CRA finds that a GST/HST-registered non-resident marketer using services of a Canadian subcontractor was thereby making supplies in Canada

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. After referring to the rule in ETA s. 142(1)(g), which deems a supply of a service to be made in Canada if the service is performed in whole or in part in Canada, CRA stated:

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).

Accordingly, NR should charge GST/HST on its commissions.

CRA went on to indicate that the services supplied by RC appeared to be zero-rated. (Note that the exclusion from zero-rating in Sched. VI, Pt. V, s. 7(f) applies to “a service of … soliciting orders for supplies by or to the [non-resident recipient, i.e., NR]” whereas here the solicitation was for supplies by the Canadian customer of NR.)

Neal Armstrong. Summaries of 28 February 2019 CBA Roundtable, Q.8 under ETA s. 142(1)(g) and Sched. VI, Pt. V, s. 7(f).