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
[Addressee]
Case Number: 114204
Dear [Client]:
Subject: GST/HST RULING
GST Ruling on Section 150 Election between Branches
Thank you for your letter of [mm/dd/yyyy], concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to […][Foreign Co B Cdn Branch] and […][Foreign Co A Cdn Branch].
All legislative references are to the Excise Tax Act (ETA) unless otherwise specified.
STATEMENT OF FACTS
Based on your letter of [mm/dd/yyyy], we understand […]: […] [information about [Foreign Co A Cdn Branch] and [Foreign Co B Cdn Branch]].
The following diagram provides a summary of the relationship between [Foreign Co A Cdn Branch] and [Foreign Co B Cdn Branch]:
[Foreign Holdings Co]
/ \
/ \
/ \
[Foreign Co A] [Foreign Co B]
| |
| | [Foreign Country]
__________________________________________________________________
| |
| | [Canada]
[Foreign Co A [Foreign Co B
Cdn Branch] <--------- Cdn Branch]
ServicesRULING REQUESTED
You would like to know if […][Foreign Co A] and […][Foreign Co B] are entitled to make the election under section 150 of the ETA with respect to services supplied by [Foreign Co B Cdn Branch] to [Foreign Co A Cdn Branch] (and any other qualifying supply between the parties), so as to deem said supplies to be financial services.
RULING GIVEN
Based on the facts set out above, we rule that [Foreign Co A] and [Foreign Co B] are not entitled to make the election under section 150 of the ETA with respect to services supplied by [Foreign Co B Cdn Branch] to [Foreign Co A Cdn Branch].
This ruling is subject to the qualifications in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service. We are bound by this ruling provided that none of the above issues are currently under audit, objection, or appeal, that no future changes to the ETA, regulations or our interpretative policy affect its validity, and all relevant facts and transactions have been fully disclosed.
EXPLANATION
It is our view that in order for the residency requirement in the definition of “closely related group” in subsection 123(1) to be met, the corporation must as a whole be resident in Canada since the election applies to the corporation as whole. Where a non-resident person has a permanent establishment in Canada, subsection 132(2) provides that the person is deemed to be a resident only in respect of the activities carried on through the permanent establishment. The person as a whole is not deemed to be resident in Canada. Accordingly, where a non-resident corporation has a permanent establishment in Canada and is deemed to have a restricted residency in Canada under subsection 132(2), that is, it is deemed to be resident in Canada in respect of, but only in respect of, the activities carried on through the permanent establishment, the residency requirement in the definition of “closely related group” in subsection 123(1) is not met.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-954-4394. 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,
Doris McMullan
Corporate Reorganizations Unit
Financial Institutions & Real Property Division
Excise and GST/HST Rulings Directorate
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