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, 11th floor
320 Queen Street
Ottawa ON K1A 0L5
Case Number: 158124
Dear [Client]:
Subject: GST/HST RULING
Carrying on business in Canada
Thank you for your letter of, June 12, 2014 concerning the application of the goods and services tax/harmonized sales tax (GST/HST) to supplies made by your non-resident client. This ruling is further to GST/HST Interpretation 140855r issued to you on August 20, 2014.
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.
STATEMENT OF FACTS
Based on your [correspondence] and related attachments, our understanding is that:
1. […]("USco") is a corporation resident in the United States and is not registered for GST/HST purposes.
2. USco supplies […]([…][information services]) to businesses and individuals.
3. A small portion of USco’s customer base is comprised of individuals located in Canada ("Canadian Customers") to whom the [information services] [are] supplied by subscription. USco has no other business activities in Canada.
4. USco acquires specific […]([…][Data]) […] from its Canadian resident affiliate, […]("Canco") for the purpose of packaging, marketing and selling the [information services] to Canadian Customers.
5. USco also acquires […]([…][One-Time Services]) from Canco for a separate fee. […].
6. Other than supplying the [Data] and [One-Time Service] to USco, Canco is not otherwise directly involved in the provision of [information services] to Canadian Customers.
7. Canadian Customers are typically introduced to the availability of [information services] by third party vendors ("TPVs") who carry on business in Canada.
8. A TPV earns a commission for providing successful leads i.e., Canadian Customers who acquire the [information services] by subscription from USco.
9. The following is a list of the various [information services] subscriptions offered by USco to Canadian Customers: […]
10. Canadian Customers enter into an agreement for the provision of [information services] directly with USco via a website hosted on a web server located in the U.S.
11. The [information services] [are] delivered electronically to Canadian Customers from the same server located in the U.S. and does not involve direct human intervention.
12. The website’s terms and conditions (“Terms”) identify USco as the supplier of the [information services].
13. The method of payment for the [information services] is by credit card.
14. USco does not collect GST/HST on the supplies of [information services] made to Canadian Customers.
15. USco does not have a bank account in Canada.
16. USco does not have a temporary or permanent presence in Canada.
17. USco does not have employees in Canada however some of USco’s employees visit Canada on an irregular basis.
18. Canco and USco have entered into a new agreement ("Services Agreement") whereby Canco supplies additional services ("New Services") to USco. Annex “A” to the Services Agreement describes the New Services as follows:
- assisting in the development and implementation of a comprehensive sales plan and strategy to penetrate target verticals including: […];
- performing weekly prospecting into key target accounts and sales calls both via phone and in person to present solutions;
- participating in weekly staff calls and preparing reports on status of key activities and deals;
- assisting in the preparation of term sheets and proposals for delivery to prospective clients;
- assisting in the negotiation of contract terms under the […][guidelines] and establishing baseline contracts for acceptance and execution by USco;
- use of the Canco website for the limited purpose of providing a portal for use in communicating with purchasers and prospective purchasers of USco [information services] that are located in Canada; and
- attending key trade events, trade shows and partnership meetings to promote the USco [information services] in Canada.
19. Under the terms of the Services Agreement, Canco is expressly precluded from acting as agent of USco in Canada.
20. Canco does not have contact with USco’s customers and is not otherwise involved in the supplies of [information services] made by USco to Canadian Customers.
RULING REQUESTED
1. Is USco carrying on business in Canada for GST/HST purposes?
2. Are the [One-Time Services] made by Canco to USco zero-rated supplies?
3. Are the New Services made by Canco to USco zero-rated supplies?
RULING GIVEN
Based on the facts set out above, we rule:
1. USco is not carrying on business in Canada for GST/HST purposes.
2. The supplies of [One-Time Services] made by Canco to USco are zero-rated pursuant to section 7 of Part V of Schedule VI.
3. The supplies of New Services by Canco to USco are zero-rated pursuant to section 5 of Part V of Schedule VI.
In accordance with the qualifications and guidelines set out in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service, the Canada Revenue Agency (CRA) is bound by the ruling(s) given in this letter provided that: none of the issues discussed in the ruling(s) are currently under audit, objection, or appeal; no future changes to the ETA, regulations or the CRA’s interpretative policy affect its validity; and all relevant facts and transactions have been fully and accurately disclosed.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-670-9897. 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,
Donato Licursi
Border Issues Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate
Email this Content