Telephone #: (613) 954-8585
Fax #: (613) 990-1233
File #: 11680-7(dc)
Para. 142(2)(b) & ss. 143(1)
XXXXX July 23, 1996
Dear Sir:
I refer to your request for an application ruling dated April 2, 1996, concerning the application of the Goods and Services Tax (GST) to the supply of tangible personal property otherwise than by way of sale. I apologise for the delay in responding to your request.
In accordance with GST Memoranda Series Section 1.4, an application ruling can only be issued where reference to a clearly defined fact situation of a particular registrant can be made. As your request is based on a hypothetical set of circumstances and not in respect to a particular registrant, an application ruling cannot be issued at this time. Alternatively, I am pleased to issue you an interpretation which will elaborate on how the GST applies to the questions raised in your letter.
According to the information at hand, you are of the opinion that a supply of tangible personal property (TPP), by way of a lease, made by an unregistered non-resident leasing company (Lease Co.) to a Canadian company (Can Co.) five years ago is a supply deemed to be made outside Canada pursuant to subsection 143(1) of the Excise Tax Act (Act), whereby any payment made by Can Co. under the lease remains not subject to the GST, even though Lease Co. has become registered for GST purposes during the course of the lease.
The lease agreement was accepted by Lease Co. at its head office in the U.S. The TPP was delivered by Lease Co. to Can Co. in Canada.
I assume that the TPP was delivered by lease Co. from outside Canada.
Pursuant to paragraph 142(1)(b) of the Act, a supply of TPP, otherwise than by way of sale, shall be deemed to be made in Canada if possession or use of the property is given or made available in Canada to the recipient of the supply. Paragraph 142(2)(b) is the converse rule.
Under GST Policy Statement 193, for purposes of paragraphs 142(1)(b) and 142(2)(b), the Department considers that the place where "possession or use of the TPP is given or made available" refers to the place where:
(i) the recipient of the supply of the TPP obtains physical possession of the property at the time of the supply is made, or
(ii) in situations where physical possession of the TPP is not obtained at the time the supply is made, the recipient may obtain or have access to the property.
The place where possession or use of the TPP is given or made available can be determined based on the location of the property at the time the supply is made (i.e., at the time the agreement is entered into). Generally, the location can be determined by reference to the terms of the agreement (e.g., lease or rental agreement).
Subsection 133(1) of the Act provides that where an agreement is entered into to provide property, the entering into the agreement shall be deemed to be a supply of the property made at the time the agreement is entered into.
Therefore, the TPP supplied by Lease Co. can be said to have been made available to Can Co. outside Canada; at the time the lease agreement was accepted (entered into), at Lease Co.'s head office in the U.S. Accordingly, paragraph 142(2)(b) of the Act would apply, whereby the payments made by Can Co., under the lease agreement, would not be subject to the GST, under Division II tax.
Should Lease Co. become registered for GST purposes over the course of the lease agreement this would not impact on the supplies made by Lease Co. while an unregistered non-resident. Specifically, the payment made by Can Co. would remain not subject to the GST.
Under the circumstances I do not believe that it is necessary to comment on the application of subsection 143(1) or on the issue of carrying on business in Canada as these issues now become moot.
This interpretation is based upon our understanding of the Act and regulations thereunder in their present form. The interpretation does not take into account the effects of any proposed or future amendments thereto or future changes in interpretation.
While we trust our comments are of assistance to you, we would advise that they do not constitute a GST ruling and are, therefore, not binding upon the Department in respect of any particular fact situations.
Should you require further information concerning the above, please contact Mr. Randy Nanner at (613) 952-8810 or Mr. Daniel Chamaillard at (613) 957-8220.
Yours sincerely,
H.L. Jones
Director
General Applications Division
GST Rulings and Interpretations Directorate
Policy and Legislation Branch
GAD#: 2855(GEN)
| c.c.: |
R. Nanner
D. Chamaillard |
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