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
TO:
[Addressee]
FROM:
Jacqueline Russell, CGA
Industry Sector Specialist
Services and Intangibles Unit
Excise and GST/HST Rulings
320 Queen Street
Ottawa ON
DATE: June 5, 2013
SUBJECT: GST/HST INTERPRETATION -
[...] [Whether room upgrades form part of a tour package]
This is [...] concerning whether a charge in respect of a room upgrade is eligible for the tour package rebate available under the Foreign Convention and Tour Incentive Program in circumstances where the room upgrade is identified separately on the invoice for a supply of a tour package as a separate charge. We apologize for the delay in our response.
All legislative references are to the Excise Tax Act unless otherwise specified.
We understand that a room upgrade charge may apply when some or all of the accommodation included in a tour package is replaced with better accommodation at an additional cost. The room upgrade may be to a larger room or suite at the same hotel, to a room or suite with a better view, or to accommodation at a more luxurious hotel. It is our understanding that the invoices [...] show a price for a tour package with an additional room upgrade charge identified separately rather than a single combined amount.
It is also our understanding that the room upgrade is provided to the non-resident by the supplier of the tour package and the supplier is not acting as an agent (of the hotel, for example). We also understand that the request solely concerns upgrades to the accommodation in the tour package and not amounts charged for added accommodation; i.e., the charge is for an upgrade with respect to the nights included in the tour package only and not for any additional nights of accommodation. Finally, it is our understanding that the suppliers are charging GST/HST on the room upgrade charge, and the non-resident purchasers are requesting a rebate in respect of this tax in addition to the tax charged on the tour package. As such, we are assuming that the nonresident purchasers are not being paid or credited a rebate amount by the suppliers.
The additional amount charged for the upgrade in accommodation (i.e., the "room upgrade" on the invoice) is the price difference between the accommodation included in the tour package and the accommodation actually provided to the customer. In other words, the separate charge is an
incremental charge for the upgrade in accommodation. As such, we are assuming that the amount charged as a "room upgrade" is significantly less than the amount charged for the "tour package."
It is our view, based on the guidelines in GST/HST Policy Statement P-077R2, Single and Multiple Supplies, that the tour operator is making a single supply of a tour package to the nonresident, and the charge in respect of the room upgrade is part of the consideration for that supply.
Generally, pursuant to subsections 165(1) and (2), GST/HST is imposed on the value of the consideration for a supply, where "consideration", as defined in subsection 123(1), includes any amount that is payable for a supply by operation of law.
As you know, subsection 252.1(2) allows a non-resident to claim a rebate in respect of the short-term and/or camping accommodation included in a tour package, while subsection 252.1(3) allows a non-resident non-registered tour operator to claim a rebate in respect of the GST/HST paid on supplies of short-term and/or camping accommodation and tour packages that include such accommodation. Subsection 252.1(1) indicates that "tour package" has the meaning assigned by subsection 163(3), but does not include a tour package that includes a convention facility or related convention supplies. As defined in subsection 163(3), "tour package" means a combination of two or more services, or of property and services, that includes transportation services, accommodation, a right to use a campground or trailer park, or guide or interpreter services, where the property and services are supplied together for an all-inclusive price. Subsection 163(3) is the only provision in the ETA where the phrase "all-inclusive price" is used; it is not defined in the ETA.
Typically, tour operators purchase blocks of passenger transportation services, short-term or camping accommodation, sightseeing excursions, and other property or services which they break up and re-assemble into individual tour packages for sale to travellers at an all-inclusive price.
Section 163 sets out the rules for determining the tax to be charged on the consideration for a tour package: rather than charging a single tax rate on the all-inclusive price, the overall consideration is allocated to portions, based on the elements in the tour package and their respective tax status when they are purchased separately. The Goods and Services Tax Technical Paper issued by the Department of Finance in August 1989 indicated that the reason for these deeming rules was because tour operators are functioning as retailers engaged in the business of buying items for resale purposes. The "all-inclusive price" requirement appears to have been in recognition of the industry practice rather than a restriction or limitation on the application of the tour package rules.
As stated in GST/HST Memorandum 27.3, Foreign Convention and Tour Incentive Program - Rebate for Eligible Tour Packages and Accommodation Supplied as Part of Eligible Tour Packages, in the tourism industry, prices for certain items are sometimes listed separately on the invoice for information purposes. Even where this is the case, in some circumstances, the tour package may still be considered to be supplied for an all-inclusive price.
The room upgrade and its associated charge are shown separately on the invoice to inform the non-resident that the requested room upgrade has been made, and to indicate the incremental cost of that upgrade. The room upgrade charge is shown separately for information purposes, and is part of the allinclusive price for the tour package. Therefore the GST/HST on the room upgrade charge is included in the calculation when determining the amount eligible for a rebate.
For your information, it is our view that this position also applies in circumstances where there is a single supplement charge in respect of a tour package, which is shown separately from the tour package price on an invoice rather than a single combined amount. Generally, a single supplement charge is an amount charged in respect of the accommodation included in a tour package when the accommodation will not be shared with another person. The charge represents the incremental cost difference between the cost of the accommodation when occupied by a single person and the same accommodation when occupied by two people who split the cost. Single supplement charges may also apply in respect of cruises. Where the price for a tour package and a single supplement charge are shown separately on an invoice, and there are no other supplies listed on the invoice, we will accept that the single supplement and its associated charge are shown separately for information purposes. As such, the single supplement charge is part of the allinclusive price for the tour package, and therefore, the GST/HST on the single supplement charge is included when determining the amount eligible for a rebate.
Please do not hesitate to contact me at 952-7909 if you have any questions.
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