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: 142807
Business Number: […]
March 6, 2014
Dear [Client]:
Subject: GST/HST RULING
[Application of the goods and services tax/harmonized sales tax (GST/HST) to the] […] Congress
Thank you for your letter of [mm/dd/yyyy], concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to […] ([…][the Congress]) to be held in […][City 1, Province 1] from [mm/dd] to [mm/dd/yyyy].
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%.
All legislative references are to the Excise Tax Act (ETA) unless otherwise specified.
STATEMENT OF FACTS
Based on your letter and the information provided in your subsequent [correspondence] […] on [mm/dd/yyyy], we understand the following:
1. Founded in [yyyy], […] (“the Organization”) is a […] body with [#] member organizations, including […][agencies], companies, societies, associations and institutes across [#] countries.
2. The Organization is a not-for-profit organization headquartered in […][a location outside of Canada].
3. Companies and organizations working in […][XYZ] may apply to become members of the Organization.
4. As set out in the Organization’s Constitution, […] (“the Congress”) is an event of the Organization. The Congress is one of the […] events in [XYZ].
5. The Congress has been held annually since [yyyy]. Each year, the Congress is held in a different country, with […] and a local host.
6. Membership benefits related to the Congress include: […]; discounts on exhibition space; and eligibility to host a Congress.
7. Members of the Organization that are interested in hosting a future Congress in their country are invited to submit proposals. After a pre-established competitive selection process, the future host is chosen by […] of the Organization.
8. […] (“the Member”) is a member of the Organization and thus is eligible to submit a proposal to host a Congress.
9. The Member is a not-for-profit organization and a GST/HST registrant.
10. The Member was successful in its proposal to host [the Congress] in [City 1].
11. More than [#] individuals are expected to attend [the Congress]. […][Description of the attendees].
12. Based on historical data, you have stated that more than 75% of the participants in the Congress will be non-residents of Canada. You also indicated that, for the Congress held in [yyyy] in […][City 2, Province 2], more than 80% of the participants were non-residents of Canada.
13. You have provided a copy of […] (“the Contract”) between the Organization and the Member, which outlines the respective responsibilities of each organization with respect to [the Congress]. […].
14. […] of the Contract provides background information on the Organization and the Congress, including the following: The Organization co-organizes the Congress together with the selected Member and the Organization’s partners, […] (“the Partner Organizations”).
15. Section […] of the Contract sets out the purpose of the Contract, the scope of [the Congress], and the responsibilities of the Member, and indicates the following:
a. The Member is responsible for providing a suitable venue for [the Congress], with session and meeting rooms that meet the Organization’s detailed requirements, as well as specified audio-visual equipment, furniture, personnel, and refreshments. The Member will also provide supplementary facilities (offices, members’ lounge, presentation preparation room, internet café, and press centre). The detailed requirements and specifications are set out in […] to the Contract.
b. The principal venue for [the Congress] will be the […] (“the Convention Centre”).
c. The Member is responsible for organizing […] (“the Exhibition”) as an integral part of [the Congress]. The Member has the right to charge exhibitors for exhibit space and other exhibition services. [The Congress] attendees shall be granted access to the Exhibition free of charge. […].
d. All catering services delivered on-site at the Convention Centre for [the Congress] must be sourced through the Member, regardless of the organization that will pay the costs. The Member will provide coffee/tea service at least […] in the morning and once in the afternoon during [the Congress]. The Member will provide a private dining area for VIP-restricted lunches.
e. The Member will make appropriate arrangements to ensure that suitable and sufficient hotel accommodations are available for attendees of [the Congress] and provide a planned schedule shuttle bus service […] to attendees if the hotels are not in walking distance of the Convention Centre.
f. The Member is responsible for organizing the social events for [the Congress], including the […]. The […] shall be free to delegates, but the Member may sell tickets to the […] and the other social events. The Member will provide […] transportation for the delegates if the venues are not within walking distance of the Convention Centre.
g. The Member is responsible for maintaining [the Congress] website […].
h. The Member is responsible for the registration of every participant in [the Congress], whether performed online or on-site.
i. The Member is responsible for providing the Organization with a list of all [Congress] attendees, […]
16. Section […] of the Contract sets out the responsibilities of the Organization, and indicates the following:
a. The Organization […], which has expertise in the organization and conduct of the Congresses, will provide administrative and organizational support to the Member and its Local Organizing Committee.
