[OFFICIAL ENGLISH TRANSLATION]
Date: 20010704
Docket: 1999-4070(GST)I
BETWEEN:
CLUB TOUR SAT INC.,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Lamarre Proulx, J.T.C.C.
[1] This is an appeal under the
informal procedure from an assessment dated April 18, 1997,
concerning the period from November 1, 1996, to November 30,
1996, and bearing number 868945.
[2] The question at issue concerns
subsections 252.1(8) and 234(2) of the Excise Tax Act
(the "Act"). Subsection 252.1(8) of the Act
concerns the rebate claimed by the registrant as an amount paid
or credited to a non-resident recipient in respect of a supply of
short-term accommodation or a tour package that includes such
accommodation. This provision is found in Division VI, Rebates.
Subsection 234(2) of the Act provides for the
deduction of the rebate given by the registrant. That provision
is found in subdivision V(b), Remittance of tax.
[3] Marc Robillard, an accountant,
testified for the appellant. The appellant supplies
travel-related services in Canada, including short-term
accommodation to non-resident clients. The business has a
catalogue of the services it offers, and foreign tour organizers
can combine them as they wish. In addition to short-term
accommodation, there are such services as complete
transportation, meals, admissions, guided tours, sports and
cultural activities and transportation to the airport. The
clients are agencies, individuals and groups.
[4] Since the dispute concerns the
period from 1993 to 1996, when Mr. Robillard was not the
accountant, he called Ms. G'Sell to testify. She was the
president and sole shareholder of Tour Sat from 1993 to 1996. The
business was sold in 1997. Ms. G'Sell explained that 10% of
what the appellant sold was accommodations alone. Next,
approximately 50% was all-inclusive tour packages, the price of
which did not change. Next came tour packages organized on
request, the price of which varied depending on the supplies or
on the number of passengers.
[5] Mr. Robillard explained that the
appellant had gone over its invoices since 1993 and had extracted
the portion dealing with short-term accommodations. It now claims
only a deduction for the tax relating to this supply and nothing
for the remainder. According to the appellant's calculations, the
deduction would be 8% or 9% over what was claimed on the tax
payable in respect of the tour package. Mr. Robillard argued that
a person who supplies a greater percentage of short-term
accommodation is penalized in comparison to a person who
primarily supplies activities instead. He would prefer to be able
to offer a credit for 100% of the tax payable on the short-term
accommodation alone and abandon the remainder of the credit.
[6] Mr. Robillard admitted that the
invoices in question were prepared on the basis of a lump sum
(Exhibit I-6). The calculation of this lump sum took the various
components, including short-term accommodation, into account.
Exhibit A-1 is such a document and shows the price of the
various components, but this is not the document that is sent to
the client. Exhibit I-6 is the invoice sent to the client.
[7] Luc Potvin testified for the
respondent. In March 1997, he was an auditor with Revenu
Québec. He explained that section 163 provides that a
supplier must separate the supply of a tour package into taxable
and non-taxable portions. Subsection 232(4) of the
Act allows an agent who has exercised the privilege
granted him under subsection 252.1(8) of the Act to
deduct, in computing the net tax, the amount of the rebate to
which the non-resident would have been entitled. A reference to
the rebate must be made on the invoice. Mr. Potvin explained
that the appellant had made its entries correctly in respect of
the invoices for the tour packages. It defined the taxable
portion of the supplies, charged the seven percent tax and
credited 50% of the tax to the non-resident recipient, since the
number of bednights in Canada was always equal to the total
number of bednights indicated on the tour package. In connection
with the invoices for short-term accommodation alone, the
appellant gave a 100% rebate for the tax.
[8] Along with its claim for the
period from November 1 to November 30, 1996, the appellant
included claims in respect of previous periods, that is, those
from March 1, 1993, to September 1, 1996, for a total amount of
$75,212. The Minister disallowed the deduction because the
appellant had invoiced the non-resident client on a tour package
basis. Mr. Potvin explained that a tour package is a trip for
which the client pays one amount for two or more supplies, one of
which is short-term accommodation. Moreover, the additional
portion claimed would not have been credited to the client.
[9] Counsel for the respondent
submitted that the auditor had not seen anything that would have
allowed him to conclude that the appellant's claims would be
reflected in the invoices in question. In fact, he confirmed that
the price for the services was a lump sum and that the method
used should be the 50% method.
Finding
[10] Subsection 252.1(8) of the
Act provides that a registrant may claim the deduction
under subsection 234(2) of the Act as an amount paid or
credited to a recipient. Subsection 234(2) of the Act
provides that a registrant who credits a person with an amount as
a rebate may deduct this amount in computing his net tax.
