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: 133588r
Business Number: […]
Dear [Client]:
Subject: GST/HST RULING -
[The] […][Charity]’s public service bodies' rebate entitlement
Thank you for your letters of [mm/dd/yyyy] and [mm/dd/yyyy], wherein you requested that we reconsider our ruling of [mm/dd/yyyy], which stated that the […]([…][Charity]) is not resident in […][Participating Province Y] for purposes of the public service bodies’ rebate.
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 and 15% in Nova Scotia. The GST applies in the rest of Canada at the rate of 5%.
British Columbia was a participating province from July 1, 2010, to March 31, 2013. Effective April 1, 2013, the 12% HST in British Columbia has been replaced by the 5% GST and a provincial sales tax.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.
STATEMENT OF FACTS
We understand
1. The [Charity] was incorporated under […][an act in] [Participating Province X] on [mm/dd/yyyy].
2. The [Charity] is a registered charity for income tax purposes, effective [mm/dd/yyyy]. The [Charity] is also a charity for ETA purposes.
3. The [Charity] is registered for GST/HST purposes, with GST/HST account number […].
4. The [Charity]’s home office is located in […][City 1, Participating Province X].
5. […] [Locations of the Charity’s activities]:
* […]
* […]
* […][Participating Province X]
* […][Participating Province Z]
[…]
6. […]
7. The [Charity] has entered into […][Agreement A] with […][the Consultant], located in [Participating Province Y]. [The Consultant] does not have any authority to contract on behalf of the [Charity].
8. The [Charity] has paid HST in [Participating Province Y].
9. The [Charity] entered into […][Agreement B], dated [mm/dd/yyyy], with [Participating Province Y] in respect of the proposed future […] location.
10. According to your submission, the [Charity] has undertaken the following steps in respect of the future […] location:
* rights of occupation and use were secured;
* surveying was completed;
* zoning applications were submitted;
* consultations were held with impacted groups (e.g. First Nations, various provincial Ministries);
* infrastructure funding was secured;
* signage and gates were erected;
* the property was insured;
* taxes were paid;
* feasibility studies were documented and presented to regional officials;
* a […] year lease was drafted; and
* […]
11. […]
12. The [Charity] does not own any land in [Participating Province Y].
13. The [Charity] has held annual […] fundraisers in [Participating Province Y] for the past [#] years.
14. […]
15. […]
16. […][Restrictions of the Charity]
17. […]
18. You have stated that the […][businesses] are agents of the [Charity]. There is no written agency agreement between the [businesses] and the [Charity].
19. […][Describes tangible personal property of the Charity in Participating Province Y]
20. […][Describes tangible personal property of the Charity in Participating Province Y]
21. […][Describes tangible personal property of the Charity in Participating Province Y]
RULING REQUESTED
You would like to know
1. Is the [Charity] resident in [Participating Province Y]?
2. Can the [Charity] claim a public service body (PSB) rebate of any of the provincial part of the HST paid or payable in [Participating Province Y]?
RULING GIVEN
Based on the facts set out above, and after carefully considering the information you presented in your correspondence, we confirm that
1. The [Charity] is not resident in [Participating Province Y].
2. The [Charity] can claim a PSB rebate of the provincial non-creditable HST charged based on the extent it intended to consume, use or supply the property or service in the course of its activities in each participating province in which it is resident.
EXPLANATION
Resident in a province
The ETA contains deeming rules whereby a person is deemed to be resident in a province in certain circumstances. Pursuant to paragraph 132.1(1)(a), a person is deemed to be resident in a province if:
* the person is resident in Canada; and
* in the case of a corporation, the corporation is incorporated or continued under the laws of that province and not continued elsewhere.
Pursuant to paragraph 132(1)(a), a corporation incorporated or continued in Canada and not continued elsewhere is deemed to be resident in Canada. A corporation incorporated in Canada refers to a corporation that is formed in Canada (i.e. via the act of provincial or federal incorporation). The [Charity] is incorporated under [an act in] [Participating Province X]. Therefore, the [Charity] is deemed to be resident in Canada. The [Charity] is also deemed to be resident in [Participating Province X] under paragraph 132.1(1)(a).
In addition, paragraph 132.1(1)(d) deems a person to be resident in a province if the person is resident in Canada and the person has a permanent establishment in that province. A specific definition of “permanent establishment” applies for purposes of section 132.1, which is different from the definition of “permanent establishment” found in subsection 123(1). You referred in your submission to GST/HST Policy Statement P-208R, Meaning of Permanent Establishment in Subsection 123(1) of the Excise Tax Act. The definition of “permanent establishment” in subsection 123(1) has no application to section 132.1. As such, neither the definition of “permanent establishment” in subsection 123(1) nor Policy Statement P-208R is relevant to determining whether the [Charity] is resident in [Participating Province Y].
