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
XXXXX
XXXXX
XXXXX
XXXXX
Case Number: 85921
Attention: XXXXX
September 21, 2009
Dear XXXXX:
Subject:
GST/HST RULING
Non-resident Non-Profit Organization
Thank you for your letter of XXXXX concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to XXXXX. We apologize for our delay in responding.
All legislative references are to the Excise Tax Act (the ETA) unless otherwise specified.
Statement of Facts
We understand that:
1. XXXXX is a body corporate incorporated by special act of the Parliament of XXXXX.
2. The activities of XXXXX are primarily governed by the provisions of the XXXXX ("Act").
3. The XXXXX Act sets out XXXXX objects to be: XXXXX.
4. The XXXXX Act mandates XXXXX activities to include: XXXXX.
5. XXXXX is permitted to perform these functions in cooperation with members of the XXXXX industry as well as governments and agencies in XXXXX and internationally.
6. The XXXXX Act sets out limits on how XXXXX can manage its money. XXXXX.
7. The XXXXX Act does not address the issue of profit, nor does it provide for the winding up of XXXXX.
8. XXXXX promotes XXXXX by maintaining offices in various countries around the world including Canada.
9. The XXXXX Act specifically prohibits XXXXX from carrying on business as XXXXX.
10. The XXXXX Act requires XXXXX to file an annual report with the government XXXXX responsible for overseeing its operations.
11. XXXXX Annual Reports for the XXXXX - XXXXX fiscal year and for the XXXXX - XXXXX fiscal year both substantiate that XXXXX was operating in a manner consistent with its statutory mandate for those XXXXX fiscal years.
12. These annual reports included financial statement information for the XXXXX fiscal years ending in XXXXX. During these XXXXX fiscal years XXXXX main sources of revenue were government appropriations, industry contributions, advertising revenues, and interest earned on investments.
13. In each of the XXXXX fiscal years under review, appropriations by the Government of the XXXXX accounted for more than XXXXX % of XXXXX total annual revenue.
14. In each of those XXXXX years under review, XXXXX revenue from the sale of goods and services accounted for less than XXXXX % of the total annual revenue.
15. In the fiscal year ending in XXXXX, XXXXX financial statements show total revenue of $ XXXXX. The total expenditures for that fiscal year were $ XXXXX resulting in XXXXX.
16. The financial statements for the fiscal year ending in XXXXX show total revenue of $ XXXXX. The appropriations by the Government of XXXXX were lower than in the previous fiscal year. The total expenditures for the XXXXX fiscal year were $ XXXXX resulting in XXXXX.
17. In the fiscal year ending in XXXXX, XXXXX financial statements show total revenue of $ XXXXX. Appropriations by the Government of XXXXX were again reduced from the amount provided in the XXXXX fiscal year. However, total expenditures for that fiscal year were $ XXXXX resulting in XXXXX.
18. The financial statements for the fiscal year ending in XXXXX show total revenue of $ XXXXX. After XXXXX years of XXXXX, the appropriations by the Government of XXXXX in this fiscal year. The total expenditures for the XXXXX fiscal year were $ XXXXX resulting in XXXXX.
19. During this XXXXX year period, the largest annual operating XXXXX realized by XXXXX ($ XXXXX) amounted to only XXXXX % of its total revenue for that fiscal year.
Ruling Requested
You would like to know if XXXXX qualifies as a "non-profit organization" as that term is defined in the Excise Tax Act ("the ETA").
Ruling Given
Based on its statutory mandate and the contents of its Annual Reports, we rule that XXXXX is considered to be a person organized solely for a purpose other than profit, with no part of its income payable to or otherwise available for the personal benefit of any member; and that for fiscal years ending in XXXXX it operated for a purpose other than profit. Therefore, for those fiscal years it did qualify as a non profit organization under s. 123(1) of the ETA.
