28 February 2019 CBA Roundtable, Q.8

A registered non-resident (NR) does not itself have any presence in Canada but uses a resident (sub)contractor (RC) to provide marketing and soliciting services (in the credit card processing line of business) to a resident Canadian company in consideration for commissions. There is no formal agency agreement in place between NR and RC. CRA stated:

Section 7 of Part V of Schedule VI to the ETA zero-rates the supply of a service made in Canada to a non-resident person unless the service is specifically excluded by paragraphs 7(a) through 7(h) of that section. Based on the limited information provided, it appears that the supplies of services made by RC to NR would be zero-rated pursuant to section 7.

A non-resident registered supplier (NR) of marketing and solicitation services (in the credit card processing line of business) contracts with a resident supplier (CanSupplier) that for every merchant signed up with the service, NR will receive a commission. NR then contracts with a resident contractor (RC) to perform the services in exchange for a portion of NR’s commission from CanSupplier. Although NR has no physical presence in Canada and performs no services there, RC performs services in Canada under its contract with NR. There is no formal agency agreement in place between them.

Is NR providing its services exclusively outside Canada for purposes of s. 142(2)? CRA responded:

Based on the limited information provided, the subcontracted services performed by RC in Canada would result in the supplies of the services by NR being made in Canada pursuant to paragraph 142(1)(g).