GST/HST Info Sheet GI-170 "Charter Flights Supplied to Third-Party Charterers"May 2015

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.

Example 5

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.

"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.

Continuous 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

...Example 4

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.

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.

Distinction between passenger transportation service to the public, who are independent of the operator, and lease of aircraft

Passenger Transportation Service

For GST/HST purposes, the 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 1

A potential third-party charterer requests a charter flight from a carrier for travel from Calgary, Alberta to St. John’s, Newfoundland and Labrador. The carrier provides a quote outlining the details of the charter flight, specifying the type of aircraft and capacity, the date and time for departure and expected arrival, the airports where the passengers will embark and disembark the aircraft, the expected flight time, and the cost for the charter flight. The third-party charterer accepts the quote, and is issued an itinerary with more specific details, including the aircraft and the crew, the passenger boarding locations, the specific dates and times of the charter flight, and the expected fuel consumption.

The supply of the charter flight is a passenger transportation service for GST/HST purposes because:

• the aircraft is a mode of conveyance;
• the operator of the conveyance (i.e., the carrier) is independent of the travellers; and
• the charter flight has an itinerary.