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: 99181
February 14, 2012
Dear [Client]:
Subject:
GST/HST RULING
Supply of Intangible Personal Property [to a non-resident recipient]
Thank you for your fax of October 29, 2007 concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the supply of intangible personal property. We apologize for the delay in replying.
All legislative references are to the Excise Tax Act (ETA) and the regulations thereunder, unless otherwise specified.
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.
Statement of Facts
We understand the facts as submitted to be:
[...] (the 'Resident Supplier') is a Canadian resident company registered for GST/HST purposes.
[...] (the 'Non-Resident Recipient') is a non-resident, non-registrant company located in [...][Country X].
As described in the provided Agreement between the parties, effective [mm/dd/yyyy], the Resident Supplier has agreed to supply the Non-Resident Recipient with the non-exclusive use rights to information belonging to the Resident Supplier for an up front payment of CD$[...] and contingent payments of CD$[...] in each of the succeeding [...] years.
The Agreement contains no terms or conditions with respect to the location of the [...] use of the rights.
Ruling Requested
You would like to know if the supply of the rights by the Resident Supplier to the Non-Resident Recipient is a zero-rated supply.
Ruling Given
Based on the facts set out above, we rule that the supply of the rights by the Resident Supplier to the Non-Resident Recipient is a zero-rated supply of intangible personal property pursuant to section 10.1 of Part V of Schedule VI 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 supply of the rights is a supply intangible personal property.
Pursuant to paragraph 142(1)(c) of the ETA, a supply of intangible personal property is deemed made in Canada if,
(i) the property may be used in whole or in part in Canada, or
(ii) the property relates to real property situated in Canada, to tangible personal property ordinarily situated in Canada or to a service to be performed in Canada;
Since the rights supplied can be used in whole or in part in Canada, the supply is deemed made in Canada.
A supply of intangible personal property that is deemed made in Canada may be a zero-rated (taxable at 0%) supply under Part V of Schedule VI to the ETA.
Pursuant to section 10.1 of Part V of Schedule VI, a supply of intangible personal property is zero-rated where the supply is made to a non-resident person who is not registered under Subdivision d of Division V of Part IX of the ETA at the time the supply is made, but not including:
(a) a supply made to an individual unless the individual is outside Canada at that time;
(b) a supply of intangible personal property that relates to
(i) real property situated in Canada,
(ii) tangible personal property ordinarily situated in Canada, or
(iii) a service the supply of which is made in Canada and is not a zero-rated supply described by any section of this Part or Part VII or IX;
(c) a supply that is the making available of a telecommunications facility that is intangible personal property for use in providing a service described in paragraph (a) of the definition "telecommunication service" in subsection 123(1) of the ETA;
(d) a supply of intangible personal property that may only be used in Canada; or
(e) a prescribed supply.
Based on the facts, none of the exclusions apply in this case and therefore the supply of the IPP is a zero-rated supply.
For your convenience, find enclosed a copy of GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at (613) 957-8220.
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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