CBAO National Commodity Tax, Customs and Trade Section – 2013 GST/HST Questions for Revenue Canada, Q. 35. (“Property and Services Offer in a Senior Citizen Residence”) (available with membership password at http://www.cba.org/CBA/sections_NSCTS/main/GST_HST.aspx): In its 2 May 2012 Tax News Item “Property and Services Offered in a Senior Citizens’ Residence,” Revenu Quebec indicated that various services would be part of a single supply of residential accommodation in the residence, including meals, monitoring, housekeeping in common areas, snow removal, cable television, weekly housekeeping, laundry, group transportation as well as transportation for medical appointments and assistance with certain activities of daily living. CRA stated that it will accept the same position:
provided such services form part of a single supply the predominant element of which is that of a residential unit made by way of lease, licence or similar arrangement. The types of additional services that may be include are discussed in …GST/HST Notice 224 under “Ancillary property and services.”
31 March 2009 Ruling 103912 [revenues from nursing home and assisted-living facility residents]: OPCO leased nursing assisted-living homes from Lessor.
CRA found that the supplies (including of residential units) made by Opco to the nursing home residents pursuant to “Resident Admission Agreements” were supplies of services which were not exempt under s. 6 of Part I of Sched. V; whereas the supplies made to the assisted-living residents pursuant to “Tenancy Residency Agreements” were exempt under s. 6.
31 March 2009 Ruling RITS 103912: Residents of an assisted living facility paid a single Accommodation Fee for their accommodation and various services. The Accommodation Fee was consideration for a single supply of a residential unit so that it was exempt under s. 6 of Part 1 of Sched. V.
GST/HST Notice 224 under “Ancillary property and services.” September 2007
Examples of ancillary property and services include: meals, a laundry service for bed linens and towels; housekeeping services; entertainment and activities for the benefit of all residents including religious services, gardening, musical programs, exercise classes, bingo and shuffleboard; use of a recreation area and lounge rooms; a library at the facility; or any of the following services provided on a 24-hour per day basis: general building security, medic alert system monitoring, building patrol, security camera monitoring, telephone and door reception and responding to general emergencies.
...[A]n operator may provide, together with long-term occupancy of a room, daily services of administering medication and weekly assistance with bathing individuals staying at the facility. These services would not, on their own, be sufficient to alter the characterization of the supply as that of a residential unit.
However, some residential care facilities, such as nursing homes or extended care facilities, provide significant nursing and personal care services to individuals on a regular basis. These services may be essential to the overall supply made by the operator and may alter the fundamental nature of the supply. ...
17 February 2005 Interpretation Case No. 47887: The provision by a corporation to its employees of temporary lodging in a condominium leased to it by a subsidiary would be an exempt supply because there was no charge to the employees.
24 October 2003 Ruling RITS 48006: The provision of a care and service package to residents of a retirement residence represented supplies that were separate from the provision to them of residential accommodation, with the result that such services were taxable supplies.
8 August 2002 Ruling Case No. 31015: A registrant upon completion of construction of a nursing home would not be entitled to the new housing rebate under s. 256.2 (and also would not be required to self-assess under section 191) because the subsequent supplies it made to residents of the facility would not be considered to be described in section 6. The agreement with the residents indicated that they would be provided with accommodation, care, services and programs, and it was not possible for the registrant to supply any one of these elements to the exclusion of the others. Accordingly the registrant would be considered to be making a single supply that was not simply that of accommodation as set out in section 6.
31 March 2009 Ruling 103912 [headleases of nursing homes and assisted-living facilities]: OPCO constructed long-term care facilities comprising nursing homes and assisted-living facilities (collectively, the “Facilities”) and sold them to LESSOR, which completed construction, and leased them back to OPCO.
CRA found that as OPCO's supply made under a Resident Admission Agreement to a nursing home resident is a supply of a service, OPCO does not make any supplies that are exempt under s. 6, so that lease payments for such Facilities are not exempt under s. 6.1
In determining whether the exemption in s. 6.1 applies to any particular lessor's supply, it is only the lessee's supplies of property (i.e., residential units) that must be considered and not supplies of services by it to the residents which must be taken into account in determining whether the head lease is exempt under section 6.1, so that the lease of the assisted-living Facilities would be exempt if the “substantially all” test was satisfied on this basis. If any portion of the Facilities includes real property that does not form part of the residential complex e.g., any part that is leased to a third party for the operation of a hair/barber shop, any lease payment attributable to that part of the Facility is taxable.
20 October 2003 Headquarter Letter RITS 46713: A portion of a retirement home that was used for a higher level of services was characterized as being used for supplies that were exempt under s. 2 of Part II of Schedule V and not under s. 6 of Part I of Schedule V. Accordingly, a lease of those premises to the operator of the premises was not exempt from GST (under s. 6.1 of Part I of Schedule V), and was subject to tax.
5 March 1998 Headquarter Letter RITS HQR 0000928: Discussion of the requirements for the lease of units in a hotel, which had been partially converted into a nursing home, to be exempt under s. 6 or s. 6.1.
14 February 1997 Interpretation Case No. HQR0000489: A mutual fund trust that acquires existing nursing homes and extended health-care facilities from arm's length vendors and then leases the nurses homes and extended care facilities to a Canadian corporation on a long-term basis will not be subject to tax on the lease of those parts of the nursing homes and extended care facilities that fall within the definition of residential complex. The part of what otherwise would be a residential building that is leased for business use is not considered to be reasonably necessary for the use and enjoyment of the building as a place of residence.
17 June 1994 940617: A lease of vacant land by O to L will become exempt when L subleases the land to D who acquires possession of the land in order to construct a single unit residential complex on it in the course of his commercial activities.
6 July 2011 Interpretation Case No. 131657 [separate charge by Landlord to Tenant for improvements to residential facility]: The Municipality, as Landlord, leases real property including a building containing residential units, common areas, administrative office space and associated external areas and outbuildings to Tenant on an exempt basis under s. 6.11 of Part I of Sched. V, who, in turn, supplies the real property on an exempt basis to Subtenants under s. 6 of Part I of Sched. V. The Landlord will renovate the premises, with a negotiated entitlement to be reimbursed by Tenant (under a MOU) for costs incurred in excess of $XX.
In indicating that the reimbursements likely would be consideration for the supply of a separate service by Landlord, CRA stated:
There is nothing in the MOU that provides that the amount paid by the Tenant to the Landlord are to be treated as rent for purposes of the Lease Agreement, nor is there any suggestion that failure to pay the amount would result in a default under the Lease Agreement.
31 March 2009 Ruling 103912 [headleases of nursing homes and assisted-living facilities]: OPCO constructed long-term care facilities comprising nursing homes and assisted-living facilities (collectively, the “Facilities”) and sold them to LESSOR, which completed construction, and leased them back to OPCO. LESSOR’s supplies of the residential complex portion of each Facility is exempt under s. 6.11.
18 January 2013 Interpretation Case No. 140364
In response to a question as to whether “each occupant of a residence must benefit from a supply of at least 10 meals per week in order that the supply is exempted by virtue of section 6.2,” CRA stated (Tax Interpretations translation):
…we are in agreement with your interpretation that the requirement of 10 meals per week attaches to the residence and not to each occupant of the residence. Thus, if for example a residence is occupied by 2 persons who have concluded an agreement to receive 10 meals per week in total, the supply of meals is exempted if the other conditions of section 6.2 are satisfied.
29 August 2011 Ruling Case No. 62030: A trailer situated on a leased site at a trailer park has had its wheels removed, is fully skirted, and a room addition has been constructed, attached to the trailer and permanently affixed to a cement pad. There are year-round connections of hydro, water and sewer facilities, the roads to the park are ploughed, and the unit is fully furnished by the individual and used as a residence. Ruling that the rentals together with on-charges of municipal taxes are exempt under s. 7(a)(i) of Part I of Sched. V. The trailer is considered to come within "any other similar premises" in the definition in s. 123(1) of a residential unit.
4 April 2011 Headquarters Letter Case No. 92799: a purchaser of a block of shares in a co-operative corporation which is the beneficial owner of a recreational vehicle park thereby becomes entitled to be licensed a particular site in the park provided that the purchaser pays his or her portion of the "assessments" for common costs. Such purchase, which is characterized as a single supply of real property by way of license, is not exempt under s. 7(a)(i) of Part I of Sched. V given that, except in exceptional circumstances, a recreational vehicle does not qualify as a residential unit. The payment of the assessments also is not exempt under s. 7(a)(i).
4 April 2011 Headquarter Letter Case No. 122697: the lease to the individual of land located at a seasonal waterfront resort site specifies that the site shall be used for recreational use only. The individual stays in a manufactured trailer on the site for approximately 95% of the period from the beginning of May to Thanksgiving while maintaining a primary residence in the city (with the resort unit being supported on concrete blocks for permanent stability and connected in a permanent way to hydro, gas, water and septic facilities.) Given that the unit is used as the individual's place of residence (albeit not the primary place of residence) it qualifies as a place of residence and the lease is exempt under s. 7(a)(i) of Part I of Sched. V.
4 April 2011 Headquarter Letter Case No. 87088: a lease of land located at a lake resort site became exempt under s. 7(a)(i) when the individual's husband retired and began to use a park model trailer, which was installed in a permanent manner at the site (including connection to hydro, gas, water and septic facilities), as his place of residence from May to October of each year, with the individual spending her weekends and summer periods there. Although an individual may have more than one place of residence, a place of residence would not normally include an abode of a transient nature.
Nursing homes, which have registered nurses on staff to provide 24-hour nursing care to the residents, are the type of facilities that we consider to fall within paragraph (c) of the definition of “health care facility” section 1 of Part II of Schedule V. In contrast, a facility operated to provide only support services and assistance with activities of daily living without nursing care would not meet the criteria of this paragraph.
The registrant's "group homes" for people with developmental disabilities did not so qualify as health care facilities as the residents did not "require continuous nursing and personal care under the direction or supervision of qualified medical and nursing care staff."
31 July 2003 Ruling Case No. 37807: A retirement home other than that portion of it that was devoted to residents suffering from Alzheimer's or other dementia did not qualify as a health care facility. "In a health care facility, the provision of care would not be discretionary benefits that are available in addition to accommodation."
15 August 2002 Headquarter Letter 35709:
"Assessment centres operated for the purpose of supplying medical reports to respond to questions posed by insurance companies, tribunals, lawyers, Workers' Compensation Boards, employers, etc. ... are not facilities included in the 'health care facility' definition ... [their] examinations and assessments fall outside the ambit of care or treatment because they are performed solely for the purpose of producing a medical report for another person, such as an insurance company."
28 May 2004 Ruling RITS 47263: The provision of services (other than optional services) by the operator of a nursing home to the residents constituted an integrated institutional health care service rather than a supply exempted under s. 6 Part I of Schedule V, given that the primary purpose for which the home was operated was to provide long-term care that involved nursing, personal and supervisory care, meals and support services.
15 August 2002 Headquarter Letter 35709:
"The definition 'institutional health care service' is a package of services that are conjugated together to describe an institutional health care service. This element [paragraph (h)] is directly linked to the preceding elements of the definition and in keeping with the context of the other elements, this element also includes supporting services for the care provided by health care professionals. For example, this element would include the services rendered by an orderly or a technician in a hospital trained to carry out certain attendant or technical duties."
14 April 2000 Headquarter Letter 7741: CCRA rejected the position that the operator of a medical clinic supplied to its patients institutional health care services on the basis the health care services rendered by the physicians were described in paragraph (h), i.e., services rendered by persons who received remuneration for the services from the operator. Instead, CCRA maintained its position that
"where a corporation or other company, including a medical clinic, contracts for services and property, including the premises, supplies, staff, etc., that it in turn provides to the physicians with respect to their medical practices, and the clinic is entitled under an agreement with the physician to retain a certain percentage of their ... billings, the clinic is providing management services to the physicians. It is our view that the portion of the physicians' ... income that the clinic retains is a charge to the physicians for the clinics' operating and administrative expenses."
"'Case room' is the official term for a delivery or birthing room for maternity patients."
1 May 1995 Headquarter Letter File 11835-2: Supervisors (who were independent contractors rather than employees) residing at residences for handicapped individuals would be exempt under paragraph (h) of the definition of institutional health care services in respect of the fee for their supervisory services.
Naturopathy is provincially regulated and therefore the scope of practice, and what constitutes a naturopathic service for GST/HST purposes, varies from province to province. The scope of practice for a naturopathic doctor may include, but is not limited to:
- physical examinations/assessments (medication reviews, diagnostic testing)
- botanical medicine
- clinical nutrition
- physical medicine (massage, manipulation, hydrotherapy)
- homeopathic medicine
- intravenous (IV) therapy
- chelation therapy
- hyperbaric oxygen therapy
- lifestyle counselling
Example 4 [file review for opinion]
...The review of a file by a naturopathic doctor for purposes of providing an opinion on the diagnosis, prognosis, or treatment of an individual is a naturopathic service rendered to an individual by a practitioner of naturopathic services. ...
Example 5 [insurance co. report]
A naturopathic doctor performs an assessment and prepares a report required by an insurance company in respect of applications for, or the continuation of an insurance policy. ...
...The purpose of this supply is to assist the insurance company in determining if an individual is eligible for coverage under an insurance policy. Although the individual may ultimately receive medical or rehabilitative benefits under an insurance policy, the purpose of this supply is not to treat or assist the individual but rather to determine eligibility to enter into or continue an insurance policy. The supply is not a qualifying health care supply. ...
Example 13 [dual supply: teaching and naturopathic service]
A naturopathic doctor contracts with a teaching clinic to supervise students at the clinic. Each student interacts one-on-one with a patient for the diagnosis and treatment of a disorder under the direction of the naturopathic doctor. The patient is invoiced by the naturopathic doctor for the service she receives. ...The naturopathic doctor also invoices the clinic for the teaching services he provides.
The GST/HST will not apply to the fee charged to the patient for the service she receives where it is an exempt naturopathic service. Although the naturopathic doctor oversees the services rendered to the patient and may have interaction with the patient, the naturopathic doctor is also making a supply of a teaching service to the clinic. Where no other exempting provision applies, the naturopathic doctor is required to charge and collect the GST/HST... .
