Dow & Duggan – Tax Court of Canada finds that CRA does not have the discretion to stipulate the documentary requirements for direct-shipment export zero-rating

Sched. VI, Pt. V. s. 1 generally zero-rates sales made in Canada to a recipient who promptly exports the goods, whereas Sched. VI, Pt. V. s. 12 may inter alia zero-rate sales made in Canada to a non-resident where the supplier itself ships the goods out of Canada. Unlike s. 1, s. 12 does not state a requirement that the supplier “maintains evidence satisfactory to the Minister of the exportation of the property by the recipient.”

Wong J noted:

This Court has previously held that the evidentiary threshold in section 1 of Schedule VI, Part V means: (1) that the Minister has the discretion to set the standard as to what evidence will satisfy her for the purposes of zero-rating under that section; and (2) this Court should not intervene unless the Minister commits a reviewable error in exercising her discretion… .

She found that the Minister did not have the same discretionary authority under s. 12, although she indicated that it would be “reasonable to refer to the Minister’s [published] list of satisfactory evidence for qualifying under section 1, as a guideline for section 12.” However, she found that most of the supplies before her were not zero-rated in the absence of satisfactory documentary support in any form.

Neal Armstrong. Summaries of Dow & Duggan Log Homes International (1993) Limited v. The Queen, 2019 TCC 280 under Sched. VI, Pt. V. s. 12 and s. 168(9).