19 October 2007 GST/HST Interpretation 93132 - FCTIP Rebate for Accommodation

Please note that the following document, although correct at the time of issue, may not represent the current position of the Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence.

Dear XXXXX:

Thank you for your fax XXXXX concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to tour packages under the new Foreign Convention and Tour Incentive Program (FCTIP).

We understand that XXXXX provides customized packages and that you have several questions on the implementation of the FCTIP, specifically with respect to the rebate of GST/HST on tour packages. You have provided two examples of customized packages sold by XXXXX.

Interpretation Requested

1. You understand that under the previous Visitor Rebate Program (VRP), a tour package consisted of eligible accommodation plus any other component (meals, attractions, theatre tickets, etc.) and that the new FCTIP has introduced the concept of property and services. You also understand that a tour package must include eligible accommodation plus at least one service.

a) Would a tour package that included only accommodation and property qualify as an eligible tour package for the rebate?

b) You have provided a list of possible components that may be included in a tour package and you would like to know if such components would be classified as either property or services.

2. With respect to eligible accommodation, you would like to know the following:

a) When calculating the rebate on a tour package, why would the rebate need to be pro-rated to account for ineligible accommodation such as accommodation outside Canada given that GST/HST would not be charged on accommodation outside Canada in the first place?

b) What other types of accommodation besides accommodation outside Canada and accommodation on self-propelled vehicles, are ineligible?

3. If a Canadian tour operator buys a package from another Canadian tour operator and resells this package to a foreign tour operator for sale to non-residents, is there a means for either of the Canadian tour operators to handle the GST rebate on the package on behalf of the foreign tour operator?

4. From Info Sheet GI-032, Rebates for Non-Residents Purchasing Tour Packages you understand that qualifying non-residents can receive a rebate by being paid or credited the amount directly by a registrant (e.g., a Canadian tour operator) provided certain criteria are met.

a) Who are qualifying non-residents?

b) What criteria must be met for the rebate to be credited by a Canadian registrant?

c) When Canadian registrants credit the rebate for tour packages to foreign tour operators, does a separate rebate application with accompanying paperwork need to be completed for each tour, or can the Canadian registrants continue to deduct the amount credited through input tax credits?

5. When a third party files a rebate application on behalf of a foreign tour operator:

a) What documentation would be required as proof that the foreign tour operator resold the accommodation as part of a package to non-residents?

b) What type of agreement is acceptable for transferring the right to the rebate to the third party? Other than a Power of Attorney, will the former 'Assignment of right to rebate' form from the previous VRP be accepted?

Interpretation Given

The FCTIP, a new rebate program that replaces the VRP, came into effect April 1, 2007. The FCTIP continues to provide GST/HST relief to non-residents for:

•   all of the GST/HST paid on accommodation sold to non-resident tour operators that are not registered for the GST/HST and that include the accommodation in eligible tour packages for non-residents, and

•   generally 50% of the GST/HST paid on eligible tour packages that are sold to non-resident consumers and non-resident organizations or businesses that are not registered for the GST/HST, including tour operators.

It also continues to provide relief for certain properties and/or services used in the course of conventions held in Canada.

We have recently published GST/HST Notice No. 221, Questions and Answers on the Cancellation of the Visitor Rebate Program and the Implementation of the New Foreign Convention and Tour Incentive Program (the Notice), which is a comprehensive series of questions and answers on the elimination of the VRP and the introduction of the new FCTIP. A copy has been enclosed for your convenience. Reference to the relevant questions and answers from the Notice will be made where applicable in this interpretation.

Definition of tour package

Question 1(a)

The definition of a tour package is the same under the new FCTIP as it was under the previous VRP.

A tour package for GST/HST purposes is:

"a combination of two or more services, or of property and services, that includes transportation services, accommodation, a right to use a campground or trailer park, or guide or interpreter services, where the property and services are supplied together for an all-inclusive price, but does not include a tour package that includes a convention facility or related convention supplies".

Because of this definition, a tour package cannot consist solely of property for GST/HST purposes. Therefore, a package that includes accommodation, which is property, and other property, is not a tour package for GST/HST purposes.

Furthermore, for a tour package to be eligible for a GST/HST rebate under the FCTIP it must include short-term and/or camping accommodation in Canada. Given that short-term and/or camping accommodation in Canada is property, the package must also include at least one service in order to be an eligible tour package under the FCTIP.

The definition of tour package and related terms as well as examples can be found in the Notice starting with Question 3.1.

Characterization of items as property or service

Question 1(b)

In order to properly characterize the items in the list that you have provided, it is important to know the context in which they are provided (i.e., the package that the item is a part of). To look at the items in isolation would be misleading.

Instead, we offer the following comments in regard to the two example packages that you have provided.

The example packages are group packages of a type that you have referred to as "XXXXX". Included in XXXXX of the first package are XXXXX fees for XXXXX sports matches in addition to hotel accommodation, meals, guide services and transportation. The second package example includes XXXXX fees for XXXXX concerts as well as hotel accommodation, meals, guide services, admissions to unspecified attractions and activities and porterage.

It is our opinion that these packages are not eligible tour packages for the purposes of the FCTIP, but rather are supplies of a service of arranging for the sports games and concerts, respectively. The additional components (hotel accommodation, meals, etc.) are a part of the supply of the service of arranging for the sports games and concerts.

We would be pleased to review and offer comments with respect to any other specific packages that you may have questions about. Also, examples of eligible and not eligible tour packages can be found in the Notice starting at Question 3.8.