Notice 286 Draft GST/HST Policy Statement - "Qualifying Health Care Supplies and the Application of Section 1.2 of Part II of Schedule V to the Excise Tax Act to the Supply of Medical Examinations, Reports and Certificates" October 2014
CRA stated: "It is important to note that a link between a supply and the receipt of health care benefits is not always indicative that the purpose of the supply was to provide health care services... ."
Examples of qualifying health care supplies:
- Diagnostic MRI at a private clinic on a medical practitioner’s written order (Ex. 1)
- A second diagnostic or treatment opinion provided by a second practitioner to the first (Ex. 2)
- Medical assessment to provide sick leave certificate (Ex. 4), to assess modifications to an employee’s duties or workplace (Ex. 5) or to assess need of disabled child (Ex. 9)
Examples of non-qualifying supplies:
- Medical exam to assist in an employee recruitment decision (Ex. 3)
- Medical assessment and report re an individual joining or buying back service in a pension plan (Ex. 6)
- Medical evaluation required by Immigration Canada (Ex. 7) or for driver’s licence (Ex. 10)
- Mediation services of psychologist in divorce proceedings (Ex. 8)
- Medical exam for life insurance (Ex. 11), disability (Ex. 12, 18), income replacement (Ex. 19), workplace insurance (Ex. 20, 21) or catastrophic impairment (Ex. 13) coverage
- Medical assessment of fitness for trial (Ex. 14, 15), or expert medical opinion in litigation (Ex. 17)
- Medical assessment of individual’s capacity to consent to treatment or appointment of attorney (Ex. 16)
- Medical assessment for insurer to determine appropriateness of proposed treatments (Ex. 22) or related review of records (Ex. 23).
Respecting Ex. 17, CRA states:
In cases where a health care service is supplied together with a medical-legal assessment…[and they] constitute a single supply... the purpose of that single supply would include the purpose for each element of the supply. Where a supply has multiple purposes, that supply would be a qualifying health care supply if any of the purposes is included in the definition of “qualifying health care supply.”
The Queen v. Riverfront Medical Evaluations Ltd., 2002 FCA 341 Medical reports prepared by the respondent for supply to legal and insurance company clients qualified as an exempt supply.
13 June 1996 Headquarter Letter File 11865-4: A for-profit entity contracts with a hospital to supply various nursing and personal care services. The nursing services, which are rendered to individuals in the hospital, are exempt under section 6. However, the personal care services are taxable. When subsequently, the operator of the hospital makes a supply of those services, such supply is exempt under section 2.
23 January 1996 Headquarter Letter File 11865-17: After December 31, 1995 a clinic is considered to make a single supply of an institutional health care service, whereas prior to that it was characterized as making a number of supplies, of which application services, program development, specimen handling and washing and freezing activities were considered to be taxable supplies.
CBAO National Commodity Tax, Customs and Trade Section – 2013 GST/HST Questions for Revenue Canada, Q. 32. [clinic diagnosing for insurer] (available with membership password at http://www.cba.org/CBA/sections_NSCTS/main/GST_HST.aspx): Individuals with a potential insurance claim for an injury or illness are sent to a clinic for diagnosis. A medical practitioner diagnoses the individual (at the clinic, the practitioner’s office or the individual’s home) under a subcontract with clinic and bills the clinic, which in turn bills the individual’s insurer.
The supply of the diagnostic services from the clinic to the insurer would be exempt under s. 5.
Excise and GST/HST News - No. 89 (Summer 2013) [personnel v. nursing services]
Where a company supplies nurses to a facility such as a hospital or a long-term care facility, the company's supply must be analyzed separately from any supply made by the operator of the facility. … If the company's responsibility is limited to providing registered or licensed nurses to the facility so that the facility may satisfy its own staffing requirements, and the nurses are subject to the control of the operator of the facility and render services under the direction of the facility in accordance with the facility's responsibility to provide care to a patient or resident of the facility, the company has made a taxable supply of personnel or human resources, and not a supply of exempt nursing services. … However, if the company is responsible for the provision of nursing services to the patients or residents of the facility and is accountable for the quality of nursing care provided, the company may have made an exempt supply of a nursing service rendered by a registered or licensed nurse to an individual, where the service is provided within a nurse-patient relationship.
8 August 2012 Ruling Case No. 128607 [foot care]: The provision by a registered nurse, who had received specialized foot care training, of providing foot care services to clients in their homes, was exempt.
8 August 2012 Interpretation Case No. 124636 [health promotion consulting not nursing]: A registered nurse who carries on business as a health promotion consultant, including health teaching or health promotion, communicating with individuals, families, groups, communities and populations, collaborating with care providers, directly or indirectly influencing the practice of care providers and/or policy, developing learning resources for nurses or other care providers and collecting health data, is not providing an exempt service. The requirement that exempt services under s. 6 be rendered to an individual within a nurse-patient relationship is interpreted
as meaning nursing services that involve personal interaction between a nurse and an individual who is a patient where there is an established or ongoing relationship between the nurse and the patient and the nurse is a direct care provider of the patient.
Example 8 [nutritionist's services part of naturopathic supply]
A naturopathic doctor enters into a contract with a nutritionist to provide nutritional counselling to a patient of the naturopathic doctor. The nutritional counselling is ordered and supervised by the naturopathic doctor following an assessment of the patient. ... The patient is invoiced by the naturopathic doctor for the nutritional counselling based on an hourly rate.
Although the service is performed by the nutritionist, the service forms part of the overall naturopathic service rendered by the naturopathic doctor. The patient is a patient of the naturopathic doctor and the naturopathic doctor is ultimately liable for the provision of care to his or her patients. ...
...A cancellation fee paid by a patient for a missed or cancelled appointment is treated as payment for the intended supply (i.e., treatment or other naturopathic service).
5 July 2011 Headquarters Letter Case No. 125648: After noting that the exemption in s. 14 was applicable to training and support services provided by a for-profit corporation to children with neurological or developmental disorders who required assistance with behavioural difficulties, social skills, verbal and non-verbal communication, personal care and day-to-day functioning, CRA noted that the corporation had a social worker on staff and noted that the exemption in s. 7.2 also potentially was available. It stated:
Section 7.2 applies not only to services rendered to the individual with a disorder or disability, but also to services rendered to an individual who is a relative or caregiver of an individual with a disorder or disability, provided the services fall within the practice of the profession of social work and are rendered within a professional-client relationship. The exemption does not, however, apply to services provided by a social worker to an individual who provides care or supervision to the individual with a disorder or disability in a professional capacity, such as another social worker, a teacher or a personal care aide.
14 April 2000 Headquarter Letter 7741: With respect to a medical clinic that retained physicians to provide services to patients, CCRA indicated that notwithstanding that the billings for the services were made by the clinic, it was reasonable to characterize the arrangement as involving the receipt of proceeds by the physicians, with the share of the clinic in the proceeds representing consideration for the provision by it of taxable administration and operational services. Therefore, the portion of the proceeds belonging to the physicians remained exempt pursuant to section 9.
5 July 2011 Headquarters Letter Case No. 125648: The exemption in s. 14 was applicable to training and support services provided by a for-profit corporation to children with neurological or developmental disorders who required assistance with behavioural difficulties, social skills, verbal and non-verbal communication, personal care and day-to-day functioning. The services included the provision of counselling, training or coaching, support and respite services to the parents or other caregivers. The corporation was generally compensated though third-party government funding in which a parent of the child received funding from a provincial Ministry. The majority of the corporation's clients were referred by a paediatrician or a child psychiatrist. Favourable rulings were given respecting other similar activities. CRA stated:
We note that specially designed training does not have to be provided on a one-for-one basis in order to fall within section 14.
24 July 2013 Ruling Case No. 109069 [contract ballet instructor]: In ruling that a self-employed ballet instructor who contracts out her services to local dance schools is making taxable supplies, CRA stated:
Self-employed sole proprietors…are generally not schools as contemplated under Part III of Schedule V, especially when they contractually provide their services to other learning institutes and not directly to the individual student. … In addition, an instructor who provides private lessons to one individual at a time with a customized program for each client is normally not regarded as a school.
3 July 2013 Interpretation Case No. 146888 [[language test]: An internationally-recognized language test provided to the students of a program training them to teach English as a second language would not qualify as an exempt supply of a course as the “test provides a competency rating but it is not linked to a certificate, diploma, licence or similar document required by an individual to perform a trade or vocation.”
23 January 2013 Interpretation Case No. 132321 [dance lessons]: In the course of a general discussion of the tax status of dance lessons, CRA stated:
For the purposes of this income test, income from non-vocational dance courses (e.g. courses taken for general interest, fitness or recreation) cannot be included in the amount of revenue derived from courses that develop or enhance a student’s occupational skills, even if the dance school uses this source of added income as a means to defray the costs of providing courses which are vocational in nature.... For instruction in dance to meet the requirements of section 8 the instruction would generally be part of a full time program which provides an individual with the competence to practise or perform the vocation of a professional dancer or dance instructor. This instruction must further be attested to by a certificate, diploma, licence or similar document.
Jamie M. Wilks, "Educating and Training Vocational Schools and Other Educational Institutions How to Comply With Complex GST/HST Rules", Sales and Use Tax, Volume XII, No. 3, 2013, p. 638.
Single v. multiple supply (p. 638)
In Sterling Business Academy Inc. v. Canada, [fn 2: Sterling Business Academy Inc. v. Canada,  G.S.T.C. 130 (T.C.C.) ("Sterling")] Sterling Business Academy Inc. ("SBA") charged a single price for enrollment in vocational courses that was not normally broken down between the tuition and the Materials (books and other supplies). The books were required reading and essential for studying the courses. The Tax Court found that the classroom teaching and Materials were all essential parts of the courses and generally purchased for a single consideration, and, therefore, concluded that SBA made bundled supplies of exempt educational services to students…. In Avenue Business Campuses Ltd. v. R., [fn 3: Avenue Business Campuses Ltd. v. R.  G.S.T.C. 125 (T.C.C.) ("Avenue").] the Tax Court found that Avenue Business Campuses Ltd. ("ABC") made separate supplies of Materials and vocational courses (educational services)….
“Trade or vocation” (p. 639)
One of the elements of the exemption in section 8, Part III is that the courses lead to certificates, diplomas, etc. "that attest to the competence of individuals to practise or perform a trade or vocation." There are a number of cases considering whether the students receive instruction in an area that could qualify as "a trade or vocation." These cases have generally been liberal in their interpretation of what constitutes "a trade or vocation." [fn 5: See, for example, Global Infrobrokers Inc. v. R.,  G.S.T.C. 176 (T.C.C.), Forever Dance Inc. v. R.,  G.S.T.C. 152 (T.C.C.) ("Forever Dance") and Fleming School of Dance Ltd. v. R.,  G.S.T.C. 152 (T.C.C.) ("Fleming"), where entrepreneurship and dance courses were accepted as vocational training.]
Supplies may still be exempt if s. 8 election is made (p. 642)
In the case of charities, there appears to be a possible technical glitch with respect to the Taxable Election. Notwithstanding that the Taxable Election is made under section 6 or 8 to tax the courses or educational services, these supplies could still be considered exempt under section 1 of Part V.1 (the general exemption for supplies made by charities). As discussed above with respect to the general exemption for supplies made by public institutions, there is a specific carve-out for educational services falling within the scope (or potential scope) of section 6, 7 or 8 of Part III, Schedule V. The Taxable Election should be made prospectively. In Algonquin College of Applied Arts v. Canada, [fn 18:  G.S.T.C. 71 (T.C.C.).] the Tax Court of Canada rejected post facto tax planning by a public college that sought to retroactively elect for courses to be taxable to access ITC claims.
22 September 2011 Ruling Case No. 129475: A for-profit corporation (the "Corporation") provides a service for fees to the families of non-resident minor children in consideration for arranging for them to study at a Canadian school district, stay at a Canadian home and participate in eight recreational activities to be arranged by the Corporation. The students are recruited through non-resident commission agents, the Corporation contracts directly with and pays the Canadian host families and pays tuition to the school district for schooling the children pursuant to a memorandum of understanding with the school district. CRA finds that there is a single supply, and as "academic instruction is the dominant element of the supply...all the elemens included in the package have the same tax status as the dominant element," and "the Corporation is making a single supply of a service of instructing an individual in a course." Such supply is exempt under Sched. V, Part III, s. 9(a).
Excise and GST/HST News – No. 96 under “University and public college meal plans” June 2015 [assimilation of supply to agreement]:
Where a student enters into an agreement for meals to be provided under a meal plan and the agreement specifies that there is a single consideration, but the payment for that consideration may be made on an instalment basis, the CRA accepts that this type of arrangement meets the requirement of “single consideration”.
In addition, the CRA considers “top-ups”, or the addition of funds to a qualifying meal plan, to be additional consideration for the same supply for GST/HST purposes. As such, the tax status of meals provided under a qualifying meal plan is not impacted by “top-ups” or the addition of funds to the qualifying meal plan.
Refund of balance
The tax status of a supply for GST/HST purposes is to be determined at the time the student initially enters into the agreement with the supplier and will not be affected if, at the end of the plan period, unused funds are refunded or carried over for use in the future.
The appellant (“Caithkin”) worked as an intermediary in the foster-care system, by finding suitable foster homes for various Children's Aid Societies and placing children there and providing related training and supervisory services. The Societies paid the appellant a per-diem rate, out of which the appellant paid the foster homes. Graham J found that Caithkin had not provided an exempt supply under s. 2 of Part IV of Sched. V, as it satisfied only two of the three requirements of s. 2:
- Caithkin was making a “re-supply” to the Societies of “care, supervision and place of residence services” that it in turn “acquire[d] from the foster parents” (TCC para. 24).
- Caithkin was providing care, supervision and place of residence supplies "to children," notwithstanding that the recipient of such supply was the Societies (TCC para. 33).
- However, Caithkin was not providing the services in an establishment that it operated. Caithkin could be said to be providing the foster parents' homes to the children, but it could not reasonably be said to be operating them (TCC para. 37).