[11] For the period in question,
subsections 252.1(8) and 234(2) of the Act read as
follows:
Rebate paid by registrant
(8) Where
(a) a
registrant makes a supply of short-term accommodation or a tour
package that includes short-term accommodation to a non-resident
recipient who is the consumer of the accommodation or who is
acquiring the accommodation or tour package for supply in the
ordinary course of a business of the recipient of making such
supplies,
(b) the
registrant pays to, or credits in favour of, the recipient an
amount on account of a rebate under subsection (2) or (3) to
which the recipient would be entitled in respect of the
accommodation if the recipient had paid the tax in respect of the
supply and had satisfied the conditions of section 252.2,
(c) the
amount paid or credited is equal to
(i) in the
case of a supply of a tour package, the amount that would be
determined in respect of the supply under paragraph
(5)(b), and
(ii) in the case of
a supply of short-term accommodation that is not part of a tour
package, the tax paid by the recipient in respect of the supply,
and
(d) in the
case of a rebate under subsection (2),
(i) payment of
the consideration for the supply is made at a place outside
Canada at which the registrant, or an agent of the registrant, is
conducting business, or
(ii) where the
accommodation is supplied as part of a tour package that includes
other property or services (other than meals or property or
services that are provided or rendered by the person who provides
the accommodation and in connection with it), a deposit of at
least 20% of the total consideration for the tour package is
paid
(A)
by the recipient to the registrant at least 14 days before the
first day on which any short-term accommodation included in the
tour package is made available under the agreement for the supply
of the tour package, and
(B) by means of a credit
card or charge card issued by, or a cheque, draft or other bill
of exchange drawn on an account outside Canada with, a
non-resident institution that is a bank, cooperative credit
society, trust company or similar institution,
the registrant may claim a deduction under subsection 234(2)
in respect of the amount paid or credited, and the recipient is
not entitled to any rebate or to any refund or remission of tax
in respect of the accommodation.
Deduction for rebate in respect of supplies to
non-residents
234(2) Where, in the circumstances described in
subsection 252(3), 252.1(8) or 252.4(2) or (4), a registrant pays
to, or credits in favour of, a person an amount on account of a
rebate referred to therein, the registrant may deduct the amount
in determining the net tax of the registrant for
(a) the
reporting period of the registrant that includes the particular
day that is the later of the last day on which any tax to which
the rebate relates became payable and the day on which the amount
is paid or credited; or
(b) any
subsequent reporting period of the registrant for which a return
is filed within one year after the particular day.
[12] Paragraph 252.1(8)(c) of the
Act clearly explains what amount may be paid or credited
to a person. In the case of a supply of a tour package that
includes short-term accommodation, it is the amount that would be
determined under (5)(b). In the case of a supply of
short-term accommodation that is not part of a tour package, it
is the entire tax in respect of the supply.
[13] Subsection 252.1(1) refers to
subsection 163(3) of the Act for the meaning of "tour
package". In subsection 163(3) of the Act, "tour
package" is defined as follows:
means 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.
[14] Paragraph 252.1(5)(b) read
as follows:
Tax paid in respect of tour package
(5) Where a person
files an application in which a rebate under subsection (2) or
(3) is claimed in respect of one or more supplies of tour
packages that include short-term accommodation and in respect of
which tax was paid by the person, for the purposes of that
subsection, the amount of tax paid in respect of the
accommodation shall, for each of those tour packages, be deemed
to be equal to
...
(b) in any
other case, the amount determined by the formula
B x D
C 2
where
B is the
total number of nights for which short-term accommodation
included in that tour package is made available under the
agreement for the supply of that tour package,
C is the
number of nights the non-resident individual to whom the
accommodation is made available spends in Canada during the
period commencing on the earlier of the first day on which
over-night lodging included in the tour package is made available
to the individual and the first day any overnight transportation
service included in the tour package is rendered to the
individual and ending on the later of the last day such lodging
is made available to the individual and the last day any such
transportation service is rendered to the individual, and
D is the tax
paid by the person in respect of the supply of that tour
package.
[15] Thus, when the number of nights for
which the short-term accommodation was made available to an
individual is equal to the number of nights spent in Canada, the
amount that may be paid or credited to the person is equal to 50%
of the tax payable in respect of the supply of the tour
package.
[16] The Statement of Interpretative
Policy P-089 submitted to me at the hearing clearly
explains what a supplier of tour packages may do in terms of the
Act. This statement is, in my opinion, after reviewing the
legislative provisions in question, consistent with the
Act:
This statement of interpretative policy will discuss the
calculation of the non-resident rebate in respect of short-term
accommodation included in a tour package where the rebate is paid
or credited to non-residents by registered suppliers of tour
packages.
The issue is to clarify whether registered suppliers of tour
packages that include accommodation have the option to credit to
their non-resident clients an amount of rebate equal to the tax
on the actual value of the accommodation portion of the tour
package or 50% of GST on the tour package.
The policy is that registered suppliers may only credit to
their non-resident clients 50% of GST payable on a tour package
regardless of the actual value of the accommodation in the tour
package.
A tour package means a combination of two or more travel
services or of property and services provided at an all inclusive
price (i.e. the supplier is not providing the services
separately). These could include transportation, accommodation,
meals, sightseeing excursions or the services of a guide. For the
purpose of section 163, a tour package does not necessarily have
to include accommodation or transportation services. However, for
the purpose of the non-resident rebate, a tour package must
include eligible short-term accommodation.
However, in situations where the short-term accommodation and
the other travel services are not sold at an all inclusive price
(i.e. each of the property and services listed on the invoice can
be purchased separately), it is not a supply of a tour package
and the registered supplier cannot use the 50% rule. He/she may
only credit 7% of the actual value of the accommodation as shown
on the invoice to the non-residents.
[17] The invoices in question in the case at
bar are consistent with the definition of tour package. They were
established on the basis of a lump sum price for a combination of
travel services. Since these services included short-term
accommodation, the amount that may be credited to the
non-resident recipient is 50% of the tax payable on the entire
tour package. Furthermore, subsection 234(2) of the
Act explicitly provides that what may be claimed as a
deduction in computing the net tax is the amount paid or credited
to a person, nothing more. The amounts claimed as a deduction by
the appellant were neither paid nor credited to non-resident
clients.
[18] Therefore, the appeal is dismissed.
Signed at Ottawa, Canada, this 4th day of July 2001.
J.T.C.C.
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