b. The Organization shall provide to the Member accurate and comprehensive statistical data from the [#] preceding Congresses regarding registration and attendance at key events and activities that involve logistical support by the Member.
c. The Organization is responsible for the content of the sessions and meetings, issuing the call for papers and choosing topics and speakers, and allocating the session and meeting rooms at the Convention Centre to concurrent meetings and sessions.
d. The Organization will permit the Member to utilise [the Congress] domain ([…][website]) which the Organization has registered and currently hosts. The Member will be able to use this domain to promote and conduct [the Congress]. The Organization will be responsible for the programme part of the website.
e. The Organization will promote [the Congress] at Organization-organized and co-sponsored events during [yyyy] and [yyyy]. The Organization will promote [the Congress] [through] […][correspondence] sent to its community (about [#] participants in previous congresses and symposia) on a […] minimum basis.
f. The Organization will promote the Exhibition amongst its Member Organizations and to its contact database in order to help the Member to find exhibitors.
17. Section […] of the Contract states, in part, that the mutual purpose of the Organization and the Member is for [the Congress] to be a professionally organized and conducted event consistent with the Congress’s reputation […], and that the Member will provide to the Organization the equipment, facilities, materials and services referred to in […] of the Contract.
18. Section […] of the Contract sets out the financial matters, and indicates the following:
a. The registration fees for [the Congress] have been proposed by the Member, in consultation with the Organization, and have been approved by the Organization.
b. The registration categories ([…][list of categories]) are set by the Organization.
c. The Member will be responsible for the timely collection of all registration fees from [the Congress] attendees.
d. The Member shall remit […]% of all of the registration fees received to the Organization, […][currency], by certain dates.
e. The Member guarantees that the payment due to the Organization shall be not less than […][amount].
19. Section […] of the Contract states that the responsibility for Congress expenses is as follows:
a. Except as otherwise expressly provided in the Contract, the Member shall be responsible for the payment of all […], costs and expenses incurred in the preparation and execution of [the Congress], […]
20. Exhibit […] to the Contract sets out the registration conditions and procedures, and indicates the following:
a. Registration fees set forth in the Contract are inclusive of all taxes and duties which, if they occur in Canada, will be paid by the Member.
b. No person or group may participate in [the Congress] without paying the registration fee, unless an exception is agreed upon by both parties.
c. Those registering in one of the categories with a […] fee must meet the Organization’s minimum requirements for that category.
d. The Member will provide the Organization with a list of [the Congress] attendees […]
e. The Organization considers […] – as well as the lists of [the Congress] attendees […] – to be valuable property of the Organization.
RULING REQUESTED
You would like to know:
1. Will the Congress be considered a “foreign convention” with respect to the application of the […][GST/HST]?
2. Does the [GST/HST] apply to the admissions to [the Congress]?
3. Is the Member entitled to claim input tax credits (ITCs) to recover the GST/HST paid on expenses related to hosting [the Congress]? If so, should they be claimed as part of the Member’s regular quarterly GST/HST reporting?
4. Does the Member charge the [GST/HST] on the […]% share of the registration fees that are remitted to the Organization? If so, is the Organization entitled to claim a rebate in respect of that amount?
RULING GIVEN
Based on the facts set out above, we rule that:
1. The Congress is a “foreign convention” with respect to the application of the [GST/HST].
2. The [GST/HST] does not apply to the admissions to [the Congress].
3. The Member is entitled to claim ITCs to recover the GST/HST paid or payable on expenses related to organizing [the Congress], provided that all of the conditions for claiming ITCs are met. The ITCs should be claimed as part of the Member’s regular quarterly GST/HST reporting.
4. The Member is required to charge the [GST/HST] on its supply of organizing [the Congress] made to the Organization. The Organization will be entitled to claim a rebate in respect of the [GST/HST] paid on the supply made to it by the Member relating to [the Congress], subject to a 50% limitation on the tax calculated on that part of the consideration for the supply that is reasonably attributable to food, beverages and catering. As the organizer of [the Congress], the Member may choose to pay or credit the rebate amount to the Organization instead, and claim a corresponding deduction on its GST/HST return.
This ruling is subject to the qualifications in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service. We are bound by this ruling provided that none of the above issues are currently under audit, objection, or appeal, that no future changes to the ETA, regulations or our interpretative policy affect its validity, and all relevant facts and transactions have been fully disclosed.
