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: 126057
Business Number: […]
February 3, 2014
Dear [Client]:
Subject: GST/HST INTERPRETATION
Place of supply of […] services
Thank you for your letter concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to […] services relating to […][X]. We apologize for the delay in replying.
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 (effective April 1, 2013) and 15% in Nova Scotia. The GST applies in the rest of Canada at the rate of 5%.
Effective April 1, 2013, the 12% HST in British Columbia has been replaced by the 5% GST and a provincial sales tax.
All legislative references are to the Excise Tax Act (ETA) unless otherwise specified.
We understand that […]([…][Company A]) is registered for GST/HST purposes and supplies […] services to [X]. Many of [X] are multi-jurisdictional, in that they cover members located in various provinces and within federal jurisdiction. [X] are generally administered by […], members of which are usually located in various parts of Canada, […].
Each [X] has an administrative agent to perform the daily administration of [X]. The administrative agent may be a third-party […] firm or a self-contained office […]. […]. All of the records of [X] are kept at the location of the administrative agent.
You have provided several scenarios.
Scenario 1: [X] with members in various provinces
Under this scenario, […] located in […][City 1, US], has established an administrative office there to administer a number of US and Canadian [X] […]. The administrative office performs all the administrative functions mentioned above, including payment of [X]’s expenses. [Company A] provides […] services to […] from [Company A]’s office in […][City 1, Province 1], […]. [Company A]’s bills are sent to the administrative office in [City 1, US] for payment.
Scenario 2: [X] with members in various provinces
Under this scenario, […] a third-party […] firm located in […][City 1, Province 2] [was hired], to perform all the administrative functions mentioned above, including payment of [X]’s expenses. [Company A] […] provides the majority of the services through [Company A]’s office in [City 1, Province 1]. […]. [Company A]’s bills are sent to the administrative office in [City 1, Province 2] for payment.
Scenario 3: [X] with members in […][Province 3], [Province 2]and […][Province 4]
Under this scenario, […] a third-party […] firm located in […][City 1, Province 3] [was hired], to perform all the administrative functions mentioned above, including payment of [X]’s expenses. [Company A] […] provides the services through its offices in […][City 2, Province 3], or [City 1, Province 1], as appropriate. […]. [Company A]’s bills are sent to the administrative office in [City 1, Province 3].
INTERPRETATION REQUESTED
You would like to know whether HST should be charged on the taxable supplies of the […] services provided by [Company A] in the scenarios that you have provided.
INTERPRETATION GIVEN
A taxable (other than zero-rated) supply of property or a service made in Canada is subject to GST at 5% if it is made in a non-participating province and is subject to HST at the applicable rate if it is made in a participating province. A zero-rated supply is a supply in respect of which the tax rate is 0%.
Pursuant to paragraph 142(1)(g), a supply of a service (other than a service in relation to real property) is made in Canada if the service is, or is to be, performed in whole or in part in Canada. Therefore, where the […] services provided by [Company A] in the scenarios are performed in whole or in part in Canada, such as from its offices in Canada, those services are deemed to be supplied in Canada.
Under section 144.1, a supply is deemed to be made in a province if it is made in Canada and is, under the rules set out in Schedule IX, made in the province. Also, a supply that is made in Canada that is not made in any participating province is deemed to be made in a non-participating province. Section 3 of Part IX of Schedule IX provides that notwithstanding any other part of Schedule IX, a supply of property or a service is made in a province if the supply is prescribed to be made in the province under the New Harmonized Value-Added Tax System Regulations (the Regulations).
The general place of supply rules for services, such as the […] services provided by [Company A], are set out in section 13 of the Regulations. Generally, under subsection 13(1) of the Regulations, a supply of a service is made in a province if, in the ordinary course of business of the supplier, the supplier obtains an address in the province that is
(a) if the supplier obtains only one address that is a home or a business address in Canada of the recipient, the home or business address in Canada obtained by the supplier;
(b) if the supplier obtains more than one address described in paragraph (a), the address described in that paragraph that is most closely connected with the supply; or
(c) in any other case, the address in Canada of the recipient that is most closely connected with the supply.
For purposes of subsection 13(1) of the Regulations, the address obtained by the supplier in the ordinary course of its business must be an address in Canada of the “recipient” of the supply who, under subsection 123(1), is generally defined to mean the person who is liable under the agreement for the supply to pay the consideration payable for the supply. The determination of the recipient of a particular supply, such as in the scenarios provided, would depend on the facts of each case, including the terms of the agreement for the supply and the relationship of the parties. For example, if it were to be established based on a complete set of facts that […][Y] is the recipient of the supply of the services made by [Company A] in a particular situation, then it would be the obtained business address in Canada of [Y] that would be relevant to the determination of the province in which the supply is made. If it were to be established that […][Z] is the recipient of the supply of the services in a particular situation, then it would be the obtained business address in Canada of [Z] that would be the relevant address in that case.
If the supplier obtains more than one home or business address in Canada of the recipient in the ordinary course of its business, the province in which the supply is made is determined by the address that is most closely connected with the supply. The business address of the recipient from which the supplier is hired pursuant to the agreement for the supply (the “contracting address”) is generally the address that is most closely connected with the supply. This address will therefore determine the province in which the supply of the service is made where it is in Canada and is obtained by the supplier in the ordinary course of its business. If the contracting address of the recipient is not obtained, the business address of the recipient that is most closely connected with the supply would be the obtained business address of the recipient in Canada that the supplier has the most contact with and that the supplier mostly uses in connection with that supply.
Where the supplier does not, in the ordinary course of its business, obtain a home or business address in Canada of the recipient, but obtains another address in Canada of the recipient, the supply is made in the province where such an address that is most closely connected with the supply is located. For purposes of this part of the place of supply rule, there is no requirement for the address of the recipient to be an address at which the recipient is located. The types of addresses that could fall under this part of the rule could also include an address of the recipient such as a billing address, provided it is obtained by the supplier for a legitimate underlying business reason.
If the supplier does not obtain any address in Canada of the recipient in the ordinary course of its business, such as where it is only an address of the recipient outside Canada that is obtained, the province in which the supply of the services is deemed to be made is generally determined by the location of the performance of the services. Subsection 13(2) of the Regulations generally provides that a supply of a service is made
(a) in a participating province if the Canadian element of the service is performed primarily in participating provinces and
(i) an equal or greater proportion of the Canadian element of the service is not performed in another participating province, or
(ii) if subparagraph (i) does not apply, the tax rate for the participating province is the highest among the participating provinces for which no greater proportion of the service is performed in another participating province; and
(b) in a non-participating province if the Canadian element of the service is not performed primarily in participating provinces.
The “Canadian element” of a service is defined in section 2 of the Regulations to mean the portion of the service that is performed in Canada. Further, the term “primarily” means more than 50%.
For further information, please refer to the "Services" section of GST/HST Technical Information Bulletin B-103 Harmonized Sales Tax – Place of Supply Rules for Determining Whether a Supply is made in a Province that is available on our website.
Finally, note that in certain circumstances, a supply of a service that is made in Canada to a non-resident may be zero-rated under Part V of Schedule VI, as explained in GST/HST Memorandum 4.5.3, Exports – Services and Intellectual Property that is available on our website.
The foregoing comments represent our general views with respect to the subject matter of your request. These comments are not rulings and, in accordance with the guidelines set out in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service, do not bind the Canada Revenue Agency with respect to a particular situation. Future changes to the ETA, regulations, or our interpretative policy could affect this interpretation.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-954-4291. 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,
Geoff Macmillan
Border Issues Unit
General Operations and Border Issues Unit
Excise and GST/HST Rulings Directorate
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