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 definition of "non profit organization" set out in the ETA is as follows:
"non-profit organization" means a person (other than an individual, an estate, a trust, a charity, a public institution, a municipality or a government) that was organized and is operated solely for a purpose other than profit, no part of the income of which is payable to, or otherwise available for the personal benefit of, any proprietor, member or shareholder thereof unless the proprietor, member or shareholder is a club, a society or an association the primary purpose and function of which is the promotion of amateur athletics in Canada;
In order for XXXXX to be a non-profit organization under the ETA, it must meet four criteria.
1. "... a person (other than a...government) ..."
The ETA defines "government" as follows: "'government' means Her Majesty in right of Canada or a province". XXXXX was incorporated by a special act of the Parliament of XXXXX and is therefore not a "government" as that term is used in the ETA.
XXXXX is not otherwise one of the organizations excepted from being considered a non-profit organization under the ETA.
2. "... that was organized...solely for a purpose other than profit ..."
Our policy P-215 Determination of Whether an Entity is a "Non-Profit Organization" in the ETA states as follows:
[CRA] will examine the purposes for which the entity was organized to determine whether the entity was organized solely for non-profit purposes. ... An entity may be considered to be organized solely for non-profit purposes if its aims and activities are directed toward the general improvement of conditions within one or more areas of business. ... If the activities of such an entity were consistent with these aims, then it would qualify as a non-profit organization provided that all other conditions with respect to non-profit organizations as defined in subsection 123(1) were complied with.
The following elements of its statutory mandate confirm that XXXXX was organized for a purpose other than profit:
• The objects and functions of XXXXX are directed solely toward the general improvement of conditions within one area of business: XXXXX;
• XXXXX is prohibited from carrying on business as a XXXXX;
• There is nothing in XXXXX statutory mandate which requires it to realize an operating profit;
• There is no statutory obligation on XXXXX to return any of its funds to the Government of XXXXX; and
• XXXXX funds remain subject to the limitation that they be spent solely on XXXXX's operations.
3. "... operated solely for a purpose other than profit ..."
The determination of whether an entity is operated solely for non-profit purposes is a question of fact at any given time. Therefore any determination of whether an entity operated solely for non-profit purposes is specific to the time the determination is made. An organization should review its operations on a yearly basis so as to ascertain whether it continues to satisfy the ETA's requirements for a "non-profit organization".
The annual reports filed by XXXXX for the period under review demonstrate that the organization was operated solely for the purpose of achieving its objects and was not operated for profit:
• The vast majority of XXXXX annual income came in the form of appropriations from the Government of XXXXX;
• The revenue XXXXX generated from the sale of its goods and services accounted for less than XXXXX % of its total income;
• The annual operational XXXXX realized by the activities of XXXXX were not excessive given the organization's over-all budget; and
• When XXXXX realized a XXXXX at the end of a fiscal year, its funding from the Government of XXXXX was reduced in the subsequent fiscal year.
Therefore, we are satisfied that for the fiscal years ending XXXXX, XXXXX operated for a purpose other than profit.
4 "... no part of the income of which is payable to or otherwise available for the personal benefit of, any proprietor, member or shareholder thereof ..."
XXXXX has not been given the power to declare or pay a dividend or otherwise distribute its resources among its members.
The XXXXX Act mandates that the money of XXXXX can only be used to pay or discharge the costs, expenses and other obligations incurred by XXXXX in the performance of its functions. Any remuneration or allowances payable under the XXXXX Act are set by an independent tribunal.
The financial statements for the fiscal years ending in XXXXX confirm that no moneys have been paid to any members of XXXXX nor returned to the Government of XXXXX which created it and continues to fund it.
For fiscal years ending in XXXXX, our review of the statutory mandate and the contents of the Annual Reports confirm that XXXXX:
• Is not an organization who is specifically excluded from being considered a non profit organization;
• Is considered to be a person organized solely for a purpose other than profit;
• With no part of its income payable or otherwise available for the personal benefit of any member; and
• It operated for a purpose other than profit.
Therefore, for those fiscal years it did qualify as a non profit organization under s. 123(1) of the ETA.
If XXXXX statutory mandate remains unchanged and it continues to operate for a purpose other than profit, it would likely continue to qualify as a non profit organization under the ETA.
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
XXXXX
UNCLASSIFIED
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