Please note that the following document, although correct at the time of issue, may not represent the current position of the Canada Revenue Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence du revenu du Canada.
Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 15th floor
320 Queen Street
Ottawa ON K1A 0L5
June 23, 2015
[Addressee]
Case Number: 144489
Business Number: […]
Dear [Client]:
Subject: GST/HST RULING AND INTERPRETATION
Resident in a province for GST/HST [PSB Rebate] purposes
Thank you for your [correspondence] of [mm/dd/yyyy], concerning a request to be deemed a resident in a province for purposes of the public service body (PSB) rebate. We apologize for the delay in providing a response.
The HST applies in the participating provinces at the following rates: 13% in Ontario, New Brunswick and Newfoundland and Labrador, 14% in Prince Edward Island and 15% in Nova Scotia. The GST applies in the rest of Canada at the rate of 5%.
All legislative references are to the Excise Tax Act (ETA) unless otherwise specified.
STATEMENT OF FACTS
Based on your [correspondence] and the terms of the agreement between […] (“the Association”) and […][its Members], we understand that:
1. The Association is a registered charity for income tax purposes, effective [mm/dd/yyyy]. The Association is a charity for ETA purposes.
2. As per Industry Canada website, the Association has been incorporated pursuant to the laws of Canada under Canada Corporations Act - Part II since [mm/dd/yyyy]. The Association was continued under the Canada Non-for-profit Corporations Act on [mm/dd/yyyy].
3. The Association is not incorporated or continued pursuant to the laws of any province.
4. The Association has one office in […][City 1, Province 1] and one employee working from […][their] home in […][City 2, Province 2].
5. In its national capacity, the Association works in conjunction with […] (“Members”) across the country. The Members are: […][Description of Members]
6. A “Member Agreement”, […] in the Association’s correspondence, was signed by the Association and the Members on [mm/dd/yyyy].
7. The Member Agreement is intended to outline the duties, obligations and role of the Parties relative to one another within the context of the Parties’ commitment to work together and to maintain a “spirit of cooperation”.
8. According to the Member Agreement:
a. […][Description of Members’ territories]
b. […][More details about Members’ territories]
c. The Association shall: […][Description of the Association’s Duties and Responsibilities]
d. The Members shall each: […][Description of Members’ Duties and Responsibilities]
e. […][Description of the terms and conditions upon which the Agreement will terminate]
9. An Amended Member Agreement was signed on [mm/dd/yyyy] indicating […][a new Member in the Association and the dissolution of an another Member of the Association].
10. […], you indicated that in completing its GST/HST Public Service Bodies rebate claims the Association typically shows the rebate amount due from the provincial part of HST paid in [Province 2] in the [Province 2] section of the form GST284, Application for GST/HST Public Service Bodies' Rebate and Self-Government Refund; the same approach is followed in claiming the provincial part of the HST paid […][in other participating provinces].
11. In [mm/yyyy] the Association was informed that it cannot claim the provincial part of the HST incurred in […][some of the participating provinces], since it is not a resident in those provinces. The Association was advised that if they had an office […][in a participating province], they would be able to claim the rebate for the provincial part of the HST […][in that participating province].
12. Most of the Association’s operating costs are incurred in [Province 1]; however, […] costs are also incurred in other provinces throughout the year.
13. […] you indicated that the [responsibilities of the] Association’s employee who is working from [City 2] […] include:
* preparing meeting minutes;
* making arrangements to set up meetings;
* looking after Association’s […] and corporate filings;
* providing support to the Association’s VP in [City 1], as well as providing support to the CEO;
* verifying accuracy of the expense claims;
* negotiating with hotels when arranging for meetings, etc.
14. […] you also confirmed that the Association does not have a dedicated office space for the employee working in [City 2] and that employee is working from home. The employee does not have an authority to contract on behalf of the Association.