In upholding the finding below that Caithkin was making taxable supplies, Rennie JA dismissed the appellant's further argument that "establishment" in s. 2 is not restricted merely to physical locations and included a business organization, stating (at para. 19):
Given its ordinary meaning, the word "in," which informs the word "establishment", denotes a physical place ... . A bundle of services is not a physical place.
21 November 2014 Ruling 150099a [residents of Saskatchewan care home requiring assistance with ADL qualify]: Facts. All of the residents of a Saskatchewan personal care home require assistance with their activities of daily living. The facility consists of: a kitchen and dining area; a nursing area which contains a nursing desk, secure medication room and consultation room; an activity room and large common room for entertainment and church services; accommodation areas; administrative areas; and a fenced in courtyard. The facility’s staff includes a nursing care supervisor, care aides, and cooks. The nursing care supervisor is responsible for the residents’ medications and treatments (as a doctor or nurse practitioner has ordered); she arranges their doctor appointments and scheduled lab draws; and arranges for refills of their medications. The care staff is responsible for monitoring residents’ blood pressure, constipation, height and weight; for meeting their personal care and emotional needs; and assisting with their spiritual, exercise, and recreational programs. The Agreement between the operator (the “Corporation”) and the resident stipulate the obligations of the Corporation, such as accommodation, meals, services and care provided and the obligations of the resident such as resident fees.
[T]he supply made by the Corporation to a person with a disability of accommodation, meals, services and care pursuant to the Agreement is an exempt supply pursuant to section 2 of Part IV of Schedule V… .
The supply made by the Corporation to a resident of the Facility pursuant to the Agreement is a single supply of a service of providing care, supervision and a place of residence in an establishment that is operated for the purpose of providing care, supervision and a place of residence to individuals with a disability. This conclusion is supported by the terms of the Agreement between the Corporation and the Resident, and the requirements of the Corporation’s license…to operate a personal care home… .
…The CRA’s interpretation of the term “disability” is that it generally refers to a long-term impairment that restricts an individual in carrying out his or her activities of daily living. …[E]ach of these residents has an impairment and because of that impairment is restricted in carrying out the activities of daily living. …[T]he impairment of each resident has lasted or is expected to last for at least 12 months.
31 July 2003 Ruling Case No. 37807: Supplies to the residents of a retirement home did not qualify under s. 2 of Part IV of Schedule V. "It is our view that needs and other conditions normally related to aging are not, in and of themselves, determinative factors that the individuals have a disability."
P-064, 25 May 1993, "Treatment of Timeshares"
15 August 2006 Ruling Case No. 56497: A charity which also sold goods thoroughout the year in a gift shop also engaged in a special fund-raising campaign in which those who made donations over a specified amount received a T-shirt which had been purchased by the charity and was not available for sale in its shop. In finding that the supplies of T-shirts by the charity were not exempt, with HST or GST applying on the consideration of $X for each supply of a T-shirt, CRA stated:
...where the charity provides the person making the contribution with property or a service of more than nominal value that served as an inducement to make the contribution, then for ETA purposes, the amount of the contribution is not regarded as a gift but as consideration for the supply of the property or service given in return by the charity. As well, the supply of the property or service made by the charity to the contributor is not a gift made for no consideration.
7 September 2000 Ruling 11830-1B (Case 26962): The provision of optional "working breakfasts" for a separate charge by a registered charity hosting a conference relating to its objects was exempt; whereas the provision by it at the same conference of an "international night dinner" for a separate charge was taxable. A supply of booth space to exhibitors at the same conference for modest charges also was exempt.
Camp Mini-Yo-We Inc v. The Queen, 2006 FCA 413 The fees charged by a camp were excluded by s. 1(f) notwithstanding that religion was interwoven with all aspects of daily life at the camp given that:
the predominant element of the service provided was supervision and teaching in recreation and sports; an element not altered either by the camp's religious purpose or by periods of prayer and reflection" (para. 14).
RC4082 "GST/HST Information for Charities," p. 14: the value of the listed admissions or rights generally are not considered to be significant if they are less than 30% of the cost of the membership.
15 August 2006 Ruling Case No. 56497: A charity which sold goods throughout the year in a gift shop also engaged in a special fund-raising campaign in which those who made donations over a specified amount received a T-shirt which had been purchased by the charity and was not available for sale in its shop. As the T-shirts had a value of over 10% of the contributions, it issued charitable receipts for only the amount of the contributions minus such T-shirt value (see ITTN, No. 26). In finding that the supplies of T-shirts by the charity to the donors were not exempt, with HST or GST applying on the consideration of $X for each supply of a T-shirt, CRA stated:
excluded from exemption under paragraph 3(a) of Part V.1 of Schedule V is a supply by way of sale of any personal property or service made by a charity in the course of a fund-raising activity where: • the charity makes supplies of such property or services in the course of that activity on a regular or continuous basis throughout the year (any period of twelve consecutive months) or a significant portion (30% or more) of the year; or • the agreement for the supply entitles the recipient to receive from the charity property or services on a regular or continuous basis throughout the year or a significant portion of the year. ....as XXXXX supplied the t-shirts to contributors on a weekly basis from XXXXX to early XXXXX, it sold the t-shirts on a regular and continuous basis throughout a significant portion of the year. As a result, XXXXX supplies of the t-shirts to persons making contributions of $XXXXX and $XXXXX were not exempt.
22 March 1999 Headquarters Letter HQR0001233: In order for seminars and workshops to qualify as being for "fund raising" it is not sufficient that one of their purposes be to raise money. Their "underlying purpose" must be to raise money to support the activities of the charity. It was not clear that this test was satisfied and, in any event, the seminars and workshops in question were to be held on a regular basis in the year.
10 May 1999 Interpretation HQR0001756: Where a charity sells admission tickets to professional performances that take place over a four day period, with the tickets being sold on a regular and continuous period for 11 months prior to the performances through a professional ticket agency, this 11-month time frame is long enough to exclude the charity from the fund-raising exemption found in s. 3 of Part V.1 of Sched. V:
Where admissions to a performance are sold in advance, we view the period over which the admissions are sold as the critical period in applying section 3 of Part V.1, rather than the period of the performances.
9 November 1998 Ruling Case No. HQR0001247: A charity which runs a childen's summer camp sells T-shirts at a price above their direct cost to campers during the six- to seven-week period that the property is being used as a summer camp. The T-shirts are sold to raise funds for the charity's activities, as well as for advertising purposes. In finding that these were exempt supplies, CRA stated:
As the sales of the T-shirts do not take place on a regular or continuous basis throughout a significant portion of the year, these sales qualify as being made in the course of an exempt fund-raising activity....
12 February 1998 Ruling HQR0001025: A charity which was sponsoring a tournament sold tickets on a sporadic basis for a period and sold the majority of the tickets once it started advertising. In finding that these were exempt supplies, CRA found that as the pre-advertising sales occurred on a sporadic basis, it was not necessary to comment on whether 19 weeks respresented a significant portion of the year (i.e., the sales after the launch of the advertising campaign did not occur in a significant portion of the year.) RC4082 "GST/HST Information for Charities,":
Examples of supplies that are exempt include: •greeting cards you sell only in the Christmas season; and •chocolate bars you sell in an eight‑week fund‑raising drive. Examples of supplies this exemption does not cover and that you will generally have to collect tax on if you are a GST/HST registrant, include: •goods you sell year‑round in a tuck shop; and •subscriptions to your charity’s magazine.
10 July 1997
Section 3 Fund-Raising Activities Given that the small supplier thresholds for charities are increased significantly under the amendments to sections 148 and 148.1 (see commentary on clauses 9 and 10), many more charities than currently is the case will not be required to be registered to collect GST. As a result, fewer fund-raising activities will fall within the scope of the tax. Section 3 of new Part V.1 is provided for those charities that are large enough to remain registered for the tax. It exempts most supplies made by such charities in the course of fund-raising activities that are not otherwise exempt under section 2 of that Part. Such supplies are exempt under section 3 where they are not made on a regular or continuous basis throughout the year or a significant portion of the year and do not entitle recipients to receive property or services from the charity throughout the year or a significant portion of the year. Also, the existing exclusions from the volunteer exemption will apply to this new exemption provision. This exemption is intended to parallel the approach toward exemptions for fund-raising activities that is taken by many provinces for purposes of their sales taxes. For instance, where a charity operates a retail business year round or supplies admissions to performances held throughout its theatre season from May to October, the supplies will be taxable. However, if, for example, a charity had two fund-raising drives per year during which it sold chocolate bars, the supplies would be exempt. A similar exemption is introduced for public institutions (see commentary on clause 105).
17 January 2012 Ruling Case No. 131923: A wholly-owned subsidiary (CCo) of a municipality in turn owns all the shares of ACo and BCo. CRA finds that ACo and BCo are not para-municipal organizations because they are not owned or controlled by the municipality. In particular, it is CCo and not the municipality which appoints their directors and approves their budgets.
6 December 2002 Memorandum RITS 35845: The provision of temporary accommodation at a boarding home for individuals requiring medical treatment off-site represented the single supply of a right to stay at the home which, to the extent that the individuals stayed for more that one month at the home, was exempted under s. 6(a) of Part I of Schedule V.
Sydney Mines Fireman's Club v. R.,  GSTC 126, 2011 TCC 403 The Appellant was a non-profit society which purchased and held title to all equipment used by the local fire department (a distinct entity consisting of volunteer firefighters), as well as operating a bar and community hall in order to raise money. Campbell J rejected the Appellant's position that it could claim input tax credits ("ITCs") on its purchase of one such item of equipment (a boat) on the basis that some of the funding for the boat purchase came from the Nova Scotia government, and that such funding should be viewed as the consideration for a taxable supply of the boat to the government. The Appellant instead was using the boat in making exempt supplies for no consideration under Sched. V, Part VI, s. 10. In reaching the latter conclusion, Campbell J also noted (at para. 40-41) that the properties and services that are aggregated for purposes of the "substantially all" test in s. 10 must be the very same properties or services that are provided for no consideration, so that only the supply of the boat was to be considered (and the Appellant's other taxable activities were not to be considered) in determining the application of s. 10 to the Appellant. As that supply was for no consideration, the "substantially all" test was satisfied.
City of Regina v. The Queen, No. 1991-4570 (GST) G (TCC)
Grants received by the City of Regina were unconditional rather than being linked to work performed by the City in improving highway connector routes. Accordingly, that activity of the City was engaged in for no consideration and, therefore, represented an exempt supply by virtue of s. 10 of Part VI of Schedule V. As a result, that the City was not entitled to input tax credits on related costs.
Overnight recreational, athletic or religious camps
Many PSBs operate camps that involve supervision or instruction in recreational or athletic activities. Where such a camp also involves overnight supervision, the supply of the camp by the PSB is generally taxable regardless of the age of the children attending. Overnight supervision includes supervision by volunteers, such as qualified program leaders.
Children who attend overnight camps may also receive other forms of instruction, such as religious instruction or computer training. In these cases, the supplies of these camps generally remain taxable provided the camps involve recreational or athletic activities.
Where a camp operated by a PSB does not involve overnight supervision (that is, a day camp), the supply of the camp will be exempt if the camp is primarily for children 14 years of age or under.
19 July 2013 Ruling Case No. 147778 [definition of “program;” some children over 14]: Ruling that the provision of sports programs by a private membership-based sports club (the Corporation) would be exempt under Sched. V, Part VI, s. 12(a) notwithstanding that in the case of one of the two programs, some of the children were 15. CRA also indicated that the Corporation “itself may define its own programs provided it is done on a reasonable basis” so that here the decision by the Corporation to treat “the pre-season off-site camps to be part of the same program as the on-site training” was to be respected.
Camps for underprivileged
Supplies by PSBs of camps involving supervision in recreational or athletic activities that are intended to be provided primarily to individuals who are underprivileged or who have a disability are exempt from the GST/HST. The supplies of these camps are exempt even if the camps include overnight supervision and regardless of the age of the individuals attending.
26 April 2013 Ruling 34568 [memberships taxable as members could receive funding]: On heavily redacted facts, CRA ruled that supplies of membership in an unregistered federal non-profit organization (a non-share corporation) for a fee to the (voting individual) members were not exempt under s. 17 (or s. 189 of the Act), given that the members were able to receive funding from the corporation and only members were eligible to apply for funding. CRA stated:
When a member receives funding…this constitutes a direct benefit for that member. …[T]he fact that a benefit is available to all members does not necessarily signify that the benefit is “indirect.” If, by reason of membership, a member receives a direct benefit (other than any listed in paragraphs (b) to (f)), the supply of the membership is taxable.
15 June 2011 Headquarters Letter Case No. 126726: Before finding that supplies of memberships in a non-share not-for -profit corporation did not qualify for exemption in light of the benefits received by members (in light of facts which were heavily redacted), CRA stated (respecting s. 17(a) of Part VI of Sched. V):
Benefits that are meant to accrue only to members by reason of their membership are generally direct benefits. Generally, activities carried out by a non-profit organization on behalf of a broad public sector so that both members and non-members alike benefit in a roundabout or secondary manner will be considered to be an indirect benefit. On the other hand, where the activities are directly aimed at benefiting only the members of a particular organization, then the activities will generally be considered a direct benefit.
Ontario College of Teachers v. The Queen, 2014 TCC 130 [professional accreditation is more than the mere provision of information and certificates]
The appellant ("the College") was the statutorily designated professional governing body of teachers in Ontario. The Minister denied input tax credits that the College claimed in relation to its teacher accreditation process, on the grounds that the supply of teaching credentials was exempt pursuant to s. 20(d) of Part VI of Schedule V which, at the relevant time, read:
[A] supply of a service of providing information in respect of, or any certificate or other document evidencing, the vital statistics, residency, citizenship or right to vote of any person, the registration of any person for any service provided by the government or any other status of any person.
In granting the College's appeal, Jorré J noted (at para. 52) that the substance of what the College was charging for was evaluating and determining a candidate’s eligibility as a teacher, and further stated (at paras. 56-57):
What is being done is evaluating a candidacy, and of course there is going to be some sort of record of that, but that is not what the paragraph in issue exempts.
On the face of the provision, what the paragraph would cover is someone asking, for example, for a copy of their birth certificate and paying a fee for it.
The words "in respect of", although broad, were insufficient to expand the kind of supply covered by the wording of s. 20(d) (paras. 62-64).
