a competitive event for the right or privilege of participating in the event and that is not separately identified as a contribution to the prizes. Where a registrant is a prescribed registrant at any time in a reporting period, the registrant’s net tax for the period shall be determined in a prescribed manner.