15. With respect to the expenses incurred by the Association outside of [Province 1], you provided the following examples of the types of expenses that the Association incurs in other provinces:
* expenses incurred in connection with conferences intended to provide education to […][attendees]; the location for these conferences changes from year to year;
* attending meetings in other cities outside of [Province 1];
* travel expenses incurred by Board Members (the Board of Directors has members from […][across] Canada);
* [other] travel expenses […].
RULING REQUESTED
Can the Association be deemed resident for GST/HST rebate purposes in each […][province] where Members are located?
RULING GIVEN
Based on the facts set out above, we rule that for purposes of the Public Service Body rebate the Association is only resident in [Province 1] since it is the only province where the Association has a permanent establishment. As a charity that is only resident in [Province 1], the Association is entitled to claim an […]% PSB rebate of the provincial part of the HST paid on eligible purchases and expenses regardless of in which province the HST was paid or payable, in addition to being able to claim a 50% PSB rebate of the GST/federal part of the HST paid or payable on eligible purchases and expenses.
EXPLANATION
A charity is able to claim a 50% PSB rebate of the GST or the federal part of the HST paid or payable on eligible purchases and expenses.
A charity resident in a participating province may also be entitled to a PSB rebate of the provincial part of the HST. Therefore, it must be determined in which province(s) the Association is resident.
In determining if a person is resident in a province, we look to subsection 132.1(1), which states:
…other than determining the place of residence of an individual in the individual’s capacity as a consumer, a person is deemed to be resident in a province if the person is resident in Canada and
a) in the case of a corporation, the corporation is incorporated or continued under the laws of that province and not continued elsewhere;
b) in the case of a partnership, an unincorporated society, a club, an association or an organization, or a branch thereof, the member, or a majority of the members, having management and control thereof is or are resident in that province;
c) in the case of a labour union, it is carrying on activities as such in that province and has a local union or branch in that province,
d) in any case, the person has a permanent establishment in that province.
Subsection 132(1), “Person resident in Canada”, states, in part, that:
…a person shall be deemed to be resident in Canada at any time
a) in a case of a corporation, if the corporation is incorporated or continued in Canada and not continued elsewhere;
b) in the case of a partnership, an unincorporated society, a club, an association or an organization, or a branch thereof, if the member, or a majority of the members, having management and control thereof is or are resident in Canada at that time…
As per the information contained on the Industry Canada website, the Association has been incorporated under the Canada Corporations Act - Part II since [mm/dd/yyyy], and was continued under the Canada Non-for-profit Corporations Act on [mm/dd/yyyy], indicating that it is a corporation incorporated in Canada. Therefore, the Association is a resident in Canada pursuant to paragraph 132(1)(a). However, the Association does not meet the condition of paragraph 132.1(1)(a) that “the corporation is incorporated or continued under the laws of that province and not continued elsewhere”, as the Association is not continued under the laws of a province.
You have stated that the Association is a partnership due to the Member Agreement. For GST/HST purposes a partnership is a person. If the Member Agreement creates a partnership, then a separate person would exist for GST/HST purpose and that separate person would have to qualify on its own account for any public service body rebates.
In our view the Member Agreement does not create a partnership as a partnership is created where two or more persons enter into a relationship to carry on business for profit. The Member Agreement does not create a relationship to carry on a business for profit. Instead, the Member Agreement’s purpose is to […][set out the duties and obligations of the Parties in] the context of the Parties’ commitment to work together […].
As the Association is a corporation and not a partnership or any of the other types of persons listed in paragraph 132.1(1)(b), this paragraph does not apply.
Since the Association is not provincially incorporated, and it is not a partnership or a labour union, paragraphs 132.1(a), (b) and (c) do not apply; however, pursuant to paragraph 132.1(1)(d) the Association will be deemed resident in a province if it has a permanent establishment in a province.
According to subsection 132.1(3) and the New Harmonized Value-added Tax System Regulations, No. 2, a charity is deemed to have a permanent establishment in a province if a place in that province would be a permanent establishment for income tax purposes under the following circumstances:
* the charity were a corporation; and
* the charity’s activities were a business for income tax purposes.