31 July 2012 Interpretation Case No. 103548: A developer who applies for a development permit or subdivision approval may be required by the municipality to pay a levy, or construct or pay for the construction of municipal improvements (which potentially may be in excess of those required to support the particular contemplated development), with such improvements becoming municipal property. In the excess capacity situation, fees collected from subsequent developers generally are used by the municipaliy to reimburse this developer's costs. Such a levy would generally be considered to be for an exempt supply under Sched. V, Part VI, s. 20(c) by the municipality of a permit or similar right. The amount payable by a developer to the municipality as its proportionate share of the improvement costs also would generally be regarded as consideration for an exempt supply under s. 20(c).
6 October 2011 Ruling Case No. 122497: In order to ensure fire safety service to municipal residents, a municipality pays a contractor to repair a privately owned bridge. The municipality seeks reimbursement from the property owners for this cost through a local improvement charge. The supply of such repair services by the municipality to the property owners is exempt under s. 21 or 21.1.
Calgary v. Canada, 2012 SCC 20
The City of Calgary unsuccessfully submitted that its activities of acquiring public transit asset and making them available for use in its transit system constituted a separate taxable supply made to the Province of Alberta (which provided funding therefor) rather than being part of its making of exempt municipal transit services to the public. Furthermore, even if the Province could be regarded as being a second recipient (in addition to the Calgary public) of the municipal transit services made by the City, this did not detract from this supply being included as an exempt supply in Schedule V, Part VI, s. 24, as this provision "does not indicate that the supply must be made exclusively to members of the public" (para. 65).
Lorrainville v. The Queen,  GSTC 36, 2003 TCC 895 (Informal Procedure)
The sale of serviced lots by a municipality, with a separate (as to 94% of the total consideration) municipal infrastructure charge was found to entail two supplies (the sale of land, and the provision of infrastructure services) given that land could have been sold independently of the installation or repair of sewer and water systems and given that the breakdown between the two charges appeared clearly in the sale contract.
Hedges v. The Queen, 2014 TCC 270 [marihuana is a drug but "Authorization to Possess" it is not a purchase "exemption"]
Hedges was assessed for his failure to charge GST on his sales of illegally produced dried marihuana to an intermediary ("BCCCS"), which in turn sold it to individual members suffering from ailments. After a detailed review of the regulatory regime, including the Marihuana Medical Access Regulations permitting sales by licensed producers to patients who, following certification by a medical practitioner, had received an "Authorization to Possess" (ATP) from Health Canada, C Miller J found that zero-rating of the product under Sched. VI, Part I, s. 2(d) turned on whether, as a general mater, dried marihuana was a “drug” which “may [not], under the MMARs, be sold to a consumer without a prescription or exemption” (para. 74).
He found that it was a "drug" as broadly defined in the Food and Drugs Act (noting at para. 67 that “dried marihuana sold for use recreationally is not a drug as defined under the FDA, while dried marihuana sold for use therapeutically is”) and rejected Crown submissions that the term should be restricted to drugs approved under the FDA and accessible by prescription.
However, he found (at para. 84) that “the medical declaration required to be completed by a practitioner pursuant to the MMARs is not an order nor is it given to a pharmacist [and] is clearly not a prescription” and further found (at paras. 94-6) that an ATP is not as exemption. The appeal was dismissed.
GST Memoranda Series 4.1 "Prescription Drugs and Biologicals" ETA - Schedule VI Part II
GST M 300-4-2 "Health Care Services"
Health Quest Inc. v. The Queen, 2014 TCC 211 (Informal Procedure) [insufficient product design evidence]
The appellant ("Health Quest") distributed footwear for the relief of various disabling conditions of the foot. The Minister reassessed the taxpayer on the basis that many of the shoes sold were not zero-rated supplies under s. 24.1 of Part II of Schedule VI of the ETA. Campbell J found that the Minister's pleading of this legal conclusion did not shift the burden of proof to the taxpayer (see summary under General Concepts - Onus).
The Minister was unable to prove that the shoes were not specially designed for use for a "crippled or deformed or similarly disabled foot," as the appeal officer's evidence was based on there not being sufficient information to conclude that they were. Campbell J suggested that "product literature, any scientific studies conducted and testimony of medical professionals" would have been beneficial in drawing any conclusions (para. 37) and indicated (at para. 41) that Masai Canada Ltd. v. Canada (Border Services Agency), 2012 FCA 260 "implied that to establish if a product, at least under the Customs Tariff, is 'specially designed' there should be evidence on the design and purposive intent behind the design of the product."
Tremblay v. R.,  GSTC 64, docket 2000-1348-GST-I (TCC) (Informal Procedure)
An elevator shaft constructed by the builder of the appellant's home in order to permit the operation of a wheelchair lift provided by a separate supplier was found to be an "accessory" essential for the use of the lift, so that its supply was zero-rated under section 32.
Buccal Services Ltd. v. The Queen,  GSTC 70 (TCC) (Informal Procedure)
A healthcare facility through a dentist (as independent treatment provider) provided various laboratory and diagnostic services such as special x-ray studies, photographs and anesthesia facilities. The appellant had a paucity of evidence to support its submission that 40% to 50% of the supplies made by it were zero-rated supplies. Kempo T.C.J. went on to reject a submission that dental supplies made by the appellant fell within ss.23 (now, 11.1) 25, 26 and 34 of Part II of Schedule VI, stating that "where the service is clearly included in Schedule V, the exempt status of that service would govern and take precedence over the zero-rating provisions" (p. 70-3) and found that the services provided were institutional healthcare services instead.
Hubka v. The Queen,  GSTC 58 (TCC)
Supplies of ice cream made in the form of boxes of 12, 24 or 36 single serving packages were excluded from zero-rating by s. 1(k). Bonner TCJ. stated (at p. 58-3):
"I cannot discover any basis either in the language of para. (k) or in the statutory context for arriving at a conclusion that the packaging which contains the single serving packages of ice cream is in any way relevant. The plain language looks to the packaging of the ice cream and not to the packaging of the packages."
River Road Co-Op Ltd. v. The Queen,  GSTC 34 (TCC)
A direct charge retail co-operative charged $3.50 per week to each member of the co-operative irrespective of the type or volume of goods purchased by the member. Lamarre TCJ. concluded that such service fees did not constitute partial payment for goods purchased by the members and, therefore, no portion of such fees qualified for zero-rating.
Muller v. Baldwin, L.R. 9 Q.B. 457
In the absence of anything in the governing legislation to the contrary, "exported from the port" was to be construed in its ordinary meaning of "carried out of the port" and, therefore, included coals taken out of the port on a steamer to be consumed on board during a distant voyage.
Overview of requirements
3. A supply of tangible personal property (other than an excisable good) made by a person to a recipient (other than a consumer) who intends to export the property is zero-rated if all of the following conditions are met:
- a. in the case of property that is a continuous transmission commodity that the recipient intends to export by means of a wire, pipeline, or other conduit, the recipient is not registered for GST/HST;
b. the recipient exports the property as soon after the property is delivered by the person to the recipient as is reasonable having regard to the circumstances surrounding the exportation, and where applicable, to the normal business practice of the recipient;
c. the recipient has not acquired the property for consumption, use, or supply in Canada before exportation;
d. after the supply is made and before the recipient exports the property, the property is not further processed, transformed, or altered in Canada, except to the extent reasonably necessary or incidental to its transportation; and
e. the person maintains evidence satisfactory to the Minister of National Revenue of exportation of the property by the recipient.
Intent to export vs actual export of the property
7. Tangible personal property will generally be regarded as exported where the property is carried or sent out of Canada for trade, consumption, use, or supply by the recipient outside Canada, and the property is not consumed, used, or supplied en route before delivery to a place outside Canada. The recipient must have the intention of exporting the property when the supply is made in order for it to be zero-rated. However, ...[t]he recipient must export the property in fact.
As soon after the property is delivered by the person to the recipient as is reasonable
9. Whether tangible personal property is exported “as soon after the property is delivered by the person to the recipient as is reasonable” will depend on the facts of each situation, including the type of property involved and the general business practices of the recipient. The CRA will consider the following factors where the supplier can provide documentary evidence why the property was not exported either immediately after the supply was made, or in the time frame originally anticipated:
- a late shipment from a subcontractor delays the shipment of the whole consignment;
- transportation obstacles have been encountered;
- some tangible personal property is held in inventory while awaiting delivery of other property before exporting all of the property at once;
- the delay is attributable to the recipient’s normal business practice; or
- other situations have resulted in unexpected delays.
Satisfactory evidence of exportation
16. The acceptability of the evidence of exportation will depend on whether the entire shipment of the tangible personal property can be traced from its origin in Canada to the point where it leaves Canada on its way to a foreign destination. [E]vidence…will vary depending on the mode of transportation…and the nature of the property. Satisfactory evidence may include…:
- sales invoice or purchase contract that identifies the property and the recipient, matched with the respective shipping or delivery instructions on the purchase order;
- transportation document…such as a bill of lading…which is evidence of a contract of carriage as well as proof of delivery of the property on board a vessel (additional information… is available in GST/HST Memorandum 28.2, Freight Transportation Services);
- customs brokers’ or freight forwarders’ invoice that relates to the exported property;
- import documentation required by the country to which the property is exported;
- in the case of motor vehicles, boats, ships, and aircraft, registration from the foreign regulatory authority where the property has been licensed;
- or any other evidence (…not generated internally by the recipient)…that the property has been exported.
CBAO National Commodity Tax, Customs and Trade Section – 2013 GST/HST Questions for Revenue Canada, Q. 1 [prosecution or civil remedy] (available with membership password at http://www.cba.org/CBA/sections_NSCTS/main/GST_HST.aspx): Where the taxpayer has failed to provide information pursuant to a requirement under s. 289.1, “CRA’s general policy is to proceed with a compliance order under section 289.1 (civil court remedy) prior to seeking the prosecution provision under section 326.)
94 CPTJ - Q. 1: RC will be amending its administrative policy to allow certificates to be issued by purchasers containing prescribed information as evidence of exportation. However, the exporter may be required to make available to the Department the shipper's balance sheet statements and any other evidence necessary to verify the zero-rated export purchases.
Example 3 An unregistered non-resident airline is supplied with meals for consumption on board, and parts used to operate the aircraft while the aircraft is transporting passengers or property to a destination outside Canada. The supplies of meals and parts are zero-rated.
Example 4 A cruise ship stops at a Canadian port while transporting passengers between places outside Canada. During the cruise ship's stay in port, the unregistered non-resident operator of the cruise ship rents bicycles for use by some of its passengers. The supplies of rented bicycles to the operator are not zero-rated because they are not acquired for consumption, use or supply by the operator in the course of transporting passengers.
CBAO National Commodity Tax, Customs and Trade Section – 2013 GST/HST Questions for Revenue Canada, Q. 17. (“Supplier Reliance on Purchaser Certificates”) (available with membership password at http://www.cba.org/CBA/sections_NSCTS/main/GST_HST.aspx): Respecting a certificate of a non-resident that it is not carrying on business in Canada:
CRA has not indicated in GST/HST Memorandum 4.5.1, nor in any other publication, that such a document would be accepted by the CRA as proof that a non-resident is not carrying on business in Canada for purposes of zero-rating a supply under Part V of Schedule VI to the ETA. A supplier may not rely on such documentation as acceptable proof that a non-resident person is not carrying on business in Canada for purposes of zero-rating a supply under Part V of Schedule VI to the ETA.
38. The term “emergency” is not defined in the Act but generally refers to an unforeseen event or combination of events that calls for immediate action. The repairs must be of an urgent nature that if not immediately undertaken, could seriously affect the safety of the conveyance, the property, or passengers being transported, and the people working on or about the conveyance. The application of sections 6, 6.1 and 6.2 of Part V of Schedule VI depends on the facts associated with each situation.
- Example 6 While transporting an empty tank car from Montréal to Québec City, the domestic carrier notices that one of the wheels of the tank car is damaged. The carrier delivers the empty tank car to a repair facility operated by a firm specializing in repairing railway rolling stock. The repair firm contacts the unregistered non-resident lessor of the tank car and obtains authorization to repair the tank car. Following the repairs, the tank car is returned to the carrier for transportation to Québec City. The parts supplied to the unregistered non-resident, along with the emergency repair service, are zero-rated.
"GST/HST In Electronic Commerce", CCRA Discussion Paper, November 2001.
23 October 2000 Interpretation 11640-1: The Canadian operator of an internet auction site would be considered, with respect to non-resident vendors, to be arranging for, procuring or soliciting orders for supplies made by them. The payment of an annual fee by vendors for the right to list items on the auction site would be considered to be consideration for a supply to them of a right and would not be eligible for zero-rating and would be deemed by s. 142(1)(c)(i) to be a supply made in Canada.
6 May 1998 HQ Letter: administrative services provided to an RRSP with a non-resident beneficiary and a resident trustee will be zero-rated if paid for by the annuitant and taxable if funded out of the trust.
The Queen v. Dawn's Place Ltd.,  GSTC 137, 2006 FCA 349 [use of copyright in downloading images was only incidental]
International subscribers to the registrant's internet website were granted a "non-exclusive, limited and revocable licence to download and view the content of the website" on their computer. In finding that the subscription fees were not zero-rated consideration, Sharlow J.A. quoted with approval a statement of the OECD Model Tax Convention on Income and Capital that:
"Thus, in a transaction that in essence is an acquisition of data or images transmitted electronically, any incidental copying is merely the means by which the data is captured and stored. The essential consideration for the payment in that case is the data, not the use of the copyright, even though copyright is incidentally used."
James Swanson and David Ross, "Taxing Intangibles - GST and the Supply of Digital Images", GST & Commodity Tax, Vol. XVII, No. 4, May 2003, p. 25.
CBAO National Commodity Tax, Customs and Trade Section – 2013 GST/HST Questions for Revenue Canada, Q. 33. (“Application of S. 10.1, Sch. VI, P. V – Service Related to Intangible Personal Property”) (available with membership password at http://www.cba.org/CBA/sections_NSCTS/main/GST_HST.aspx): A Canadian GST-registered supplier sells custom software that it has been using to perform a service electronically, with such supplies being made in Canada. The purchaser is a non-resident who does not carry on any business in Canada, and will use the software to supply the same service to Canadian customers, with such supplies being deemed to be made outside Canada pursuant to s. 143.