Pursuant to subsection 132.1(3) and the New Harmonized Value-added Tax System Regulations, No. 2, a charity will be deemed to have a permanent establishment in a province if a place in that province would be a permanent establishment for income tax purposes under the following circumstances:
* the charity were a corporation; and
* the charity’s activities were a business for income tax purposes.
“Permanent establishment” is defined in subsection 400(2) of Part IV of the Income Tax Regulations. Generally, a permanent establishment of a charity is a fixed place of activities. A fixed place of activities includes a determined or ascertained space in which there is some presence or routine over which the charity has some degree of control and in which some undertaking or operations of the charity occur. In most cases, this includes an office, branch, factory, workshop, warehouse, plant, mine, oil well, farm, timberland or natural resource used in the day-to-day activities of the charity. It does not mean that the place of activities must exist for a long time or be located in a durable building; for instance, a temporary field office on a construction site could be a fixed place of activities.
The [Charity] does not currently have a fixed place of activities in [Participating Province Y]. The [Charity] does not yet carry out any day-to-day activities at the location that is subject to [Agreement B].
However, there are other circumstances set out in subsection 400(2) of the Income Tax Regulations where a charity may have or be deemed to have a “permanent establishment” in a province.
A charity is deemed to have a permanent establishment in a particular place if it carries on activities through an employee or agent established in that place with a general authority to contract on behalf of the charity. Based on the information provided, neither [the Consultant] nor the [businesses] have a general authority to contract on behalf of the [Charity]; therefore, this provision does not apply. […].
If a charity otherwise has a permanent establishment in Canada and owns land in a province, such land is deemed to be a permanent establishment. The [Charity] does not own land in [Participating Province Y]; therefore, this provision does not apply. However, a charity need not own land in a province to have a permanent establishment in that province.
If a charity uses substantial machinery or equipment in a particular place in a province, it will be deemed to have a permanent establishment in that province. Generally, where a charity uses (rented or owned) substantial machinery or equipment in a province either for 30 continuous days or for 90 cumulative days in a 12-month period, the charity would meet this requirement. Based on the information provided, the [Charity] does not use substantial machinery or equipment in a particular place in [Participating Province Y]. Neither the […][tangible personal property owned by the Charity nor the tangible personal property used by the Charity in Participating Province Y] constitute substantial machinery or equipment.
Since none of the circumstances set out in subsection 400(2) of the Income Tax Regulations apply, the [Charity] does not have a permanent establishment in [Participating Province Y]. As such, the [Charity] is not resident in [Participating Province Y].
In your submission you presented arguments based on the availability of input tax credits on start-up costs and tax policy. The rules for claiming PSB rebates are different than the rules for claiming input tax credits. The CRA is responsible for administering the legislation as written. Under section 259, only public service bodies resident in [Participating Province Y] can claim a PSB rebate of the provincial part of the HST using the rebate percentage for [Participating Province Y].
Public Service Body Rebate for HST paid or payable in [Participating Province Y]
Pursuant to our previous ruling, the [Charity] is resident in […][Participating Province X] and […][Participating Province Z]. The [Charity] can claim a PSB rebate of the provincial non-creditable HST charged based on the extent it intended to consume, use or supply the property or service in the course of its activities in each participating province in which it is resident. Thus, if the [Charity] pays HST on property or services purchased in [Participating Province Y], it can claim a PSB rebate of the provincial non-creditable HST charged to the extent it intended to consume, use, or supply the property or service in the course of its activities in [Participating Province X] or [Participating Province Z]. The amount of the PSB rebate is calculated using the relevant provincial rebate percentages of the participating provinces in which the [Charity] is resident.
Likewise, if the [Charity] pays HST on property or services purchased in other participating provinces, the [Charity] may claim a PSB rebate of the provincial non-creditable HST charged to the extent it intended to consume, use, or supply the property or service in the course of its activities in [Participating Province X or Participating Province Z].
As the [Charity] is not resident in [Participating Province Y], the [Charity] would not be entitled to a PSB rebate of the provincial part of the HST to the extent that the property or services are intended to be consumed, used or supplied in the course of its activities in [Participating Province Y]. However, the [Charity] would be entitled to a 50% PSB rebate of the federal part of the HST paid in [Participating Province Y] or elsewhere.
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 613-952-9592. 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,
Heather Reardon
Charities and Non-Profit Organizations Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate
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