Pro-rating the rebate amount

Question 2(a)

Under the general calculation method, the amount of the rebate for eligible tour packages under the FCTIP is determined by the formula:

C/D X E/2

where

C is the total number of nights of short-term and/or camping accommodation in Canada included in the eligible tour package;

D is the total number of nights the non-resident individual to whom the accommodation is made available spends in Canada as part of the tour package. This includes ineligible accommodation such as shelter on a boat or a train; and

E is the GST/HST paid on the purchase of the eligible tour package.

The rebate is pro-rated to account for ineligible accommodation inside Canada that is part of the tour package (D in the above formula). More information including examples on calculating the rebate amount can be found in the Notice starting at Question 6.1.

Eligible accommodation

Question 2(b)

"Eligible" accommodation for the purposes of the FCTIP is short-term accommodation and camping accommodation.

Short-term accommodation means the rental of an accommodation unit in Canada as a place of lodging for an individual who will occupy it continuously for a period of less than one month and that costs more than $20 per night.

Specifically included in the definition for rebate purposes under the FCTIP is any type of overnight shelter that is part of a tour package that also includes food and the services of a guide. Specifically excluded is shelter on a train, trailer, boat or structure that is, or could be, self-propelled and the rental of an accommodation unit under a timeshare arrangement.

Camping accommodation means a campsite at a campground or recreational trailer park in Canada that is rented continuously as a place of lodging for periods of less than one month for the same individual. It includes water, electricity and waste disposal services if accessed by means of an outlet or hook-up at the campsite, and if supplied with the campsite.

Accommodation that does not meet the definition of either short-term accommodation or camping accommodation, such as accommodation outside of Canada, is not "eligible" accommodation for rebate purposes under the FCTIP. These definitions are also provided in the answers to Questions 3.3 and 3.4 of the Notice.

Resale of tour packages to non-resident tour operators

Question 3

A Canadian tour operator that sells a tour package to a non-resident tour operator will charge GST/HST on the sale. However, the Canadian tour operator will be able to pay or credit the rebate amount to a non-resident non-registered tour operator if the non-resident tour operator is a qualifying non-resident, the package is an eligible tour package, and all other necessary conditions are met.

Paying or crediting the rebate amount

Question 4(a)

Under the new FCTIP, non-residents, such as consumers and non-registered businesses, including tour operators, that purchase an eligible tour package are able to get a rebate of up to 50% of the GST/HST paid on an eligible tour package.

These non-residents can receive the rebate by filing a rebate claim with the Canada Revenue Agency (CRA) or qualifying non-residents can be paid or credited the amount by a GST/HST registrant such as a Canadian tour operator.

As indicated in Question 7.1 of the Notice, a qualifying non-resident is a non-resident that would be entitled to apply to the CRA for a GST/HST rebate under the new FCTIP if the person had paid the GST/HST and met all of the requirements for the rebate.

The answer to Question 4.2 of the Notice contains the requirements for a non-resident, non-registered tour operator and the answer to Question 4.3 contains the requirements for a non-resident consumer or non-resident, non-registered business that is not a tour operator.

Question 4(b)

In addition to meeting the requirements of a qualifying non-resident, certain conditions must be met by non-resident consumers or non-resident, non-registered businesses that are not tour operators for a GST/HST registrant such as a Canadian tour operator to pay or credit an amount of the rebate under the FCTIP. These conditions are set out in the answer to Question 7.3 of the Notice.

Question 4(c)

When a registrant decides to pay or credit an amount of the GST/HST rebate on an eligible tour package under the new FCTIP to a qualifying non-resident, the registrant must show on the invoice the full amount of GST/HST payable and the amount it has paid or credited the non-resident for the rebate.

The registrant must account for the full amount of GST/HST in its net tax by reporting the amount on line 103 of its GST/HST return and will recover the amount it has paid or credited by taking a deduction on line 107 of its GST/HST return.

Registrants are also required to file the Form GST106, Schedule 2 – Information on Claims Paid or Credited for Foreign Conventions and Tour Packages in respect of any eligible tour package that is sold for which:

•   the GST/HST charged on the eligible tour package becomes payable after March 2007; and

•   the registrant claimed a deduction in its net tax for an amount paid or credited to a non-resident after March 2007.

A separate rebate application is not filed for each tour package when registrants pay or credit an amount of the rebate to non-residents. Additional information on paying or crediting the rebate can be found in the Notice starting at Question 7.1.

Filing a rebate claim on behalf of a non-resident

Question 5(a)

Several eligibility requirements must be met for non-resident non-registered tour operators to claim a rebate under the FCTIP for the GST/HST paid for short-term and/or camping accommodation. These requirements are listed in the answer to Question 9.2 of the Notice. One of the requirements is that the tour operator must have included the accommodation in an eligible tour package that was sold to another non-resident.

Documentation will need to be provided with a rebate claim under the FCTIP to prove that the eligibility requirements have been met. Information on the required documents can be found in the answer to Question 9.3 of the Notice.

Question 5(b)

Questions 10.1 to 10.12 of the Notice deal with a person filing a rebate claim on behalf of a qualifying non-resident. Such an agreement is a separate, private arrangement between the non-resident and the other person and is not an "assignment of a right" to the rebate. There is no assignment of rights to rebates under the FCTIP and therefore a form of this type would not be accepted.

The foregoing comments represent our general views with respect to the subject matter of your request. These comments are not rulings and, in accordance with the guidelines set out in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service, do not bind the CRA with respect to a particular situation. Future changes to the ETA, regulations, or our interpretative policy could affect this interpretation.

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at XXXXX. Should you have additional questions on the interpretation and application of GST/HST, please contact a GST/HST Rulings officer at 1-800-959-8287.

Yours truly,

XXXXX
Services and Intangibles Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate

2007/10/19 — RITS 93865 — Foreign Convention and Tour Incentive Program