After stating that the supply would be zero-rated under s. 10 (rather than 10.1) assuming the non-resident was not registered, CRA stated:
[I]f the intangible personal property supplied to the non-resident in the scenario were the type of intangible personal property that can be zero-rated under [s. 10.1]…and again assuming that the non-resident was not registered, the supply would not be excluded from zero-rating under that provision on the basis of the exclusion in subparagraph 10.1(b)(iii).
2 November 2012 Ruling Case No. 140160: Operator, a registered resident of province 1, has developed a program that consists of a secure network and various business, communications and software systems. The clients of the Operator are businesses that supply taxable goods and services and independent contract agents ("ICAs") who are contracted by the businesses to provide services. The ICAs are provided access to, and the use of, the program to provide their services. There are no restrictions with respect to where the program may be accessed and used by the businesses and the ICAs. Rulings that the supply made by the Operator to non-resident non-registered businesseses or ICAs of the right of access to, and use of, the program is a zero-rated supply of intangible personal property under section 10.1 of Part V of Schedule VI.
14 February 2012 Ruling Case No. 99181 [non-exclusive information use rights]: A Canadian company which is a registrant (the “Resident Supplier”) enters into an agreement with a non-registered non-resident company to supply it “with the non-exclusive use rights to information belonging to the Resident Supplier for an up front payment of CD$[…] and contingent payments of CD$[…] in each of the succeeding […] years.” Ruling that there is a zero-rated supply of intangible personal property by the Resident Supplier under s. 10.1.
4 February 2012 Ruling Case No. 99181 [information licence]: A resident supplier agrees to supply an unregistered non-resident recipient with the non-exclusive use rights to information belonging to the supplier for an up front payment as well as and contingent payments for a number of the succeeding years.
As the Agreement contains no terms or conditions with respect to the location of the use of the rights, the supply is deemed by s. 142(1)(c) to be made in Canada. However, it is zero-rated under Sched. VI, Pt. V, s. 10.1.
Examples of supplies of IPP that will now be eligible for zero-rating under the proposed provision include:
- subscriptions to Web sites that provide subscribers with a right to access and use digitized content on the site, such as information in a database or images, and that may also include a right to download a copy of the digitized content;
- subscriptions to interactive Web sites that provide subscribers with a right to access and use digitized content, such as games, music and videos, on the sites while they are online;
- digitized information, such as news items or stock market data, that is delivered electronically on a periodic basis to subscribers based on their personal preferences;
- digitized products, such as music, images, and books, that are downloaded from Web sites and paid for individually. ...
The CRA will generally accept an online self-declaration by customers that they are not residents of Canada along with their complete home address as proof of residency, provided it is supported by another satisfactory verification method of residency such as:
- if customers pay for the supplies of IPP by credit card or debit card, either a comparison of the customer's declared home address with the billing address, or
- a comparison of the customer's declared home address with the location of the financial institution that issued the card; or the use of geo-location software.
B-090 "GST/HST and Electronic Commerce" July 2002
Factors that generally indicate that a supply made by electronic means is one of intangible personal property are:
- a right in a product or a right to use a product for personal or commercial purposes is provided, such as:
- intellectual property or a right to use intellectual property (e.g., a copyright); or
- rights of a temporary nature (e.g., a right to view, access or use a product while on-line);
- a product is provided that has already been created or developed, or is already in existence;
- a product is created or developed for a specific customer, but the supplier retains ownership of the product; and
- a right to make a copy of a digitized product is provided
19. A “common carrier” is not defined in the Act but generally refers to a person engaged in the business of transporting property from place to place, and who offers services to the public for compensation.
- Example 1
- A Canadian resident purchases a vehicle from an automobile dealer located in Toronto. The resident asks the dealer to arrange for a common carrier to pick up the automobile from the dealer’s lot and deliver it to the resident’s son who is currently living in Portugal. The dealer hires a carrier on behalf of the resident to ship the vehicle to Portugal. The supply of the vehicle by the dealer to the Canadian resident is zero-rated provided the dealer maintains the appropriate documentary evidence of exportation.
Example 8 A manufacturer in Canada charges its customers for moulds required in manufacturing a specific product. The moulds remain in Canada but the goods produced with the use of the moulds are sold to both Canadian and American customers. The supplies of the moulds to the non-resident customers are zero-rated provided the moulds are for use directly in the manufacture or production of goods for the non-resident.
62. Continuous transmission commodities situated in Canada are frequently exchanged for similar commodities situated outside Canada. For example, natural gas acquired in Canada on a zero-rated basis by an unregistered non-resident who intends to export the gas may instead be sold and delivered in Canada, without having been exported, to a registrant in exchange for the registrant’s gas of the same class and kind already situated outside Canada. Persons may enter into such exchange agreements to minimize transportation costs and reduce shipping time without changing the zero-rated status of the transaction.
63. Generally, section 15.1 ensures that specified cross border exchanges of continuous transmission commodities transported by means of wire, pipeline, or other conduit qualify for zero-rating on a transaction basis rather than on the basis of physical flows.
64. Where the registrant who acquires the continuous transmission commodity from the first buyer is not acquiring the commodity for consumption, use, or supply exclusively in the course of commercial activities of the registrant, the supply is an imported taxable supply and the registrant is liable for tax under sections 218 and 218.1, calculated on the value of the consideration for the supply of the commodity.
69. If the recipient subsequently neither exports the commodity as described in paragraph 15.2(a), nor supplies it as described in paragraph 15.2(b), the supply is still zero-rated if the supplier did not know or could not reasonably be expected to have known, at or before the latest time at which GST/HST in respect of the supply would have been payable if the supply were not zero-rated, that the recipient would not supply or export the commodity as required.
70. Where the commodity is not exported or supplied as declared in writing by the registered recipient, the supply to the recipient is an imported taxable supply. The recipient is liable for tax under sections 218 and 218.1, and an amount calculated under section 236.1, unless the commodity is acquired for consumption, use, or supply exclusively in the course of the recipient’s commercial activities.
5 February 2013 Ruling Case No. 141852: Company A (a Canadian-resident registrant) sells crude oil for its market value to Company B (its U.S.-resident affiliate and also a registrant), with title and delivery occurring when it is injected into the pipeline, and with Company B being the importer of record into the U.S. Where Company B does not require the crude oil which it purchased, it will sell the crude back to Company A at the current market price, with payment generally made on a set-off basis. CRA stated:
If the recipient [i.e., Company B] does not know at the time of purchase whether the continuous transmission commodity, including a portion thereof, purchased from a particular supplier will be exported, then the recipient cannot and should not provide a written declaration stating that the commodity is intended to be exported in the circumstances described in paragraphs 1(b) to (d) of Part V of Schedule VI.
GST Memorandum (New Series) 3.7 (Draft), February 2012 para. 1040105: General Discussion. 2 August 2001 TI RITS 32561:
"Where a registrant receives a zero-rated supply of natural gas intended for export and a taxable supply of natural gas that is not zero-rated because it is intended for sale in Canada, the fact that the gas purchased for export may be mixed with the gas purchased for supply in Canada does not affect the entitlement to purchase natural gas using an export declaration, provided that evidence is maintained that the quantity purchased for export is the same as the quantity exported."
31 August 2004 Headquarter Letter - RITS 50657: In indicating that legal services provided to a non-resident manufacturer to defend it against product liability claims would be zero-rated, the Directorate stated that:
"Legal services supplied to a manufacturer to defend against a product liability claim are not generally considered to be directly connected to the product, but rather directly connected to the manufacturer's objective of defending itself against the claim to minimize its potential legal liability."
24 July 2003 Ruling Case No. 41660: Preparation of written appraisals of specific real properties located in Canada were "in respect of" such properties and, accordingly, were not zero-rated.
9 April 2001 T.I. 33818: Professional services provided to a non-resident insurer with regard to the liability of the non-resident insurer under an insurance contract relating to the insurance of real or tangible personal property situated in Canada were zero-rated. "Although the professional services relate to a liability of the insurer in relation to an insurance contract in respect of real or tangible personal property situated in Canada, the real or tangible personal property does not appear to be the direct object of the professional service."
P-169R: "Meaning of 'in respect of real property situated in Canada' and 'in respect of tangible personal property that is situated in Canada at the time the service is performed', for purposes of Schedule VI, Part V, Section 7 and 23 to the Excise Tax Act," 25 May 1999.
15 June 2000 Headquarters Letter RITS 31364: A legal account rendered to a non-resident insurer was not zero-rated because the services were in respect of the defence of an individual involved in a motor accident in Canada.
1 September 1999 Headquarters Letter RITS HQR0001873: Ruling that a contingency fee charged to a non-resident could be pro-rated based on the litigation services provided by the law firm before and after the commencement of the litigation.
48. The following are examples of services that are considered to be in respect of real property for purposes of Part V of Schedule VI:
- (a) services physically performed on the real property (e.g., construction and maintenance);
- (b) services that enhance the value of the real property, affect the nature of the real property, relate to preparing the real property for development or redevelopment, affect the management of the real property, or affect the environment within the limits of the real property (e.g., engineering, architectural services, surveying and subdividing, management services, security services);
- (c) services related to;
- (i) the transfer or conveyance of the real property or the proposed transfer or conveyance of the real property (e.g., real estate services in relation to the actual or proposed acquisition, lease or rental of the real property, legal services rendered to the owner or beneficiary or potential owner or beneficiary of real property as a result of a will or testament);
- (ii) a mortgage interest or other security interest in the real property; or
- (iii) the determination of the title to the real property.
“Continuous journey” of an individual or group of individuals means the set of all passenger transportation services provided to the individual or group of individuals:
- and for which a single ticket or voucher in respect of all the services is issued; or
- where two or more tickets or vouchers are issued in respect of two or more legs of a single journey of the individual or group on which there is no stopover between any of the legs of the journey for which separate tickets or vouchers are issued, and all the tickets or vouchers are issued by the same supplier or by two or more suppliers through one agent acting on behalf of all the suppliers where:
- all such tickets are supplied at the same time and evidence satisfactory to the Minister is maintained by the supplier or agent that there is no stopover between any of the legs of the journey for which separate tickets or vouchers are issued, or
- the tickets or vouchers are issued at different times and evidence satisfactory to the Minister is submitted by the supplier or agent that there is no stopover between any of the legs of the journey for which separate tickets or vouchers are issued.
In order for passenger transportation services to be part of a continuous journey, the carrier or its agent must issue either a single ticket or voucher or multiple tickets or vouchers in respect of those passenger transportation services provided to the individual or group of individuals. If not, those passenger transportation services will not form part of a continuous journey for zero-rating and place of supply purposes as explained later in this info sheet.
…If a carrier does not issue tickets, but does issue a document that contains all the information commonly found on a ticket (such as detailed flight information, airports and specific locations where passengers will embark and disembark the aircraft, departure date(s) and time(s), and the passengers’ information), then this document (hereafter, “travel document”) is considered to be a ticket or voucher for the purposes of the definition of continuous journey.
“Stopover”, in respect of a continuous journey of an individual or group of individuals, means any place at which the individual or group embarks or disembarks a conveyance used in the provision of a passenger transportation service included in the continuous journey, for any reason other than for transferring to another conveyance or to allow for servicing or refuelling of the conveyance.
A stop between two legs of a journey that is 24 hours or less is not considered to be a stopover. A stop of more than 24 hours between two legs of a journey will generally be considered to be a stopover where two or more tickets or vouchers are issued for the legs of the journey.
[T]he supply of a “passenger transportation service” is a supply of a service of transporting or carrying travellers (i.e., an individual or group of individuals) by any mode of transportation available to the public (such as a bus, taxi, train, aircraft, or boat) as long as there is:
- a mode of conveyance;
- an operator of the conveyance who is independent of the travellers; and
- an itinerary.
Generally, the supply of a charter flight to a third-party charterer is considered to be a supply of a passenger transportation service.
A supply that is a supply of property (such as a supply, by way of lease, licence or similar arrangement, of the use or right to use tangible personal property such as an aircraft) is not a supply of a passenger transportation service.
Example of zero-rated flight embarking from Canada
A third-party charterer and a carrier enter into a charter agreement for the supply of a charter flight that is a passenger transportation service that is part of a continuous journey. The charter flight is a one-way trip for a group of individuals travelling from Toronto, Ontario to Nassau, Bahamas. The carrier issues a travel document for the set of all passenger transportation services which specifies Toronto as the origin of the continuous journey.
Although the continuous journey originates in Ontario (a participating province), the supply of the passenger transportation service is zero-rated because the termination of the continuous journey is outside the taxation area.
Single v. multiple supply
A ferry flight is generally considered to be an input to a passenger transportation service. ...
[T]he fuel surcharges and the passenger/goods handling charges incurred by the carrier at airports other than its base are costs that the carrier has no choice but to incur in providing the specific air charter. When these charges are passed onto the third-party charterers, they are part of the consideration payable for the passenger transportation service.
Other costs, such as the ferry flights and the cost of accommodation, meals and ground transportation for aircraft crew, are for elements that are not supplied to the third-party charterer. Rather, these elements are inputs consumed or used by the carrier in providing the passenger transportation service. The charges for the ferry flights and crew costs would therefore form part of the consideration payable for the passenger transportation service.
However…the excess valuation charges for baggage would be viewed as a separate charge in respect of a passenger’s baggage and not part of the consideration payable for the supply of the passenger transportation service.
[T]he excess valuation charges for baggage would be viewed as a separate charge in respect of a passenger’s baggage and not part of the consideration payable for the supply of the passenger transportation service.
For GST/HST purposes, there are specific place of supply and zero-rating provisions that apply to a service of transporting an individual’s baggage when made by a supplier of a passenger transportation service that imposes a charge for the service. Generally, under these rules, when a carrier provides a separate service of transporting an individual’s baggage in connection with the transportation of the individual (i.e., on a charter flight), the GST/HST applies to any excess valuation charge at the same rate as it applies to the passenger transportation service.
11 July 1997 Technical Interpretation HQR0000416: Sales commissions and trailer fees received by a dealer who sells units in a mutual fund to non-resident investors would be zero-rated.
