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: 61950
December 12, 2012
Dear [Client]:
Subject: GST/HST RULING
Supply of services to a non-registered non-resident [NRNR]
Thank you for your letter of [mm/dd/yyyy], concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to supplies made by […] (Canco) to […] (NRNR). We apologize for the delay in replying.
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 that:
1. NRNR is not resident in Canada, is not registered for the GST/HST, and does not carry on business in Canada for GST/HST purposes.
2. Canco is a company resident in Canada and is registered for the GST/HST.
3. Canco operates and maintains a collection of servers and storage devices located in Canada and made operational by a combination of operating and application software […].
4. Canco supplies NRNR with central processing unit (CPU) capacity and storage capacity on the Framework based on fixed periods of time (the “period”). […]
5. […].
6. […].
7. The customer uploads its specific software applications, together with its proprietary data, and uses the environment (customized with its own software) during their period to process its data. The customers are given incidental use of software that makes the Framework operational solely for the purpose of accessing and utilizing the Framework.
8. At the end of the period, the customer will vacate the environment; however, its application software may be stored within the storage disks accessible to the Framework for use during the user’s next reservation period. The customer’s proprietary data is not stored on Framework-connected storage devices. Such data must be uploaded by the customer on each occasion. […]
9. Between periods, Canco personnel reset the Framework environment for the next customer.
10. During each period, Canco personnel monitor and maintain the continuing availability of the Framework environment, and […], Canco personnel can shut down the customer’s environment or cut the customer off from the Framework.
RULING REQUESTED
You would like to know whether the supplies made by Canco to NRNR as described in the facts are zero-rated supplies of services pursuant to section 7 of Part V of Schedule VI.
RULING GIVEN
Based on the facts set out above, we rule that the supplies made by Canco to NRNR as described in the facts are zero-rated supplies of services pursuant to section 7 of Part V of Schedule VI.
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
Based on the facts, we agree that the supplies made by Canco to NRNR are taxable supplies of services that are similar in nature to supplies such as application hosting, website hosting and data warehousing. Basically, Canco provides capacity to store and run the software applications and data of customers on its equipment located in Canada and monitors and maintains the equipment.
The supplies of the services made by Canco to NRNR that are performed in Canada are deemed to be made in Canada under paragraph 142(1)(g). Subject to some exclusions, section 7 of Part V of Schedule VI zero-rates the supply of a service made to a non-resident person. Based on the facts, none of the exclusions in section 7 of Part V of Schedule VI would apply with respect to the supplies of the services by Canco to the NRNR. The supplies of the services are therefore zero-rated under section 7 of Part V of Schedule VI.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-957-8220. 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,
Kevin W. Smith
Border Issues Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate
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