Please note that the following document, although correct at the time of issue, may not represent the current position of the Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence.
Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 15th floor
320 Queen Street
Ottawa ON K1A 0L5
Case Number: 104230
Attention: XXXXX
April 1, 2009
Subject:
GST/HST INTERPRETATION
Supplies Made by Non-Residents to Charity
Dear XXXXX:
Thank you for your letter of XXXXX concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to a hypothetical situation involving a charity which hires non-resident performers for a musical concert.
All legislative references are to the Excise Tax Act (the Act) unless otherwise specified.
For the purposes of this hypothetical situation, you have asked us to make the following assumptions:
1. Your client is a registered charity as defined in the Act.
2. Providing musical concerts is one of your client's charitable activities.
3. Many of the hired performers at the musical concert are non-residents.
4. The admission to the concerts is a taxable supply. (However, please see point "B" in the next paragraph below.)
5. The non-resident performers are not deemed to be carrying on business in Canada. (However, see point "D" in the next paragraph below.)
6. The non-resident performers are not registrants for GST/HST purposes.
7. The charity is charging the admissions to the musical concert.
8. The non-resident musical performers are not charging admission to the musical performance.
However, there are additional facts which have a bearing on the application of the Act to this situation, but on which you have not provided any information:
A. Is the client a registrant under the Act?
B. Does any provision in Part V.1 of Schedule V of the Act exempt the supply of admissions to the musical concerts?
C. Are the concerts provided by your client "commercial activities" as that phrase is used in s. 217 of the Act?
D. With respect to the issue of whether the non-resident musicians are carrying on business in Canada, the phrase "carrying on business in Canada" is not defined in the Act. Whether a non-resident is carrying on business in Canada is a question of fact requiring a consideration of all relevant facts, none of which have been provided to us for the purpose of this letter. For a complete explanation of the factors and principles to be considered please see our policy P-051R2.
E. Are all the resident performers always required to charge your client the GST/HST? and;
F. Has your client filed an election under subsection 225.1(6)?
Interpretation Requested
You would like to know if you have interpreted sections 217, 218, 143 and 225.1 of the Act correctly in light of the eight numbered assumptions listed above.
Interpretation Given
The statutory provisions which govern the tax treatment of a supply by non-resident performers are as follows:
Section 218 of the Act:
218. Subject to this Part, every recipient of an imported taxable supply shall pay to Her Majesty in right of Canada tax calculated at the rate of 5% on the value of the consideration for the imported taxable supply.
Section 217 of the Act:
217. In this Division, "imported taxable supply" means
(a) a taxable supply (other than a zero-rated or prescribed supply) of a service made outside Canada to a person who is resident in Canada, other than a supply of a service that is:
(i) acquired for consumption, use or supply exclusively in the course of commercial activities of the person....
Section 143 of the Act:
143. (1) For the purposes of this Part, a supply of personal property or a service made in Canada by a non-resident person shall be deemed to be made outside Canada, unless
(a) the supply is made in the course of a business carried on in Canada;
(b) at the time the supply is made, the person is registered under Subdivision d of Division V, or
(c) the supply is the supply of an admission in respect of a place of amusement, a seminar, an activity or an event where the non-resident person did not acquire the admission from another person.
Due to assumptions 5, 6, and 8, section 143 of the Act deems the services supplied by the non-resident performers to be "made outside of Canada".
We do not have any information to determine if the concerts provided by your client are "commercial activities" as that phrase is used in s. 217 of the Act. If these concerts are "commercial activities" under s. 217, the deeming provision of 143 means that subsection 217(a) quoted above excludes the supply made by the non-resident performers from the definition of "imported taxable supply" as that term is used in section 218 of the Act.
The combined operation of your assumptions and these three sections of the Act would be that your client would not be liable to self assess for GST/HST on the services rendered by the non-resident performers.
Pursuant to section 225.1(2) of the Act, Charities that are registrants have to use a special Net Tax Calculation where they remit 60% of the GST/HST collected on taxable supplies and only claim ITCs for purchases of real property, capital personal property and improvements to real or capital property of the charity. A charity must remit 100% of the GST/HST collectible by them on their sales of capital property and other specifically enumerated supplies. In addition, they may claim the 50% Public Service Bodies' Rebate for the GST/HST paid and for which they cannot claim an ITC, whether it related to their taxable or exempt activities.
Where substantially all of a charity's supplies are taxable, it can file an election under subsection 225.1(6) which would allow it to opt out of using the Net Tax Calculation. Where a charity has made this election it would be entitled to claim input tax credits to the extent that GST/HST was paid or payable on inputs acquired, imported or brought into a participating province by it for consumption, use or supply in the course of making taxable supplies for consideration.
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 613-952-0329. 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
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate
Enc.:
UNCLASSIFIED
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