Guide for Providers of Financial Services under "Zero-rated Financial Services": General synopsis of ss.1 and 2.
David Schlesinger, "De Minimis Financial Institutions," 1995 Commodity Tax Symposium Papers, C. 17: indicates that an investment by a financial institution in dividend-bearing treasury shares of a non-resident company is a zero-rated supply. Danny Cisterna, "Hot Topics for Financial Institutions," 1999 Commodity Tax Symposium Papers, C. 7: suggests that "relates to" requires a direct connection.
Guide for Providers of Financial Services: Any supply of precious metals not described in s. 3 will be treated as a supply of a financial service.
13 June 2011 Headquarters Letter Case No. 133042: in finding that a supply of goods shipped by a non-resident supplier to a GST/HST registrant at an address in a participating province was a supply made in Canada and in that province , CRA stated:
...the phrase "delivered or made available" has the same meaning as that assigned to the concept of "delivery" under the general law of the sale of goods. It is not based on the place where title to the goods transfers....If an Incoterm is used...the place where legal delivery of the goods occurs can be determined by reference to the place where delivery is considered to occur under that Incoterm.
Techtronic Industries Canada Inc. v. Agence du revenu du Québec, 2014 QCCQ 7394 [place of supply at customer destination rather than place of legal delivery into FedEx hands]
The plaintiff (“Techtronic”), which was registered for QST purposes, sold power handtools to Quebec customers pursuant to sales agreements (“Sales Policies”) that specified that the sales were made “F.O.B. Distribution Centre” (referring to its Toronto distribution centre). Hamel J found that, as a general rule, the shipments occurred through carriers such as FedEx pursuant to contracts for carriage agreed to by Techtronic (para. 112), and found (at para. 120) that Fed Ex was a “common carrier” (“transporteur public”). After noting (at paras. 97, 99, 132) that the delivery occurred in Ontario, he found that s. 22.7 of the Quebec Sales Tax Act (similar to s. 142(1)(a) of the federal Act) and s. 22.9 of the QSTA (substantively the same as s. 3 of Part II of Schedule IX of Part IX of the federal Act) deemed these supplies to be made in Quebec, so that Techtronic was properly assessed for failure to charge QST, stating (at para. 184, TaxInterpretations translation):
Even though the “Sales Policy” provides that sales of [corporeal movable property] to Quebec customers were made “F.O.B. Distribution Centre,” this does not nullify the legal effect of sections 22.7 and 22.9 of the QSTA where the conditions provided under section 22.9 of the QSTA are established on the evidence, as occurred here.
CBAO National Commodity Tax, Customs and Trade Section – 2013 GST/HST Questions for Revenue Canada, Q. 27 [carriage arranged by customer] (available with membership password at http://www.cba.org/CBA/sections_NSCTS/main/GST_HST.aspx): CRA noted that s. 1 rather than s. 3 applied where the Ontario customer rather than the Quebec vendor arranged for the common carrier to ship the goods in question. As the legal delivery occurred in Quebec, that was where the supply occurred.
National Commodity Tax, Customs and Trade Section – 2014 GST/HST Questions for Revenue Canada, Q. 22 [penalty for delayed reporting of ITC and RITC] (available with membership password at http://www.cba.org/CBA/sections_NSCTS/main/GST_HST.aspx): A large registered business with a monthly reporting period acquires a specified property or service in Ontario in January of Year 1, is charged 13% HST, but does not claim the input tax credit until its return for January of Year 2, in which it also reports the corresponding recaptured input tax credit. Will CRA assess a penalty for failure to report the RITC in the January of Year 1 return? CRA responded:
[U]nder paragraph 30(1)(d) of the NHVATS No. 2 Regulations, the large business would have been required to report the RITC no later than the reporting period following the reporting period that the tax became payable… or… was paid… . Since the RITC was not reported until the filing of the GST/HST return for the reporting period of January Year 2, the large business would be liable to a penalty under section 284.01 and as determined under section 7 of the Electronic Filing and Provision of Information (GST/HST) Regulations, equal to 10% of the unreported RITC amount.
CBAO National Commodity Tax, Customs and Trade Section – 2014 GST/HST Questions for Revenue Canada, Q. 21 [reporting RITC for wrong province results in penalty] (available with membership password at http://www.cba.org/CBA/sections_NSCTS/main/GST_HST.aspx): Will CRA assess penalties under s. 284.01 where a large business inadvertently reports the wrong province to which a recaptured input tax credit relates (e.g., Ontario rather than B.C.), but this error does not result in an increase to the net input tax credits that should be reported? After referencing the Electronic Filing and Provision of Information (GST/HST) Regulations, CRA responded:
[A]n over-reported RITC amount has been reported for Ontario, and no RITC amount has been reported for British Columbia. As the penalty calculations in section 7 of the Regulations are based on the difference between the RITCs that should have been reported for each particular province in a specified return for a reporting period and the RITCs that were actually reported, or un-reported, for that particular province in that return, the over-reported amount of RITCs for Ontario would result in a negative penalty calculation… that…[p]ursuant to section 125… is deemed to be nil. … However, the un-reported amount of RITCs for British Columbia would result in a penalty amount equal to a minimum of 5%, to a maximum of 10%, of that un-reported amount, where the amount remains unreported for 5 complete months or more.
17 May 2012 Ruling 62492: An "Acquirer" is a connection service provider (i.e., it provides connection to the Interac network for the purpose of processing Interac direct payment transactions) and a settlement agent (i.e., the Acquirer uses the services of a bank to provide funds). An "Independent Sales Organization" ("ISO") sells or leases point-of-sale terminals to merchants and uses the services of the Acquirer in order to provide continuous processing services to the merchants and related reporting. In addition to purchasing or leasing the terminal, the merchant agrees with the ISO to pay (out of user fees charge by it to customers) per-transaction fees to the ISO as well as transaction and processing fees to the Acquirer. After ruling that the services of the ISO (which were a single supply including payment processing services) were excluded under s. 4(2), CRA stated:
...when considered as a whole, the ISO’s service is predominantly the transfer, collection or processing of information and/or an administrative service performed by a person who is not at risk (i.e., the ISO does not appear to be financially at risk when it provides assistance to the Merchant such as performing data processing, monthly reports, funds transfer and other support and administrative services).
19 July 2011 Headquarters Letter Case No. 111922: Corporation X administers insurance policies for large health plan providers (Providers) and independent employers (Employers) including employee benefit plans and extended health and dental plans. After finding that its services were predominantly taxable services, CRA went on to indicate that even if some elements came within the para. (l) ("arranging for") or (f.1) (claims payments), they were excluded under under s. 4(2) (administration services including in relati0n to the payment of claims by a person not at risk).
5 April 2006 Interpretation 60463: CRA discussed Shared Cash Dispensing (SCD) transactions allowing cardholders to access their accounts to withdraw cash at automated banking machines (ABMs) not belonging to the financial institution that issued their banking card. In a typical SCD transaction, after a Cardholder standing at an ABM has requested a withdrawal from his or her account, the transaction message is sent to an Acquirer (a member of the payments network), who confirms which Issuer (i.e., financial institution) issued the Card. The Acquirer then sends the transaction message across the network to the Issuer, which then sends a message back to the Acquirer either approving or declining the transaction. The Acquirer passes the appropriate instruction back to the Card Acceptor (i.e., ABM operator) who, if the transaction is approved, will dispense the requested funds to the Cardholder out of its ABM. After noting that the service provided by an Acquirer, who is the Card Acceptor, to the Issuer in dispensing cash to a Cardholder is included in para. (a) of the financial services definition, whereas the service provided by an Acquirer to an Issuer of dispensing cash to a Cardholder is included under para. (l) where the Acquirer is not the Card Acceptor, CRA stated that in the first instance “the Acquirer is a "person at risk" in respect of the dispensing of cash to Cardholders… since the Acquirer is financially at risk for the period from the time cash is dispensed to a Cardholder to the time funds are settled,” whereas in the second instance “the Acquirer is generally a "person at risk" in respect of agreeing to dispense cash to a Cardholder…since the Acquirer is financially at risk with respect to an instrument through the settlement process.”
Excise and GST/HST News No. 87 Winter 2013
Services supplied by...independent contractors to the medical laboratory are not exempt under this provision. These services are inputs acquired by the medical laboratory in the course of its supply of the diagnostic service. GST/HST will generally apply to the consideration paid by the medical laboratory for the services of the independent contractors.
Example A sales representative for a supplier (who may or may not be the agent of that supplier) makes a taxable supply of property on behalf of that supplier as its intermediary. The invoice identifies the intermediary's name and its GST/HST registration number. Accordingly, with this information, the person who acquires the property may satisfy this element of the documentary requirements to be eligible to claim an ITC. [Emphasis added]
CBAO National Commodity Tax, Customs and Trade Section – 2005 GST/HST Questions for Revenue Canada, First Supplementary Questions, Q. 1. [billing agent not an intermediary] (available with membership password at http://www.cba.org/CBA/sections_NSCTS/main/GST_HST.aspx):
A billing agent who has made an election under the provisions of subsection 177(1.1) will not meet the definition of intermediary… . The billing agent neither effects the supply nor makes it easier to make the supply.
Regulatory Impact Analysis Statement (accompanied the 2000 amendment in 2000 to add “intermediary” definition):
These Regulations are amended to permit an invoice or receipt issued to the registrant by an agent or other intermediary of the supplier to be used to substantiate an input tax credit claim of the registrant. ... The amendment to enable a receipt or invoice issued by an agent or other intermediary to suffice as supporting documentation for an input tax credit claim simplifies compliance for registrants. Section 3
PDM Royalties LP v. The Queen, 2013 TCC 270 [no allocation on invoices]
In an attempt to obtain input tax credits for GST incurred on the IPO of an income fund, the income fund and a subsidiary LP (which held the business) agreed that the taxable expenses were to be incurred for the account of the LP. After finding that such agreement was not sufficient to make the LP the “recipient” of the services, as it was not a party to the agreements with the services providers, V. Miller went on to note various deficiencies in the invoices of the suppliers, and stated (at para. 51):
[W]here an invoice represented services to both the Appellant and the Fund and I could not ascertain the portion payable by the Appellant, I did not allow the ITC involved.
Tchebotar v. The Queen,  GSTC 43, 2013 TCC 32 [sales records shredded]
The appellants shredded all their sales records but "were fastidious in recording and categorizing their business expenses" (para. 25). Campbell J found that the Minister was justified in using a net worth assessment to determine the appellants' income, and to impose gross negligence penalties based on the amounts thus determined.
GST Memorandum (New Series) 8.4: The documentary requirements would be satisfied where a sales representative for a supplier ("who may or may not be the agent of that supplier") makes a taxable supply of property on behalf of that supplier as its intermediary. The invoice identifies the intermediary's name and its GST/HST registration number. Accordingly, with this information, the person who acquires the property may satisfy this element of the documentary requirements to be eligible to claim an ITC
2266504 Ontario Inc. v. The Queen, 2014 TCC 121 [grey market buyers cannot be agents]
The appellant operated a small grey market business to buy iPhone 4 units from Apple's Canadian retail channels and resell them in Hong Kong, where they were not yet available. Friends and family members (the “buyers”) would purchase one or two phones each, for which the appellant fully reimbursed them. The Minister denied the appellant's input tax credit claim for the HST incurred by the buyers on the basis that they were not its agents (and also on the basis of inadequate documentation).
Bocock J found that the buyers were not the appellant’s agents as they did not have the authority to bind it. Apple's terms of sale prohibited buying phones for resale - that is, Apple would never have entered into the sales contracts directly with the appellant. Bocock J stated (at para. 17):
[A] principal cannot appoint an agent to engage in a contractual entreaty [sic] into which the principal has no legal capacity or authority to enter: 1524994 Ontario Ltd. v. Canada, 2007 FCA 74 at paragraph 18.
17 July 2014 Interpretation 152176 [solar panel electricity generation]: Landowner made its real property available for the installation of solar panels and related equipment by the Investor (who retains ownership thereof) in order to generate electricity for supply to the Ontario Power Authority under the Ontario provincial micro-FIT program, with revenues being shared.
After finding that this arrangement does not constitute a joint venture, given the lack of mutual control, CRA went on to find that the activity is a prescribed activity under s. 3(1)(e) of the Joint Venture (GST/HST) Regulations, stating:
The purpose of the parties to the Agreement is to construct a facility, generate electricity, and supply it to OPA via the micro-FIT program.
The place of supply determines whether the HST or the GST and QST apply. ...For more information on the application of the GST/HST, refer to GST/HST technical information bulletin B-103, Harmonized Sales Tax – Place of supply rules for determining whether a supply is made in a province, published by the Canada Revenue Agency. In general, the rules governing the application of the QST are harmonized with those concerning the GST/HST.
Members of a national organization (who provide their business address) pay annual fees for membership and separate fees for admissions to conferences held at various locations in Canada. After referencing the ss. 6(1) and 7 rules, CRA stated:
Based on the facts, the Registration fees that the [Organization] collects from individuals who attend a particular […] conference are consideration for a supply of IPP in respect of which the Canadian rights can only be used in the province in which the […] conference takes place. Therefore, if the conference takes place in a participating province, the supply of the IPP is made in that participating province. If the conference takes place in a non-participating province, the supply of the IPP is made in a non-participating province.
17 January 2013 Ruling Case No. 130479: Members of a national organization (who provide their business address) pay annual fees for membership and separate fees for admissions to conferences held in various locations in Canada. The place of supply of the memberships is the “province in which the contracting address of the [member] is located.”
23 November 2011 Ruling Case No. 131828: The supplier of specified time memberships to a social networking website does not obtain a home or business address of the recipients of the supplies of the memberships to the Website, and when a membership card is redeemed, the supplier uses geo-location software to try to identify the physical location of the computer that is associated with the acquisition of the membership based on the IP address of the computer CRA rules that an "address" in s. 8(b) does not include an IP address, notwithstanding that there is a potential relationship between the IP address of a customer's computer and the customer's geographic location, stating:
The type of address obtained for purposes of the rule must be an address of the recipient that represents a specific physical location that is situated in a province. For instance, an e-mail address or an IP address obtained by a supplier that does not represent an actual specific physical address is not considered to be an address for purposes of the rule.