For income tax purposes, “permanent establishment” is defined in subsection 400(2) of Part IV of the Income Tax Regulations. Generally, a permanent establishment of a charity is a fixed place of activities. A fixed place of activities includes a determined or ascertained space in which there is some presence or routine over which the charity has some degree of control and in which some undertaking or operations of the charity occur. In most cases, this includes an office, branch, factory, workshop, warehouse, plant, mine, oil well, farm, timberland or natural resource used in the day-to-day activities of the charity. It does not mean that the place of activities must exist for a long time or be located in a durable building; for instance, a temporary field office on a construction site could be a fixed place of activities.
The Association’s main office is located in [City 1] and would be considered a fixed place of activities as it is a determined location that can be identified with the Association, and the Association exercises control over that office and carries out its on-going charitable activities through that office on a regular and reoccurring basis. At the same time, the premises of the Members cannot be considered as fixed place of activities of the Association since, based on the available information, Members are independent in their daily operations, separate legal entities, and as stated in the Member Agreement, “the Members shall each have exclusive authority, control and responsibility for the Member’s activities within its territory…”
However, there are other circumstances set out in subsection 400(2) of the Income Tax Regulations where a charity may be deemed to have a “permanent establishment” in a province. A charity is deemed to have a permanent establishment in a particular place if it carries on activities through an employee or agent established in that place with a general authority to contract on behalf of the charity. As indicated in the statement of facts above, the employee working from [their] home in [City 2] […] does not have an authority to contract on behalf of the Association. Therefore, the home office set up by that employee is not deemed to be a permanent establishment of the Association. Based on the information provided, the Association does not have any other employees or agents established in [Province 2]. None of the other circumstances in subsection 400(2) apply.
As the Association only has a permanent establishment in [Province 1], it is deemed to be resident in [Province 1] pursuant to paragraph 132.1(1)(d) and not in any other province.
As a charity that is only resident in [Province 1], in addition to a 50% PSB rebate of the GST and federal part of HST, the Association is entitled to claim a […]% PSB rebate of the provincial part of the HST paid on eligible purchases and expenses regardless of in which province the HST was paid or payable. The Association claims this rebate on line 305-[…] of Form GST284 SCH, Provincial Schedule - GST/HST Public Service Bodies' Rebate to claim a PSB rebate of the provincial part of the HST. The total provincial amount claimed on the provincial schedule is entered on line B of Part D of the PSB rebate application (Form GST284 Application for GST/HST Public Services Bodies' Rebate and GST Self-Government Refund). Both forms must be submitted to the CRA to request a PSB rebate of the provincial part of the HST.
The Association may have already claimed a PSB rebate for a claim period where a rebate of the provincial part of the HST was either not claimed or disallowed because the rebate was claimed on the incorrect line of the form GST284 SCH. If this is the case, the Association must adjust that previously filed PSB rebate application to correctly claim a PSB rebate for the provincial part of the HST. A reassessment or additional assessment of a rebate claim shall not normally be made more than four years after the day the application for the rebate was filed. If the Association has not yet filed a PSB rebate claim for a claim period where it was a GST/HST registrant, it has up to four years from the due date of its GST/HST return for the claim period to file a PSB rebate application. For a claim period where the Association is a non-registrant, it has up to four years from the last day of the claim period to file a PSB rebate application.
If the Association needs to change a rebate that it already filed, it can either use the CRA’s online services at My Business Account or Represent a Client, send the CRA a letter indicating the change, or call 1-800-959-5525.
If you require clarification with respect to any of the issues discussed in this letter, please contact my Manager, Carol Gaudet, at (613) 954-7936. Should you have additional questions on the interpretation and application of GST/HST, please contact a GST/HST Rulings officer at 1-800-959-8287.
Yours truly,
Tetyana Zabroda
Rulings Officer
Charities and Non-Profit Organizations Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate
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