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: 152222
Business Number: […]
May 5, 2014
Dear [Client]:
Subject: GST/HST RULING
[…] [Public service bodies’ rebate of the provincial part of the HST – whether resident in a province]
Thank you for your letter of [mm/dd/yyyy], concerning […] (the Association)’s entitlement to claim a public service body rebate of the provincial part of the Harmonized Sales Tax (HST). We apologize for the delay in responding to your enquiry.
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 Goods and Services Tax (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Effective April 1, 2013, the 12% HST in British Columbia has been replaced by the 5% GST and a provincial sales tax.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.
STATEMENT OF FACTS
We understand
1. The Association was incorporated without share capital under the laws of Canada on [mm/dd/yyyy]. The Association is not continued elsewhere.
2. The Association is a registered charity for income tax purposes, effective [mm/dd/yyyy]. The Association is also a charity for ETA purposes.
3. The Association is not registered for GST/HST purposes. However the Association files for the public service bodies’ rebate using GST/HST account number […].
4. The Association is a national organization composed of the provincial associations […] from several [participating and non-participating] provinces […]. Each member provincial association has an equal vote in the operation of the Association.
5. Pursuant to […] of the Association’s Bylaws, the Association’s board of directors consists of the Executive Committee and the president of each member provincial association.
6. Pursuant to […] of the Association’s Bylaws, the Executive Committee is comprised of the officers of the Association and the immediate past president. […]
7. There are […] directors/ trustees and like officials listed on the Association’s 2012 T1235, Directors/Trustees and Like Officials Worksheet, […]. Two of these officials reside in […][Province 1], one in […][Province 2] and one in […][Province 3].
8. The main purpose of the Association is to […][describes the Association’s purpose] and this is primarily accomplished at the Association’s annual conference. In 2012, the conference was held in […], […][Province 4].
9. In its T3010, Registered Charity Information Return for the fiscal year ending [mm/dd/yyyy], the Association described its ongoing programs as follows: […]
10. The Association has no fixed place of activities.
11. The Association does not own any real property.
12. As set out in the Association’s Letters Patent dated [mm/dd/yyyy], the Association’s head office was initially in […][Province 5]. Pursuant to […], […] [the Board of Directors determines the location of the head office]
13. In correspondence dated [mm/dd/yyyy], the Association’s representative explained […] [describes how the location of the Association’s head office is determined]
14. According to the Association’s Federal Corporation Information available on Industry Canada’s website, the Association’s registered office address is […], [Province 1] […].
15. In a phone conversation with […][a rulings officer] of the Canada Revenue Agency on [mm/dd/yyyy], the Association’s representative explained that the Association’s directors meet once or twice a year for board meetings, most recently in [Province 2].
16. In a phone conversation on [mm/dd/yyyy], the Association’s representative explained that meetings of the board of directors usually occur by conference call. The board of directors meets in person at the annual conference, which is also the location of the Association’s annual general meeting. The board of directors held a meeting at the 2012 conference in […], [Province 4].
17. The Association’s books and records are kept with the treasurer. Audited books from past years are kept with the president. As such, the books move around depending on the locations of the current officers. In 2012, both the president and the treasurer lived in [Province 1].
18. Until [mm/yyyy], the Association’s bank accounts were located in […][Province 6].
19. Contracts and other documents which require a signature are sent to the location of the appropriate officer(s) for signing. Pursuant to […] of the Association’s Bylaws, all documents requiring a signature for the Association shall be executed for the Association by any two of the President, Vice-President or Treasurer. The board of directors has the power to appoint any officer(s) or director(s) to sign specific documents on behalf of the Association.
RULING REQUESTED
You would like to know
1. In which provinces was the Association resident in 2012? In particular, was the Association resident in [Province 4]?
2. Is the Association entitled to claim a public service bodies’ (PSB) rebate of the provincial part of the HST for the claim periods of January 1 – June 30, 2012, and July 1 – December 31, 2012?
RULING GIVEN
Based on the facts set out above, we rule that
1. The Association was resident only in [Province 1] in 2012. The Association was not resident in [Province 4].
2. The Association is not entitled to claim a PSB rebate of the provincial part of the HST for the claim periods of January 1 – June 30, 2012, and July 1 – December 31, 2012.
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
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 subsection 132.1(1), a person is deemed to be resident in a province if:
* the person is resident in Canada; and
* one of paragraphs 132.1(1)(a)-(d) applies.
Pursuant to paragraph 132(1)(a) of the ETA, 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 Association is incorporated under the laws of Canada and is not continued elsewhere. Therefore, the Association is deemed to be resident in Canada.
Paragraphs 132.1(1)(a)-(c) do not apply to the Association. 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. 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. 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.
Pursuant to paragraph 400(2)(a), where a corporation does not have any fixed place of business, permanent establishment means the principal place in which the corporation's business is conducted. The term “principal” is not defined in the Income Tax Act or the ETA; therefore, it must be given its ordinary meaning. The word “principal” is generally regarded as being synonymous with the words “chief” or “main”.
Based on the facts provided, the principal place in which the Association’s activities are conducted is [Province 1]. [Province 1] is the chief or main place where corporate decisions are made. During the relevant claim periods, two of the members of the Executive Committee resided in [Province 1], the President and Treasurer. These two officers also had signing authority on behalf of the Association. In addition, the Association’s books and records were kept in [Province 1].
Therefore, the Association would have a permanent establishment in [Province 1] under paragraph 400(2)(a) of the Income Tax Regulations, if the Association’s activities were a business for income tax purposes. As such, the Association is deemed to have a permanent establishment in [Province 1] under subsection 132.1(3) of the ETA. As the Association is deemed to have a permanent establishment in [Province 1], the Association is deemed to be resident in [Province 1] under paragraph 132.1(1)(d) of the ETA.
The Association does not have a permanent establishment in [Province 4] under any of the circumstances set out in subsection 400(2) of the Income Tax Regulations. As such, the Association is not resident in [Province 4].
Charities that are not resident in a participating province are not eligible for a PSB rebate of the provincial part of the HST. The Association is only resident in [Province 1], a non-participating province. Therefore, the Association is not entitled to claim PSB rebate of the provincial part of the HST. However, the Association is entitled to claim a PSB rebate of 50% of the GST or the federal part of the HST. For further information, see Guide RC4034, GST/HST Public Service Bodies’ Rebate.
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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