Consequently, the supplier will be obligated to collect HST at the highest provincial rate, pursuant to s. 8(c).
Includes Example 49 (lawyer operates a law firm in Ontario designates her Quebec home as the billing address but also provides the Ontario office address respecting an online law website with no area restrictions - Ontario address has the closer connection).
13 June 2011 Headquarters Letter Case No. 133042: a supply of intangible personal property that can be used anywhere in Canada which is made by a non-resident supplier to a Canadian-resident GST/HST registrant occurred at the address of that recipient which the non-resident obtained in the ordinary course of its business.
18 May 2011 Headquarters Letter Case No. 123947: a resort developer supplies memberships that entitle a member to use certain real property at one or more resort locations located in Canada and outside Canada, namely, the right to use a villa or condominium at one of the resorts. The resort developer also may supply a number of points to be redeemed each year for the use of a unit. CRA declined to comment on whether the supply of memberships or points was a supply of intangible personal property or real property in the absence of being provided with the relevant agreements other than to say that if the supply of points gave the recipient only the right to use real property, the supply would be considered as a supply of real property for GST/HST purposes.
18 April 2011 Headquarters Letter Case No. 123466: the supply of memberships in an association would be governed by s. 8 as a supply of intangible personal property so that, for example, if in the ordinary course of business the association obtained a single address of the recipient in Ontario, the HST rate of 13% would apply.
3 February 2014 Interpretation 126057 [contracting address is most closely connected]: A registered non-resident (Company A) supplies services to X, many of whom have members which are located in various provinces and which have administrative agents who keep the records of X at their locations, which in some instances are in the U.S. Company A provides its services through offices in Canada.
CRA noted that where the services were performed by Company A from Canadian offices, they were deemed by s. 142(1)(g) to be supplied in Canada. Respecting s. 13(1), CRA noted that if more than one home or business address in Canada of the recipient was obtained:
The business address of the recipient from which the supplier is hired pursuant to the agreement for the supply (the “contracting address”) is generally the address that is most closely connected with the supply. … If the contracting address of the recipient is not obtained, the business address of the recipient that is most closely connected with the supply would be the obtained business address of the recipient in Canada that the supplier has the most contact with and that the supplier mostly uses in connection with that supply.
31 October 2011 Ruling Case No. 132350: A personnel services company (the Corporation) provides temporary and permanent staffing needs of its customers. Client 1 contracts with the Corporation for services provided by independent contractors who will provide services at the premises of Client 1's clients. The Corporation enters into a separate agreement with Client 1 for each individual contractor who is assigned to provide services to Client 1. The only address named in each such agreement is the physical location of Client 1's client where the independent contractor will perform his or her services. However, in the ordinary course of its business, the Corporation obtains a (single) address to which it sends all its invoices. In the ordinary course of business, the Corporation also obtains other addresses of Client 1, such as the business address of the hiring managers or human resources personnel. Somewhat similar facts are described for Clients 2 to 5. CRA stated that
the business address of the recipient in Canada that is obtained by the supplier in the ordinary course of business that is the business address of the recipient from which the supplier is hired will be considered to be address that is most closely connected to the supply.
Accordingly, the "business address" referred to above (e.g., of the human resources personnel who retained the Corporation) would be considered to determine the province in which the supply by the Corporation is made for purposes of s. 13(1).
June 2012 Draft GST/HST Technical Information Bulletin B-103, "Harmonized Sales Tax - place of supply rules for determining whether a supply is made in a province"
- Example 92 (the BC office of a corporation which receives the advice and had meetings with the advisor has a closer connection than the head office in Ontario which contracted with the advisor and the Alberta accounting office to which the invoice was directed to be sent);
- Example 95 (head office with which the consultant entered into a "global framework" agreement does not have as close a connection as the regional office determining the specific service which it requires and issues a purchase order); and
- Example 96 (the business address of a mutual fund trust in Ontario has a closer connection the the services of an accounting firm than the address of the fund sponsor or of the trustee).
12 December 2012 Interpretation Case No. 142112: A real estate broker based in Nova Scotia is hired by a company with a head office in Nova Scotia to lease real property in New Brunswick to a tenant. Before concluding that the supply of the service would be in New Brunswick, CRA stated:
A service and real property would generally be regarded as being in relation to each other pursuant to the above guidelines if the purpose of the service is to: • physically count the property; • appraise or value the property; • physically protect or secure the property; or • enhance the value of the property. Similarly, if the service is aimed at effecting or dealing with the transfer of ownership of, claims on or rights to the real property, or determining title to the property, the service will generally be regarded as being in relation to the property.
Includes Example 120 (maintenance services supplied re three buildings of equal size - two in New Brunswick and one in Quebec - are supplied in New Brunswick).
- Example 104 (a pet is tangible personal property, so that a veterinary service is made in the province where the pet is examined);
- Example 107 (a storage service (viewed as a single supply) is made in Ontario as that is where 60% of the art collection in question is situated); and
- Example 110 (the legal service of drafting an asset sale agreement relates to both Alberta tangible personal property and Ontario real estate - accordingly, the situs of the tangible personal property and real property does not govern and the place of supply instead is determined by the Ontario business address provided by the Ontario client).
CBAO National Commodity Tax, Customs and Trade Section – 2013 GST/HST Questions for Revenue Canada, Q. 23. (“HST Place of Supply Rules – Legal Services”) (available with membership password at http://www.cba.org/CBA/sections_NSCTS/main/GST_HST.aspx): A GST/HST-registered Canadian law firm performs legal services, as a single, bundled supply, on behalf of a Canadian lender in a secured financing transaction, where the security for the loan is registered under the Personal Property Security Acts in five Canadian provinces against the borrower's tangible personal property, including inventory. The firm does not know the location of the secured inventory throughout the time that the services are performed, so that it is not clear whether to apply provincial place of supply rules in s. 15 or 16. CRA stted:
[W]here it is possible based on the facts for the supplier to obtain information that is available with respect to where the tangible personal property is situated and its movement (which appears to be the case in the scenario provided), the supplier would be expected to obtain that information for purposes of applying the rule
Generally, a supply of a passenger transportation service that is part of a continuous journey is made in a participating province if the continuous journey originates in the participating province, the termination and all stopovers in respect of the continuous journey are in Canada, and the origin of the journey is specified in the ticket or voucher issued for the first passenger transportation service included in the journey.
If there is a termination or stopover outside Canada in respect of the continuous journey, then the supply of the passenger transportation service is considered to be made in a non-participating province, regardless of the province in which the continuous journey originates.
Generally, if a supply of a passenger transportation service is not part of a continuous journey, then:
- the supply is made in a participating province if the passenger transportation service begins in the participating province and ends in Canada; and
- the supply is made in a non-participating province if the passenger transportation service begins outside the participating provinces or ends outside Canada.
A third-party charterer and a carrier enter into a charter agreement for the supply of a charter flight that is a passenger transportation service that is part of a continuous journey. The charter flight is a round-trip for an individual travelling from Halifax, Nova Scotia to Boston, Massachusetts. The carrier issues a travel document for the set of all passenger transportation services which specifies Halifax as the origin of the continuous journey.
Although the continuous journey originates in Nova Scotia (a participating province) and the origin is specified in the travel document, the supply of the passenger transportation service is made in a non-participating province because there is a stopover outside Canada. Therefore, the supply of the taxable (other than zero-rated) passenger transportation service is subject to the 5% GST.
June 2012 Draft GST/HST Technical Information Bulletin B-103, "Harmonized Sales Tax - place of supply rules for determining whether a supply is made in a province"
'The time when the administrative litigation commences will normally be based on the procedural requirements imposed by the relevant legislation, or the 'rules' of natural justice if no legislation exists, under which the administrative litigaton will be brought." Examples include the receipt of a complaint by the Competition Commissioner; and the receipt of an appeal by the Tax Court registrar. Where there is no specific statutory procedure, the litigation will be considered to have commenced when the board etc. is made aware of the complainant's intentions. "Documentation such as copies of agreements, requests for advisory, professional or consulting services, the supplier's accounting records, demand letters, copies of objections or appeals, etc., would usually indicate the purpose or objective of the service rendered in relation to civil or administrative proceedings."
June 2012 Draft GST/HST Technical Information Bulletin B-103, "Harmonized Sales Tax - place of supply rules for determining whether a supply is made in a province"
Includes Example 120 (the provision of lighting and other special effects at a gala event event in Quebec is considered to be services performed at the convention centre where the gala takes place).
12 June 2014 Ruling 133588r [30 continuous-days test for use of substantial equipment]: The Charity, which was incorporated in Participating Province X, was found not to have a permanent establishment in Participating Province Y, i.e., what, by virtue of s. 2(2) of the New Harmonized Value-added Tax System Regulations, No. 2, would be a permanent establishment under Part IV of the ITA Regs if Charity’s activities were a business.
In commenting on Reg. 400(2), CRA stated:
…A fixed place of activities includes a determined or ascertained space in which there is some presence or routine over which the charity has some degree of control and in which some undertaking or operations of the charity occur. … It does not mean that the place of activities must exist for a long time or be located in a durable building; for instance, a temporary field office on a construction site could be a fixed place of activities.
…Generally, where a charity uses (rented or owned) substantial machinery or equipment in a province either for 30 continuous days or for 90 cumulative days in a 12-month period, the charity would meet [the] requirement [in Reg. 400(2)(e)].
27 June 2013 Interpretation Case No. 146556 [cardboard baling not production]: The baling of cardboard (i.e., receiving loose cardboard boxes and putting them through a baler to create bales which are easier to store and transport) “does not change the form, qualities or properties of the cardboard to such a degree that there is a new product created,” and therefore would not qualify as production.
28 March 2013 Interpretation Case No. 141341: In finding that in the situation where the operator under a joint venture is not a large business and one of the three joint venture participants is a large business, the purchase of electricity by the operator for $100,000 plus HST of $13,000 would result in the recapture of the provincial component of HST based on the proportionate (33 1/3%) interest of the large business participant, CRA stated:
…as one of the participants is a large business and the joint venture election is in effect, the operator would be deemed to be a large business in respect of purchases made on behalf of the large business participant pursuant to subsection 27(6) of the Regulations. Therefore, the amount of ITC to be recaptured would be limited to the large business participant's interest, or $2,666.64 ($8,000 [HST Provincial Component] X 33 1/3 %).
6 June 2014 Ruling 143085 [loaner vehicles are provided as part of a single supply of repair services – no RITC]: Corp A, which is a large business per s. 236.01, and s. 27 of the New Harmonized Value-Added Tax System Regulations, No.2 (the Regulations), sells and leases vehicles through its Dealership), reimburses the Dealerships for basic warranty repair services, and repairs performed under “Service Contracts,” and reimburses Dealerships for providing loaner cars (from the Dealership’s lot or, failing that, from a car rental agency) for their basic warranty customers whose vehicles cannot be driven and must be kept at the Dealership overnight.
After ruling that Corp A is not required to recapture the input tax credits with respect to the provincial part of the HST paid to the Dealerships for loaner vehicle charges included in the weekly electronic claim statements for repair services performed on vehicles, CRA stated:
[Corp A] is acquiring a single supply of a repair service that is subject to the GST/HST. The charge in respect of a loaner vehicle under either the basic warranty coverage or Service Contract is part of the consideration for the supply of the repair service. …
National Commodity Tax, Customs and Trade Section – 2014 GST/HST Questions for Revenue Canada, Q. 22 [penalty for delayed reporting of ITC and RITC] (available with membership password at http://www.cba.org/CBA/sections_NSCTS/main/GST_HST.aspx): A large registered business with a monthly reporting period acquires a specified property or service in Ontario in January of Year 1, is charged 13% HST, but does not claim the input tax credit until its return for January of Year 2, in which it also reports the corresponding recaptured input tax credit. Before noting that CRA would assess a penalty for failure to report the RITC in the February of Year 1 return, CRA noted:
[U]nder paragraph 30(1)(d) of the NHVATS No. 2 Regulations, the large business would have been required to report the RITC no later than the reporting period following the reporting period that the tax became payable… or… was paid, whichever is earlier. [T]he assumption is made that the earlier of these two reporting periods would be the February Year 1 reporting period.
GST/HST Memorandum 16-4 “Anti-avoidance Rules” 20 February 2015: General paraphrase.
RC4231 "GST/HST New Residential Rental Property Rebate" 28 March 2013
28 July 2011 Headquarters Letter Case No. 109863: Although when goods were supplied outside Canada by way of lease or licence, Division III tax generally would apply to their first importation into Canada, as described in Customs Notice N-118, generally Division III tax is not applicable if the goods (e.g., aircraft) are imported to be returned to the owner or lessor. CRA went on to note:
However, where a person other than the owner or lessor imports goods at the end of a lease, solely for return to the owner or lessor or on behalf of the owner or lessor, the importer would be considered to be the owner or lessor of the gods, such that the relief described by the [10 December 1990 Department of Finance] Press Release and Customs Notice N-118 would not be denied in this case. In addition, neither the Press Release nor Customs Notice N-118 requires that the importer of the goods be the same person that exported them.
Finally, it does not matter whether an aircraft was new or used at the time it was exported for purposes of determining whether Division III tax applies in respect of the importation of that aircraft. Further...on the importation of an aircraft classified under tariff heading 9813.00.00 or 9814.00.00...the circumstances for relieving tax on the importation..is not generally based on the identity of the importer/exporter.
13 May 2011 Case No. 123250: a company which acts as the importer of record into Canada of magazines can satisfy s. 4(b) by indicating its GST/HST registration number on the Canada Customs commercial invoice.
21 September 2011 Interpretation Case No. 125434: As part of a response to an inquiry as to the application of HST to services made by the manager (MangeCo) of an exchange-traded mutual fund trust (TrustCo), CRA stated:
The additional information requirements referred to in section 55 of the draft SLFI Regulations do not apply to an exchange-traded fund. Therefore, an exchange-traded fund calculates its provincial attribution percentage for a participating province based on the province of residency of its unitholders determined in accordance with section 6 of the draft SLFI Regulations (e.g., an individual is resident in the province in which the individual’s principal mailing address in Canada is located). An exchange-traded fund is not required to obtain additional information based on the type of unitholder.