EXPLANATION
As defined in subsection 123(1), “convention” means a formal meeting or assembly that is not open to the general public, but does not include a meeting or assembly the principal purpose of which is
(a) to provide any type of amusement, entertainment or recreation,
(b) to conduct contests or games of chance, or
(c) to transact the business of the convenor or attendees
(i) in the course of a trade show that is open to the general public, or
(ii) otherwise than in the course of a trade show;
and a “foreign convention” means a convention
(a) at least 75% of the admissions to which are, at the time the sponsor of the convention determines the amount to be charged as consideration therefor, reasonably expected to be supplied to non-resident persons, and
(b) the sponsor of which is an organization whose head office is situated outside Canada or, where the organization has no head office, the member, or majority of members, of which having management and control of the organization is or are non-resident;
[The Congress] is a convention for GST/HST purposes, and you have confirmed that at the time the sponsor established the consideration to be charged to attend the Congress at least 75% of the admissions to [the Congress] are reasonably expected to be supplied to non-resident persons.
Please note that sponsors must maintain documents supporting their calculation of the percentage of admissions that are reasonably expected to be supplied to non-residents in order to prove that a convention was a foreign convention, and make these documents available to the CRA on request. Under subsection 286(1), these documents must be kept in Canada unless the sponsor gets permission from the CRA to maintain them outside Canada.
As defined in subsection 123(1), “sponsor” of a convention means the person who convenes the convention and supplies admissions to it.
As indicated in paragraph 21 of GST/HST Memorandum 27.2, Conventions, the term “convene” is not defined in the ETA. Administratively, it is interpreted to mean the summoning or calling of people to come together for the convention. Based on the Constitution of the Organization and the Contract, the Organization is the person that convenes [the Congress].
While the Contract indicates that the Member had input in setting the amount of the registration fees, the Organization has final approval of the amounts. […]. The Contract indicates that the Member is responsible for the registration of attendees at [the Congress], and for collecting the registration fees. Based on the Constitution of the Organization and the terms of the Contract, the Organization is the person ultimately entitled to the revenues from [the Congress] and is the person that supplies the admissions.
Therefore, the Organization is the sponsor of the convention. Since the Organization’s head office is situated outside Canada and at least 75% of the admissions are reasonably expected to be supplied to non-resident persons, [the Congress] is a foreign convention for GST/HST purposes.
Section 189.2 provides that certain supplies made by the sponsor of a foreign convention, including supplies of admissions to the convention, are deemed not to have been made in the course of a commercial activity of the sponsor. As such, the sponsor of a foreign convention is not required to charge the GST/HST on its supplies of admissions to the convention.
Therefore, the [GST/HST] will not apply to the supplies of admissions to [the Congress].
As defined in subsection 123(1), the “organizer” of a convention means a person who acquires the convention facility or related convention supplies and who organizes the convention for another person who is the sponsor of the convention; “convention facility” means real property that is acquired by way of lease, licence or similar arrangement by the sponsor or organizer of a convention for use exclusively as the site for the convention; and “related convention supplies” means property or services acquired, imported or brought into a participating province by a person exclusively for consumption, use or supply by the person in connection with a convention, but does not include
(a) transportation services, other than a chartered service acquired by the person solely for the purpose of transporting attendees of the convention between any of the convention facilities, places of lodging of the attendees or transportation terminals,
(b) entertainment,
(c) except for the purposes of subsection 167.2(1) and section 252.4, property or services that are food or beverages or are supplied to the person under a contract for catering, or
(d) property or services supplied by the person in connection with the convention for consideration that is separate from the consideration for the admission to the convention, unless the recipient of the supply is acquiring the property or services exclusively for consumption or use in the course of promoting, at the convention, property or services supplied by, or a business of, the recipient;
The Contract states that the Member is responsible for the planning and execution of [the Congress] including providing the necessary equipment, facilities, materials and services to the Organization. As the Member is the person who acquires the convention facility and related convention supplies, and who organizes [the Congress] for the sponsor, for GST/HST purposes, it is the organizer of [the Congress].
Generally, subsection 169(1) provides that where a person acquires or imports property or a service, or brings it into a participating province and, during a reporting period of the person in which the person is a registrant, the GST/HST in respect of the property or service becomes payable by the person or is paid by the person without having become payable, that person is entitled to an ITC in respect of the tax to the extent (expressed as a percentage) it was acquired, imported or brought into a participating province for consumption, use or supply in the course of the person’s commercial activities.
