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: 116823
Business Number: […]
November 28, 2012
Dear [Client]:
Subject: GST/HST RULING
Application of GST/HST to Missionary Activities
Thank you for your letter of July 28th, 2009, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the missionary activities you carried out in […][Country X]. We apologise for our delay in responding.
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.
STATEMENT OF FACTS
We understand:
1. You […] worked as missionaries in [Country X] from [yyyy] to [yyyy]. During this period, you resided in [Country X] […].
2. While you were in [Country X] you owned no property in Canada. […] was used as your Canadian address. During periods of time when you would visit […][Province A] you would reside in that residence.
3. Your mission work in [Country X] involved building Christian churches and community-use buildings, preaching Christian doctrine, and training local church workers. […].
4. When you commenced your missionary activities in [Country X] your missionary work […][was] funded by an organization named the […][Organization].
5. In [yyyy] the [Organization] merged with another organisation, which required you to find another source of funding for your missionary activities. You then approached […] (the Funder) to support your missionary activities in [Country X].
6. The Funder is a registered charity within the meaning of the Income Tax Act. Its operations are conducted out of its offices located in the [Province A]. The Funder’s charitable object is to conduct Christian religious and missionary services as a religious missionary order. Its primary strategy to achieve this object is to: […][direct quote]
7. In its Registered Charity Information Return (T3010A) filed for its year ending [mm/dd/yyyy], the Funder reported the following:
* It had a total income of $[…], all of which was derived from tax-receipted gifts.
* Its total annual expenditures were $[…], of which the sum of $[…] was spent on its charitable activities and $[…] was spent on administrative costs.
* It distributed a total of $[…] for missionary work in [Country X], […][other Countries].
* The recipients of these funds were intermediaries working “under agency agreement, contract, joint-venture or similar arrangements” (as opposed to legal agents, employees or volunteers of the Funder).
8. The Funder covers its administration costs by using a portion of the tax-receipted funds donated by third parties to its missionary work.
9. You obtained funding each year by providing a project plan for the year ahead including a project budget. The Board of Directors of the Funder evaluated the project plan and once the Funder was satisfied that the project was in line with its own charitable objects, it approved funding of the project. After the first year of funding you would also provide a report on the missionary work completed in the previous year.
10. Each year you would enter into a Joint Venture Agreement with the Funder for that year. The Joint Venture Agreement stated that you worked in [Country X] as independent contractors. At no time while you received funding from the Funder did you consider yourselves employees, legal agents or authorized representatives of the Funder. You had no ability to make agreements on behalf of the Funder. The only direct oversight the Funder imposed on your project was the requirement to provide a written report at the end of each year to explain how the funding was used.
11. It was your responsibility to find churches and individuals in [Province A] to make donations to the Funder which would be used to finance your activities. To this end you would return to [Province A] for approximately [#] months each year to speak at various churches. During these speaking sessions you would both describe the work you had done to date and also request that donations be made to the Funder designated for use to support your missionary work in the upcoming year.
12. You understood that any money donated by third parties to the Funder in support your missionary work was subject to the Funder’s designated gift policy.
13. The Funder’s […] policy is stated on their website as follows: […]
14. Between [yyyy] and [yyyy] you received the following amounts from the Funder: […]
All of these amounts were paid to you out of tax-receipted funds which third party donors had donated to the Funder to support your mission work. These amounts were used by you exclusively to fund your missionary activities, which included the living expenses of your family.
15. As far as you are aware, no third party donor has ever received a direct or indirect benefit from the missionary work you performed in [Country X].
16. During this time period, you did not receive any other financial support for your missionary activities nor did you acquire any property or other assets in [Country X].
17. As you considered yourself self employed individuals, you reported the income received from the Funder as business income.
18. As a result of filing your [yyyy] income tax return showing gross business income of $[…], you received notices to file GST/HST returns and to remit any GST/HST collected or collectable on the funds you received from the Funder.
RULING REQUESTED
You would like to know if you are liable for GST/HST collected or collectable on funds provided to you by the Funder.
RULING GIVEN
Based on the facts set out above, we rule that that the funding provided by the Funder to […][you] is a grant and not consideration for a supply and therefore, not subject to the GST/HST.
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
The Funder is a registered charity for purposes of the ITA and a charity for ETA purposes. The Funder’s charitable object is the conducting of Christian religious and missionary services. Its primary activity is to fund missionary work that is consistent with the Funder’s charitable purposes. The Funder is funded in large part, by tax-receiptable donations from third parties. While individual missionaries are expected to actively fund-raise to support their missionary work, the funds raised are provided in the form of donations to the Funder and not to the missionary. The Funder issues tax receipts for those donations received. It uses some of the donation funds it receives to pay for its administration costs of operating the funding program.
Although a third party can designate that its donations be used to support specific missionaries or ministries, the granting of the funding to a particular missionary is in the absolute discretion of the Board of Directors. The Funder restricts funding to an eligible missionary based on the budget filed by the missionary, and not solely on the amounts donated by third parties. All missionaries who receive funding from the Funder must submit annual reports to the Funder detailing the work undertaken with the funds together with an annual financial report accounting for the use of the funds provided.
In accordance with the guidelines set out in the TIB-067 Goods and Services Tax Treatment of Grants and Subsidies, in general, transfer payments made for a public purpose or for charitable purposes will not be consideration for a supply under the ETA unless there is a “direct link” between the payment and a provision of goods and services made to the grantor of the funding or a specified third party.
In this case, you had been engaged in your missionary activities since [yyyy], [#] years before first approaching the Funder for financial support. The only connection between your missionary work and the funder is the similarity of subject matter that allowed your missionary activities to fall within the charitable objects of the Funder.
The payment of money by the Funder to you was made for charitable purposes as it is provided pursuant to an on-going funding program under which the Funder provides funding to eligible missionaries who are undertaking missionary work that is consistent with the charitable purposes of the Funder. It is our view that there is no direct link between the payment of the funding to you and a provision of goods and services to the Funder or a specified third party.
Based on the information provided, at no time were you providing services to the Funder. Rather the funds you received were used to support your on-going missionary activities. You were never contractually obligated to provide services to the Funder or to specified third parties in exchange for the funding.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-952-0329. 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,
Michael Mavis
Charities, Non-Profit Organizations and Educational Services Unit Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate
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