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, 13th floor
320 Queen Street
Ottawa ON K1A 0L5
[Addressee]
Case Number: 180362
Dear [Client]:
Subject: GST/HST INTERPRETATION
Interpretation of section 144 of the Excise Tax Act
[Application of GST/HST to the importation and sale of fuel oil and whether the supply is deemed to be made outside Canada]
Thank you for your letter of October 21, 2016, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the importation and sale of fuel oil by, a multinational oil and gas trading company ([…][Non-resident corporation (NRCo)]).
The HST applies in the participating provinces at the following rates: 13% in Ontario; and 15% in New Brunswick, Newfoundland and Labrador, Nova Scotia and Prince Edward Island. 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.
We understand that [NRCo], a non-resident corporation registered for the GST/HST, has entered into a one-year agreement with a Canadian purchaser (“CanCo”) for the supply, shipment, and delivery of fuel oil to CanCo. Specifically, the agreement provides for the fuel oil to be delivered to CanCo in marine vessels under ICC Incoterms (2010) “Delivery ex ship (DES)” at a delivery point in a Canadian port. The purchaser takes possession of the fuel oil prior to its release by the Canada Border Services Agency (“CBSA”) and, as importer of record, pays any applicable taxes and duties on the fuel oil in order to obtain its release by the CBSA. [NRCo] and CanCo have entered into the said agreement before the first shipment of fuel oil was imported into Canada under the terms of the agreement.
INTERPRETATION REQUESTED
You would like to know whether the supply of fuel oil by [NRCo] to its Canadian customer under the circumstances you have described would be considered a supply made outside Canada by virtue of section 144.
INTERPRETATION GIVEN
A supply of goods that have been imported in compliance with the Customs Act or any other Act of Parliament that prohibits, controls or regulates the importation of goods, but have not been released by the CBSA before the goods are delivered or made available in Canada to the recipient of the supply, shall be deemed to be made outside Canada pursuant to section 144.
One of the requirements of section 144 is that the goods be imported before the supply is made. Under section 133, the supply of the goods is deemed to be made when the agreement for the supply of the goods is entered into. Various provisions in the ETA reflect the fact that the supply is considered to be made when the agreement is entered into. The relevance of the timing of when a supply is made under section 133 to the application of section 144 is reflected in the wording of the definition of “specified supply” of goods under subsection 178.8(1). Specifically, this definition distinguishes between a supply of goods that are imported after the supply is made, and a supply of goods that have been imported in circumstances in which section 144 deems the supply to have been made outside Canada.
Thus, section 144 may apply if [NRCo] makes the supply of fuel oil to CanCo after the goods have been imported into Canada but not yet released by the CBSA. For purposes of section 144, we must establish when the goods are imported, when the supply is made, and whether the former precedes the latter. In this respect, we again note that section 133 provides that where there is an agreement for the supply of property, a supply of the property is deemed to be made at the time the agreement is entered into.
Our understanding is that the shipments of fuel oil to CanCo commenced only after the agreement for the supply was reached between [NRCo] and CanCo. Since section 133 deems the supply to have been made at the time of the agreement, the importation of the fuel oil occurs after the supply by [NRCo] to CanCo. Accordingly, section 144 would not apply in this case since the fuel oil was not imported before the supply was made.
Unless particular deeming provisions apply, such as those in sections 143, 144 or 179, the general place of supply rules found in section 142 will determine whether a supply is deemed to be made inside or outside Canada. A supply by way of sale of goods that are delivered or made available in Canada to the recipient is generally considered to be made in Canada by virtue of subsection 142(1). These general rules are based on where legal delivery of the goods to the recipient occurs, a matter determined with reference to the terms of the agreement of sale and the applicable sale of goods legislation.
In accordance with the qualifications and guidelines set out in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service, the interpretation(s) given in this letter, including any additional information, is not a ruling and does not bind the Canada Revenue Agency (“CRA”) with respect to a particular situation. Future changes to the ETA, regulations, or the CRA’s interpretative policy could affect the interpretation(s) or the additional information provided herein.
If you require clarification with respect to any of the issues discussed in this letter, please do not hesitate to call me at 613-670-9892. 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,
Anna Messore
Senior Rulings Officer
Border Issues Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate
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