As defined in subsection 123(1), a “commercial activity” of a person includes a business carried on by the person (other than a business carried on without a reasonable expectation of profit by an individual, a personal trust or a partnership, all of the members of which are individuals), except to the extent to which the business involves the making of exempt supplies by the person.
The Member is the organizer of [the Congress], and as such, is providing a service of organizing the convention for the Organization. Since there is no provision in Schedule V (if applicable to the Member) that would exempt this supply, it is made in the course of the Member’s commercial activities, and the Member is entitled to claim ITCs to recover the GST/HST paid on expenses related to organizing [the Congress]. The Member may claim the ITCs as part of the Member’s regular quarterly GST/HST reporting.
However, subsection 236(1) imposes a 50% limitation on the amount of GST/HST that may be claimed with respect to food, beverages and entertainment expenses if the registrant is subject to the limitation rules for income tax purposes, or would be subject to those rules if the registrant were a taxpayer under the Income Tax Act. Under the Income Tax Act, there are certain exceptions to these limitation rules: one of the exceptions is where the taxpayer is compensated by another person for the food, beverage and entertainment expenses incurred, if the amount of the compensation is reasonable and is specifically identified in writing to the person paying the compensation.
If the deduction that the Member may claim for food, beverages and entertainment expenses for income tax purposes is (or would be, if the Member is not subject to income tax) limited to 50% of the cost of meals and entertainment, the Member may only claim 50% of the GST/HST paid or payable on those expenses as an ITC.
As the Organization is the person that convenes the convention and charges the admissions, it is the person entitled to the registration revenues. When the Member remits a portion of the revenues that it has collected on behalf of the Organization to the Organization, there are no GST/HST implications, as this is not consideration for any supply made by the Organization to the Member.
However, the portion of the registration fees that the Member is allowed to keep is consideration for the supply of organizing [the Congress] that the Member makes to the Organization. As its supply is a taxable supply, the Member is generally required to charge the Organization the GST/HST on the consideration. Therefore, the Member would charge the [GST/HST] based on the portion of the registration fees that it may keep.
Under subsection 252.4(1) of the ETA, a sponsor of a foreign convention may claim a rebate in respect of the tax it paid on a supply of property or services relating to the convention made by a registrant organizer of the convention. The rebate is equal to the total of
(a) the tax paid by the sponsor calculated on that part of the consideration for the supply that is reasonably attributable to the convention facility or related convention supplies other than property or services that are food or beverages or are supplied under a contract for catering, and
(b) 50% of the tax paid by the sponsor calculated on that part of the consideration for the supply that is reasonably attributable to related convention supplies that are food or beverages or are supplied under a contract for catering.
However, subsection 252.4(2) allows a registrant organizer of a foreign convention to pay or credit the sponsor an amount equal to the rebate, and claim a corresponding deduction in its net tax under subsection 234(2). The amount that may be paid or credited by the organizer is equal to the rebate that the sponsor would otherwise be entitled to claim in respect of the supply made by the organizer, and the sponsor would not be entitled to claim any rebate, refund or remission in respect of the tax from the CRA.
If a registrant organizer pays or credits the sponsor a rebate amount and claims the deduction in its net tax, it is required, under subsection 252.4(5) of the ETA, to complete and file the form GST106, Information on Claims Paid or Credited for Foreign Conventions and Tour Packages, by the due date of the registrant’s GST/HST return for the reporting period in which the amount is deducted. Subsection 234(2.1) outlines the consequences for either not filing the prescribed form or for filing it late: the supplier will have to add an amount to its net tax, equal to interest at the prescribed rate, calculated on the deduction from the day the form should have been filed, and if the form was not filed, also add an amount to its net tax equal to the deduction claimed under subsection 234(2).
Therefore, since the Organization is the sponsor of a foreign convention, it will be entitled to a rebate in respect of the GST/HST on the supply made to it by the Member relating to [the Congress], subject to a 50% limitation on the tax calculated on that part of the consideration for the supply that is reasonably attributable to food, beverages and catering. However, instead of charging and collecting the tax, the Member may choose to pay or credit the rebate amount to the Organization, and claim a corresponding deduction on its GST/HST return. If the Member does pay or credit the rebate amount to the Organization, it must show both the [GST/HST] charged on the supply and the amount paid or credited on its GST/HST return, and also complete and file the form GST106 no later than the due date for the GST/HST return in which the deduction is claimed.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-952-7909. 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,
Jacqueline Russell, CGA
Services and Intangibles Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate
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