CRA finds that Incoterms did not govern the place of delivery of goods for ETA purposes

Company B, a resident registrant, agreed to sell goods (the “Property”) to Company C, an unregistered non-resident, using the Incoterms® 2010 DAP Port of Liverpool, U.K. so that delivery and title transfer was to occur at the U.K. destination – although the parties agreed that Company C was to indemnify Company B if the Property were lost or damaged in transit. The Property was then loaded onto Company C’s vessel at the Port of Halifax and immediately exported.

CRA indicated that it appeared that, because Company C acquired physical possession of the Property in Canada pursuant to the terms of the agreement, ETA s. 142(2)(a) (which deems a supply of tangible personal property to be made outside Canada if it is, or is to be, delivered or made available outside Canada) did not apply. This answer does not appear to turn on the indemnity because CRA went on to indicate that its answer would not change if the indemnity instead had been provided by an affiliate of Company C.

This answer illustrates that CRA will not always let the determination of the place of supply be governed by the applicable Incoterm.

Similarly, CRA indicated that, as the delivery of the Property to Company C appeared to be in Canada, zero-rating also would not be available for the preceding supply of the Property by a Canadian vendor to Company B.

Neal Armstrong. Summaries of 8 March 2018 CBA Commodity Tax Roundtable, Q.9 under s. 142(2)(a) and Sched. VI, Pt. V, s. 1.