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: 126545
December 14, 2012
Dear [Client]:
Subject: GST/HST INTERPRETATION
Place of supply of services
Thank you for your letter of July 26, 2010, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to supplies of services made by […][xyz]. We apologize for the delay in replying to your inquiry.
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.
In your letter, you have indicated that [xyz] provide or acquire various services relating to the leasing of tangible personal property (TPP). These services, […], should be considered to be services to which the general place of supply rules for services under section 13 of the New Harmonized Value-added Tax System Regulations (the Regulations) apply, instead of the more specific place of supply rules under sections 15 and 16 of the Regulations for services in relation TPP.
INTERPRETATION REQUESTED
You would like the CRA to confirm that the general place of supply rules for services under section 13 of the Regulations would apply to the services.
INTERPRETATION GIVEN
A taxable (other than zero-rated) supply of property or a service that is made in Canada is subject to GST at a rate of 5% if it is made in a non-participating province and is subject to HST at the applicable rate if made in a participating province. A zero-rated supply is subject to tax of 0%.
Under paragraph 142(1)(g) of the ETA, a supply of a service (other than a service that is in relation to real property) is made in Canada if the service is, or is to be, performed in whole or in part in Canada. Conversely, under paragraph 142(2)(g), a supply of a service (other than a service that is in relation to real property) is made outside Canada if the service is, or is to be, performed wholly outside Canada.
Section 144.1 of the ETA provides that a supply is deemed to be made in a province if it is made in Canada and is, under the rules set out in Schedule IX, made in the province. Also, under section 144.1, a supply that is made in Canada that is not made in any participating province is deemed to be made in a non-participating province. Pursuant to section 3 of Part IX of Schedule IX, notwithstanding the place of supply rules in any other Part of Schedule IX, a supply of property or a service is made in a province if it is prescribed to be made in the province by Part 1 of the Regulations.
As you know, different place of supply rules apply for services in relation to TPP and other types of services. The application of specific place of supply rules for certain types of services must be considered before the application of the general place of supply rule for services is considered.
As indicated in GST/HST Technical Information Bulletin B-103, Harmonized Sales Tax – Place of supply rules for determining whether a supply is made in a province (available on the CRA web site at http://www.cra-arc.gc.ca/E/pub/gm/b-103/b-103-e.pdf), whether a service is considered to be in relation to TPP depends on whether there is a direct connection between the service and the TPP taking into account the objective of the service and the particular circumstances of each case. There are several guidelines that are used to determine whether there is a direct connection between a service and TPP.
It must first be determined whether the service is designed, developed or undertaken to fulfill or serve a particular need or requirement arising from or relating to the TPP, which involves determining the purpose or objective of the service. The purpose or objective of the service may often be determined by examining a written contractual agreement for the supply between the supplier and the recipient of the service. If there is no formal written agreement, other documentation, such as purchase orders, correspondence between the parties or invoices or receipts may be useful in establishing the purpose or objective of the service.
It must then be determined whether the relationship between the purpose or objective of the service and the TPP is direct rather than merely indirect. If something else comes between the service and the TPP, the connection will not be considered to be direct.
A service and TPP would generally be regarded as being in relation to each other pursuant to the above guidelines if the purpose of the service is to:
• physically count the TPP;
• appraise or value the TPP;
• physically protect or secure the TPP; or
• enhance the value of the TPP.
Similarly, if the service is aimed at effecting or dealing with the transfer of ownership of, claims on or rights to the TPP, or determining title to the TPP, the service will generally be regarded as being in relation to the TPP.
Finally, in order for a service to be considered in relation to particular TPP that is situated at a particular location, and in order to apply the place of supply rules for these types of services, the service must relate to specific TPP that can be determined to be situated at a particular location at a particular time. If the service does not relate to specific TPP, the general place of supply rules for services will generally apply.
The determination of the type of services supplied by [xyz] requires an analysis of the facts in each particular case, including a review of the terms of any contracts and other documents relevant to a specific transaction. Unless it is determined, based on the facts in a particular case, that the objective of a service supplied by [xyz] is aimed at effecting or dealing with the transfer of rights to TPP, or ownership of the TPP, then the service would generally be characterized as a service to which the general place of supply rules for services would apply.
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 613-954-4291. 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,
Geoff Macmillan
Border Issues Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate
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