Docket: 2013-227(GST)I
BETWEEN:
THREE-W CANADA INTERNATIONAL CORPORATION,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
____________________________________________________________________
Appeal
heard on September 16, 2013 at Toronto, Ontario
Before: The Honourable
Justice Patrick Boyle
Appearances:
Agent for the Appellant:
|
Sean
Hu
|
Counsel for the Respondent:
|
Darren Prevost
|
____________________________________________________________________
JUDGMENT
The appeal from the assessment made under Part IX of
the Excise Tax Act, notice of which is dated December 19, 2011, for the
reporting period from January 1, 2010 to December 31, 2010, is dismissed,
without costs, in accordance
with the attached Reasons for Judgment.
Signed at Toronto, Ontario this 20th day of September 2013.
"Patrick Boyle"
Citation: 2013 TCC 295
Date: 20130920
Docket: 2013-227(GST)I
BETWEEN:
THREE-W CANADA INTERNATIONAL CORPORATION,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Boyle J.
[1]
Three-W Canada
International Corporation (“Three-W”) is a Canadian corporation wholly owned by
Ningqun (Jason) Wang (“Jason Wang”) who resides in London, Ontario. Jason Wang is
the director of Three-W and his son, Tony Wang also works for Three-W (“Tony”).
[2]
Three-W carries on the
business of recruiting foreign students abroad for private schools in Canada and the United States. It has been assessed for not having collected and remitted GST or HST
on the services it provided to Canadian schools.
[3]
Three-W maintains an
office in Jason Wang’s London, Ontario home. This serves as its registered
office and is used by Jason Wang to attend to Three-W’s business when he is not
out of the country. Three-W does not meet with school representatives or
students at this office. E-mail correspondence is sent from the London, Ontario office to Canadian schools and to Three-W’s Chinese business partners and
agents by Mr. Jason Wang.
[4]
Jason Wang finds and
maintains client schools in Canada and the United States. He meets in person with
the Canadian schools’ representatives at their campuses. He signs written
agreements on behalf of Three-W with the Canadian schools while he is in Canada. He and Tony also meet with students at their Canadian schools at times, for example
when there are cultural adjustment issues, behaviour issues, plagiarism issues
and school related, host family placement, or visa renewal issues. The Canadian
schools spoke directly with Mr. Jason Wang regarding student problems.
[5]
While there are more
meetings when a new school is brought on board, there are more or less annual
meetings at the school.
[6]
Occasionally, Three-W
arranges for Jason Wang or Tony to meet foreign students at the airport when
they arrive in Canada. I accept the school witness’ testimony that Mr. Jason
Wang of Three-W in fact did help on visa issues as needed, at least when
renewals were necessary.
[7]
All of the Canadian
schools became clients through dealing with Mr. Jason Wang at their Canadian
schools. The Canadian schools sign written agreements with Three-W to appoint it
recruitment agent for students from China and certain other countries. Three-W
earns all of its income from the per student commissions paid by the schools.
[8]
Three-W’s Chinese
business partners also make space available to Three-W as needed. The premises
described as Three-W’s Beijing office is the office of one of its business
partners, leased and staffed by that business partner, not Three-W. The
evidence is that Three-W’s business partners were various subcontractors to
Three-W working for a part of any Three-W commissions from schools, as well as
carrying on the rest of their business independently from Three-W. Jason Wang’s
list of Three-W business partners included a very large number of immigration
consultants, education consultants, travel agencies, educational institutions
and included government related entities (which latter I assume were neither
co-venturers nor received a portion of the commission.) These organizations
were also in the student placement business, or were good sources of student
referrals. The evidence does not satisfy me that, to the extent that Three-W
had premises available in China to it, Three-W’s services were wholly provided
from there.
[9]
Three-W issues bills to
Canadian schools sent by Mr. Jason Wang from the London, Ontario office. If he
is on the road, the same bill is sent by e-mail showing a London address for Three-W
and asking for payment at the London office.
[10]
Schools either mail
their commission cheques to the London office or make a direct deposit to
Three-W’s Canadian bank account. Three-W paid its sub-agents in China who recruited or helped to recruit students from this same Canadian bank account.
[11]
While the taxpayer may
take the position that much or even most of its revenue-generating activities
takes place in China, the evidence is clear that its student recruitment
services were carried on in part in Canada. This is the case even after
allowing for the fact that, although issuing bills and receiving payment may be
an integral part of carrying on business in Canada, it does not necessarily
constitute part of the activities of performing the service sold to the
Canadian schools being that of student recruitment. Meeting with the students
in Canada, and meeting with schools in Canada as part of an ongoing student
recruitment contract to be renewed, with commissions payable for each term the
student continues to be enrolled, is actually a very important part of
performing the service since it is the Canadian schools that are Three-W’s
paying customers and no commission is paid if students do not return the
following semester for any reason whatever. The appeal must therefore be
dismissed. Three-W is in a services business which services include the
Canadian activities of servicing the schools and students in Canada.
[12]
I can not accept the
taxpayer’s submission that the only service which Three-W was paid to provide
was that of recruiting students and it was entitled to its commissions once the
students were registered regardless. It is one of the taxpayer’s positions that,
when it later attended to its school customers and its placed students in Canada, it was providing a separate service of keeping customers satisfied and happy. Respondent’s
counsel referred to this as “after-service service” playing on the term after-sales
service. The oft-quoted decision of this Court in O.A. Brown LTD. v. Canada,
[1995] T.C.J. No. 678 deals with the issue of when there is a single supply
involving multiple services and when there are separate supplies (in paragraphs
21 and 29.)
The post-initial enrolment services provided by Three-W in Canada to the schools and the students is an integral part of the overall supply of its student
recruitment services for a single fee. They can not be regarded as separate
supplies when they are an integral component of the overall supply.
[13]
The service is not
provided wholly outside Canada for purposes of paragraph 142(1)(g). The
appeal is dismissed.
Signed at Toronto, Ontario this 20th day of September 2013.
"Patrick Boyle"
CITATION: 2013 TCC 295
COURT FILE NO.: 2011-227(GST)I
STYLE OF CAUSE: THREE-W CANADA INTERNATIONAL
CORPORATION AND H.M.Q.
PLACE OF HEARING: Toronto, Ontario
DATE OF HEARING: September 16, 2013
REASONS FOR JUDGMENT BY: The
Honourable Justice Patrick Boyle
DATE OF JUDGMENT: September 20, 2013
APPEARANCES:
Agent for the
Appellant:
|
Sean Hu
|
Counsel for the
Respondent:
|
Darren Prevost
|
COUNSEL OF RECORD:
For the Appellant:
Name:
Firm:
For the
Respondent: William F. Pentney
Deputy
Attorney General of Canada
Ottawa,
Canada