19 October 2011 Interpretation Case No. 133414: General discussion of the circumstances in which a pension plan will be subject to the SLFI rules.
CBAO National Commodity Tax, Customs and Trade Section – 2014 GST/HST Questions for Revenue Canada, Q. 19 [purchasing debt securities not lending/meaning of trust or loan corporation] (available with membership password at http://www.cba.org/CBA/sections_NSCTS/main/GST_HST.aspx): Would a person whose sole business activity is to purchase conditional sales contracts or mortgages be considered to be a trust and loan corporation? CRA responded:
A corporation would be considered to be a trust and loan corporation or a loan corporation for GST/HST purposes if it is considered as such a corporation under the federal Trust and Loan Companies Act or an equivalent provincial statute…[and] also [may] be [so] considered… if it is treated as such under other federal statutes.
…In addition…a corporation whose principal business is the lending of money or the making of loans is a loan corporation.
… Where a third party purchases or receives an assignment of a conditional sales contract, the third party would generally not be considered to be lending money or making a loan to the assignor of the conditional sales contract.
In addition, where a person that is a mortgagee assigns a loan to a third party that the mortgagee has made to a mortgagor, the third party would not be considered to be making a loan to the mortgagor.
Set out below is an extended example illustrating the application of s. 34 of the Selected Listed Financial Institutions Attribution Method (GST/HST) Regulations the “SLFI Regs”) to an exchange-traded mutual fund trust with only one class of units (“MFT”).
MFT will be a selected listed financial institution (“SLFI”) by virtue of being a mutual fund trust with units held by residents both of HST provinces (“participating provinces”) and of non-HST (“non-participating provinces”): ETA s. 225.5(1) and ss. 9(a), 3(e), 1(10 – “distributed investment plan,” and 4 of the “SLFI Regs. Corporations, partnerships, or trusts carrying on a business, which are resident in Canada are deemed (by s. 5 of the SLFI Regs) to be resident where their principal business in Canada is located, and most other Canadian residents including individuals and RRSP are deemed to be resident where their principal mailing address in Canada (or that of their annuitant) is located.
By virtue of having only a single class of units which is publicly listed, MFT will be subject to the SLFI rules applicable to exchange-traded “non-stratified investment plans” which are “exchange-traded funds.:”
Under these rules, MFT will use the specified attribution method (“SAM”) formula (set out in ETA s. 225.2(2)) to calculate its liability for provincial HST for each participating province, and will be entitled to a refund (or reduction in its remittance obligations), to the extent that these SAM amounts are less than the provincial HST that was charged to it by its suppliers (generally at a rate of 8% given its Ontario main office) – and conversely if they are higher.
Ignoring various adjustments of a more technical nature, the SAM formula (in ETA s. 225.2(2) and s. 48 of the SLFI Regs) for computing the adjustment to provincial HST for each participating province is
(A-B) * C * (D/E) - F
A is the (federal) GST payable by MFT in the reporting period (assumed to be a year),
B is its ITCs for the year,
C is the provincial attribution percentage for that province (and assuming that MFT made a reconciliation election on RC4609 "Election or Revocation of Election To Use the Real-Time Calculation Method or the Reconciliation Method" it would use the provincial attribution percentages for its current taxation year),
D is the provincial HST rate for that province,
E is the GST rate of 5%, and
F is the provincial part of the HST that is payable for that year by MFT,
so that a negative amount under this formula would represent a refund entitlement.
Accordingly, the principal driver for the SAM formula is the provincial attribution percentage (determined in the case of a non-stratified exchange-traded fund under s. 34 of the SLFI Regs) for each participating province:
To the extent that MFT “knows” that it has unitholders resident in non-participating provinces, its computed liability will be lowered based on the relative value of the units held by those unitholders. The relative value of units is measured at different “attribution points” in the year, i.e., in the case of an exchange-traded fund, September 30 and one or more (as determined by the fund) of March 31, June 30 and December 31, with the relative share values on each attribution point then being given equal weight.
Unless it elects otherwise (under ETA s. 225.4(7)), it can treat the unitholders whom it knows to be non-resident as if they were resident in a non-participating province, thereby further lowering the effective rate. To the extent that MFT incurs expenses outside Canada (as determined in accordance with detailed rules in ETA s. 217) “in respect of” the units of the non-residents then (by virtue of a deeming rule in ETA s. 225.4(c)), it could be required under s. 218.01 to self-assess GST of 5% on the amount of such expenses. Such GST would be included in “A” of the SAM formula.
However, to the extent that the residence status of its unitholders is not known, a substantial portion of them effectively are deemed to be resident in the participating province with the highest provincial HST rate (i.e., Nova Scotia with a rate of 10%) – or if the number of “known” unitholders is below 50%, all of the “unknown” unitholders effectively are deemed to be resident in Nova Scotia.
The provisions of s. 52 of the SLFI Regs requiring most unitholders who are “investment plans” (such a s mutual fund trusts, mutual fund corporations mortgage investment corporations and pooled fund trusts) to provide their investors percentages by participating province to the SLFI in which they are invested do not apply where that SLFI is an exchange-traded fund. Conversely, it appears that there is nothing requiring that MFT “look through” SLFIs which hold its units, so that if such a SLFI is resident in a particular province under the rules in s. 5 of the SLFI Regs, that residence will govern rather than the residence of its beneficiaries or investors.
If MFT cannot determine the relevant addresses of a satisfactorily large number of its unitholders, it potentially can obtain advance approval from CRA for using a third-party report to estimate the provincial residence of its unitholders: s. 16(1) – “attribution point” - (b)(ii) of the SLFI Regs. This assumes that MFT does not make an attribution point election under s. 18(1) to determine attribution points on another basis.
“For example, if a non-stratified exchange-traded fund has a large group of objecting beneficial owners and it is unable to obtain residency information required to determine the province of residency…for these unit holders from a third party service provider, the non-stratified exchange-traded fund may apply to the Minister for authorization to use an alternative method to determine its provincial attribution percentage for a participating province. A geographical analysis report from a third party indicating the province of residence of the unit holder that does not meet the specific information requirements in section 6 of the draft SLFI Regulations [now, s. 5] could be included to support the application to use an alternative method under section 225.3... .”
In 2015 MFT incurs third-party expenses of $1 million, which are subject to federal GST of $50,000 and Ontario HST of $80,000, as all such supplies are considered to be made in Ontario. It is not entitled to ITCs for any of the GST of $50,000. It is an “annual filer,” so that it annually files the SLFI return (GST494 "Goods and Services Tax/Harmonized Sales Tax Final Return for Selected Listed Financial Institutions") and does not file “regular” (GST34) interim returns in addition. In addition to its assigned “attribution point” of September 30, MFT has selected a second attribution point of March 31.
In Scenarios 1, MFT knows on December 31, 2015 the residence of all of its unitholders on the two attribution points. In Scenarios 2 and 3 it has knowledge of the residence on those dates of unitholders holding 50% (in scenario 2) or 49.99% (in Scenario 3) of its units. The respective values of the total shareholdings held by the different categories of unitholders are shown in the Table below. For arithmetical convenience, MFT is treated as if it had a market cap of only $100. In addition it is assumed that the relative allocation of shareholdings was the same on the two attribution points. If they differed, the computations summarized below to determining the applicable percentage for the applicable participating province would be performed on each of the two dates, with those two results then averaged to determine the percentage for 2015:
|Scenario 1||Scenarios 2/3|
We assume no other relevant elements in the SAM formula. We also assume that MFT has not elected (under ETA s. 225.4(7)) to exclude non-residents from the calculation of its provincial attribution percentages. Accordingly, the units known to be held by non-residents are effectively deemed to be known to be held by residents of a non-participating province (such as Alberta).
The participating percentage for Ontario is determined in accordance with the formula:
(A1/A2) + [A3 ×(A1/A4)]
A1 is the value of the units in the particular participating province (Ontario) ($40)
A2 is the value of all the units other than those known to be non-resident units ($100 – given no s. 225.4(7) election)
A3 is the lesser of 0.10 and the ratio of the unknown units (0) to A2 (0)
A4 is to total value of the known units for Canadian residents with a known provincial residence ($100)
Accordingly, the Ontario participating percentage is
(40/100) + [0 ×(40/100)], or 40%.
The participating percentage formula for Nova Scotia (i.e., the province with the highest HST rate) is (with applying A1 to Nova Scotia rather than Ontario):
(A1/A2) + [A3 × (A1/A4)] + [(1 – A3) – (A4/A2)], namely,
As the value of the Nova Scotia units is nil, this amount is:
(0/100) + [0 × (0/100)] + [(1 – 0) – (100/100, namely, 0.
Accordingly, the Ontario HST payable by MFT for 2015 is determined by applying its Ontario participating percentage of 40% to the federal GST (net of any ITCs) of $50,000 as grossed-up for the higher Ontario provincial HST rate of 8%:
40%*8%/5%*$50,000, or $32,000
Accordingly, MFT is entitled to an HST refund of $80,000-$32,000, or $48,000.
The same Ontario participating percentage formula applies:
(A1/A2) + [A3 ×(A1/A4)]
A1 is the value of the units in the particular participating province (Ontario) ($20)
A2 is the value of all the units other than those known to be non-resident units ($100 – given no s. 225.4(7) election)
A3 is the lesser of 0.10 and the ratio of the unknown units (50) to A2 (i.e., A3 is the lesser of .10 and 50/100)
A4 is to total value of the known units for Canadian residents with a known provincial residence ($50)
Accordingly, the Ontario participating percentage is
(20/100) + [.10 ×(20/50)], or 24%.
The participating percentage formula for Nova Scotia is:
(A1/A2) + [A3 × (A1/A4)] + [(1 – A3) – (A4/A2)]
As the value of the Nova Scotia units is nil, this amount is:
(0/100) + [.10 × (0/50)] + [(1 –.10) – (50/100)], namely, 40%.
Accordingly, the Ontario HST payable by MFT for 2015 is as follows:
24%*8%/5%*$50,000, or $19,200
And the Nova Scotia HST is:
40%*10%/5%*$50,000, or $40,000
Accordingly, MFT is entitled to an HST refund of $80,000-$19,200-$40,000, or $20,800.
In this scenario, the units whose holders’ residence in fact is not known are deemed to be known to be held by Nova Scotia residents.
The same Ontario participating percentage formula applies:
(A1/A2) + [A3 ×(A1/A4)]
A1 is the value of the units in the particular participating province (Ontario) ($20)
A2 is the value of all the units other than those known to be non-resident units ($100)
A3 is the lesser of 0.10 and the ratio of the unknown units (0) to A2 (0)
A4 is to total value of the known units of Canadian residents (in contrast to Scenario 2 including unknown unitholders who are deemed to be known Nova Scotian unitholders) ($100)
Accordingly, the Ontario participating percentage is
(20/100) + [0 ×(20/100)], or 20%.
The participating percentage formula for Nova Scotia is:
(A1/A2) + [A3 × (A1/A4)] + [(1 – A3) – (A4/A2)]
As the value of the Nova Scotia units is approximately $50, this amount is:
(50/100) + [0 × (50/100)] + [(1 –0) – (100/100)], namely, 50%.
Accordingly, the Ontario HST payable by MFT for 2015 is as follows:
20%*8%/5%*$50,000, or $16,000
And the Nova Scotia HST is:
50%*9%/5%*$50,000, or $45,000
Accordingly, MFT is entitled to a refund of $80,000-$16,000-$50,000, or $14,000.
19.1.1 Provincial attribution percentage – selected province... As with other non-stratified investment plans, the last part of the formula (in the last set of square brackets of the formula) used by exchange-traded funds to calculate element A accounts for amounts that are unallocated to a particular participating province (the province of residence is unknown to the non-stratified investment plan on December 31). In general, as a result of the application of the last set of square brackets of the formula used to calculate element A, where the value of units, when information is missing, represents more than 10% of the value of units of the exchange-traded fund, the part of the formula used to calculate element A in the last set of square brackets is applied to allocate the value of these units to the selected province.
Generally, a reconciliation method election allows an investment plan to elect to use its current year provincial attribution percentage for the purposes of the SAM formula.
21 September 2011 Interpretation Case No. 125434: As part of a response to an inquiry as to the application of HST to services made by the manager (MangeCo) of an exchange-traded mutual fund trust (TrustCo), CRA stated:
The amounts that can be transferred where a tax adjustment transfer election is in effect between an investment plan and manager vary depending on whether or not a reporting entity election under section 56 of the draft SLFI Regulations is also in effect. Where a tax adjustment transfer election under section 58 and a reporting entity election under section 56 of the draft SLFI Regulations are both in effect for a reporting period, the tax adjustment transfer amount would be the positive or negative net tax adjustment amount determined by the application of the SAM formula in subsection 225.2(2). Where only the tax adjustment transfer election under section 58 of the draft SLFI Regulations is in effect for a reporting period without a reporting entity election under section 56 of the draft SLFI Regulations, the tax adjustment transfer amount allowed to be transferred to the investment plan manager would generally be limited to the provincial part of the HST with respect to supplies made by the manager to the SLFI investment plan in applying the SAM formula in subsection 225.2(2). If there is a positive net tax adjustment (i.e., an amount owed by the investment plan) this liability with respect to the provincial part of the HST of the investment plan would be an adjustment to be added when determining the net tax of the investment plan manager. If there is a negative net tax adjustment (i.e., the investment plan would be eligible for a credit), where the investment plan manager has credited that amount of the provincial part of the HST to the investment plan, this credit would be an adjustment to be deducted when determining the net tax of the investment plan manager.
17 May 2012 Ruling Case No. 137962: An independent contractor who provided credit applications on behalf of a bank was found to be thereby providing a “financial consulting service” and, therefore, was not a specified registrant.
GST Memorandum 600-2 "Special Quick Method Accounting System, Charities, Qualifying Non-Profit Organizations and Selected Public Service Bodies":
Under the Special Quick Method, the prescribed rebate percentage is applied to all GST paid on purchases, other than those purchases for which an ITC may be claimed. In practice under this method, the prescribed percentage will be applied to all purchases other than purchases of specified supplies.