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: 145581
September 11, 2012
Dear [Client]:
Subject: GST/HST INTERPRETATION
Importation of U.S. Based Aircraft
Thank you for your [correspondence] of [mm/dd/yyyy], concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the importation of aircraft. Reference is also made to […].
HST applies at the rate of 15% in Nova Scotia, 13% in Ontario, New Brunswick, and Newfoundland and Labrador, and 12% in British Columbia. GST applies at the rate of 5% in the remaining provinces and territories.
All legislative references are to the Excise Tax Act (ETA) unless otherwise specified.
FACTS
We understand that […] (the Canadian company), a GST/HST registrant, is analyzing the possibility of importing United States based utility aircraft into Canada for […]. There are [#] […][Aircraft A] and [#] […][Aircraft B]. It is also considering using a [#] [Aircraft A]. Due to American foreign ownership rules, these aircraft are in an ownership trust agreement between the Canadian company’s American subsidiary and an American bank.
[…]
No agreement exists between the American subsidiary and the Canadian company governing the use of the aircraft in Canada. The American based aircraft operate in accordance with U.S. Federal Aviation Administration (FAA) rules under Federal Aviation Regulations Part 91 and in addition, they operate under the guidelines of the Canadian company’s US Aviation Operations Manual along with a low level waiver issued by the Federal Aviation Administration.
Concerning who the importer of record would be, you have stated that it could be either the Canadian company or the American subsidiary.
INTERPRETATION REQUESTED
You would like to know what costs the Canadian company would incur (if any) to have these American registered aircraft imported into Canada: […]
INTERPRETATION GIVEN
Pursuant to section 212, every person who is liable under the Customs Act to pay duty on imported goods, or would be liable if the goods were subject to duty, is required to pay 5% GST on the value of the goods. The value of the goods is determined by the Canada Border Services Agency (CBSA), pursuant to section 215, under the valuation rules of the Customs Act and related legislation. Where the person importing the goods is a resident of a participating province and the goods are not commercial goods, the provincial portion of the HST at the applicable rate is payable pursuant to section 212.1.
In certain circumstances, the importation of an aircraft may be relieved from the payment of GST/HST. Pursuant to section 1 of Schedule VII to the ETA, goods that are classified under headings 98.01, 98.02 and 98.03 of Schedule I to the Customs Tariff qualify as non-taxable importations to the extent that the goods are not subject to duty under the Customs Tariff. Heading 98.01 addresses importations of conveyances or containers engaged in the international commercial transportation of goods or passengers, heading 98.02 addresses the temporary importation of conveyances by a resident to be employed in the international non-commercial transportation of the person and accompanying persons using the same conveyance, and heading 98.03 addresses temporary importations of a conveyance and baggage by a non-resident person for use by the person in Canada. The determination of whether a good can be imported tax-free under any of these tariff classification headings is ultimately the responsibility of the CBSA. Further information on this relief or on any duties payable on importation can be obtained from the CBSA by contacting the Border Information Service (BIS) line, free of charge throughout Canada, by calling 1-800-461-9999. If you are calling from outside Canada, you can access the BIS line by calling 204-983-3500 or 506-636-5064 (long-distance charges will apply). You may also contact the CBSA by email at Contact@cbsa.gc.ca.
Further, where the previous paragraph would not apply, section 14 of the Value of Imported Goods (GST/HST) Regulations under the ETA provides that under certain conditions GST/HST is payable on 1/60th of the value for duty of an aircraft for each month or part of a month that the aircraft remains in Canada, plus any remaining duties payable in respect of the aircraft. This relief applies where the aircraft is being leased from a non-resident lessor at an arm’s length relationship. The aircraft must be exported on or before the termination of the lease or the day that is 24 months after its importation, whichever comes first. The leased aircraft may be exported and re-imported more than once. However, the total number of months that it is held in Canada under a lease with the lessor cannot exceed 24. Finally, the lessee must have obtained authorization from the Minister of National Revenue to determine the value of the imported aircraft on the 1/60th basis.
In this case, no lease has been drawn up for the use of the aircraft by the Canadian company. Furthermore, from the information provided, a lease between the Canadian company and the American subsidiary would appear not to be at arm’s length, given that the American subsidiary is a subsidiary of the Canadian company. If a lease was drawn up between the Canadian company and the trustee, it would be a question of fact whether this would be an arm’s length lease. In addition, the length of time that the aircraft will be in Canada is unclear.
Where relief from tax is not available under section 1 of Schedule VII to the ETA or section 14 of the Value of Imported Goods (GST/HST) Regulations under the ETA as described above, GST (and HST if applicable) is payable on the full duty paid value.
Claiming ITCs [& Carrying on Business in Canada]
[…] [refer to 145581R]
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 613-957-8253. 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,
Gunar Ozols
Goods Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate
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