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.
[Addressee]
Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 15th floor
320 Queen Street
Ottawa ON K1A 0L5
Case Number: 139980
January 23, 2012
Dear [Client]:
Subject:
GST/HST INTERPRETATION
[Whether a non-resident company is considered to have a] Permanent Establishment [in Canada]
Thank you for your [...][inquiry] of September 15, 2011, concerning whether a non-resident company [(the Company)] is considered to have a permanent establishment in Canada for purposes of the Excise Tax Act (ETA).
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 ETA unless otherwise specified.
We understand the following:
The Company based in [...][Country X], provides computer consulting services to clients in Canada and [Country X].
The Company is a GST/HST registrant.
The Company has [#] employees in Canada and a Canadian subcontractor (herein the "Canadian Staff").
The Canadian Staff provide temporary staffing to the Company's clients in Canada and [Country X] in the areas of software and computer consulting.
The Canadian Staff is not restricted in where they perform their services. The Canadian Staff work from their homes in Canada.
Canadian Staff do not have authority to contract on behalf of the Company.
Canadian Staff do not solicit orders or make offers on behalf of the Company.
The Company has no property in Canada (i.e. land, buildings, machinery, and inventory).
The Company has a bank account in Canada.
The Company has no rental operations in Canada.
The Company maintains a "virtual office" in Canada serving as a mail stop and telephone answering service.
Interpretation Requested
You would like to know if the Company has a permanent establishment in Canada for purposes of the ETA.
Interpretation Given
Based on the information provided, the Company does not have a permanent establishment in Canada as defined under subsection 123(1) of the ETA.
Pursuant to subsection 123(1) of the ETA a "permanent establishment", in respect of a particular person, means
(a) a fixed place of business of the particular person, including
(i) a place of management, a branch, an office, a factory or a workshop, and
(ii) a mine, an oil or gas well, a quarry, timberland or any other place of extraction of natural resources, through which the particular person makes supplies, or
(b) a fixed place of business of another person (other than a broker, general commission agent or other independent agent acting in the ordinary course of business) who is acting in Canada on behalf of the particular person and through whom the particular person makes supplies in the ordinary course of business;
GST/HST Policy Statement P-208R: Meaning of "Permanent Establishment" In Subsection 123(1) of the Excise Tax Act (a copy may be attained at http://www.cra-arc.gc.ca/E/pub/gl/p-208r/README.html), sets out various factors to consider in determining whether a person has a permanent establishment under subsection 123(1) of the ETA, and more specifically, whether there is a fixed place of business in Canada of the person or that of another person described in the provision.
Based on the information provided and the application of the factors in the policy statement, the Company would not appear to be considered to have a permanent establishment in Canada as defined in subsection 123(1) of the ETA.
With respect to your inquiry regarding laptops, based on the information provided, this would not result in the Company having a permanent establishment in Canada for GST/HST purposes.
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 (a copy may be attained at http://www.cra-arc.gc.ca/E/pub/gm/1-4/README.html), 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 613-957-8220. 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
UNCLASSIFIED
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