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.
XXXXX
XXXXX
XXXXX
Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 15th floor
320 Queen Street
Ottawa ON K1A 0L5
March 11, 2010
Case Number: 119250
Attention: XXXXX
XXXXX
Business Number: XXXXX
Subject:
GST/HST INTERPRETATION
Application of the transitional rules for the HST in Ontario to supplies of admissions made by a registered charity
Dear XXXXX:
Thank you for your XXXXX of XXXXX concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to HST transitional rules for supplies of admissions made by a registered charity. Your request has been transferred from the Ontario GST/HST Rulings Centre to the Services and Intangibles Unit. We apologize for the delay in responding to you.
The Government of Canada and the Government of Ontario have signed a Comprehensive Integrated Tax Coordination Agreement for the implementation of the HST in Ontario. The HST will come into effect in Ontario on July 1, 2010, at a rate of 13%, consisting of a 5% federal part (equivalent to the existing GST) and an 8% provincial part.
Legislation required to implement the HST in Ontario, has received Royal Assent by the Parliament of Canada and the Legislative Assembly of Ontario. However, many of the rules which would apply to transactions will be contained in regulations made under the Excise Tax Act (ETA). Although the Government of Ontario has announced details of the rules which may eventually apply, the required regulations have not yet been made by the Government of Canada.
The following interpretation is based on the transitional rules as announced in Information Notice No. 3, released by the Government of Ontario on October 14, 2009. This interpretation should not be taken as a statement by the Canada Revenue Agency (CRA) that these transitional rules will be made in their current form.
We understand that:
• XXXXX (the Charity) is a registered charity for income tax purposes, is registered for GST/HST purposes and is a resident of Ontario.
• The Charity supplies admissions (the Admission Tickets) to live theatre shows and events (the Performances) such as XXXXX. The Admission Tickets to the Performances are sold individually for each performance (i.e. the Performances are not bundled up for sale as a package).
• The Admission Tickets went on sale for the 2010 season on XXXXX, for the calendar of Performances beginning in XXXXX and ending in XXXXX.
• The Admission Tickets are supplied to individuals and payment is due when ordered. Groups and schools may make two payments: the first payment is due within XXXXX days of ordering tickets and the remaining payment is due XXXXX days prior to the Performances.
• The Charity uses the Special Net Tax Calculation for Charities.
• For its non-commercial activities, the Charity has been claiming a rebate at the rate of 50% of the GST it paid on eligible purchases for these activities.
Interpretation Requested
You would like to know:
1. When should the Charity begin to charge 13% HST on supplies of Admission Tickets to individuals and groups and schools?
2. Will the Charity retain 40% of the HST it collects on its commercial activities under the Special Net Tax Calculation for Charities?
3. Will the Charity receive an HST rebate of 50% for tax paid on eligible purchases of goods and services used in non-commercial activities?
Interpretation Given
Place of Supply
Based on the proposed new place of supply rules announced by the Government of Canada on February 25, 2010, Government of Canada Announces Proposed Changes to Place of Supply Rules for the Harmonized Sales Tax (HST), your supply of admissions takes place in Ontario.
1. Transitional Rules for Admissions under the Proposed HST for Ontario
Under the proposed HST, admissions (intangible personal property) will have special transitional rules. The HST would generally apply to any consideration for a supply of an admission to a place of amusement, a seminar, an event or an activity (hereafter referred to as an event or activity) that becomes due, or is paid without having become due, on or after May 1, 2010 to the extent that the consideration relates to the part of the event or activity that occurs on or after July 1, 2010. However, the HST would not apply to the consideration for a supply of an admission if 90% or more of the event or activity to which the admission relates occurs before July 2010.
Therefore, the proposed HST applies to the consideration for the Charity's supplies of Admission Tickets that would become due, or would be paid without having become due, on or after May 1, 2010, to the extent that the consideration relates to a Performance that occurs on or after July 1, 2010.
An amount for a supply of an intangible personal property becomes due on the earliest of the following days:
• the date of an invoice for that amount for the supply;
• the day the supplier first issues that invoice for the amount,
• if there is an undue delay in issuing that invoice, the day the supplier would have issued the invoice; and
• the day the client is required to pay that amount under a written agreement.
An amount is paid without having become due when a client pays an amount due for a supply:
• before the date of an invoice, or before a supplier issues, or would have issued, the invoice; or
• before the client is required to pay the amount under a written agreement and no invoice has been issued.
When GST applies to an admission, the Charity accounts for the tax in its GST/HST return according to the normal rules.
When HST applies to an admission, the Charity accounts for:
• the 5% federal part of the HST in its GST/HST return according to the normal rules; and
• the 8% provincial part of the HST in its GST/HST return for the reporting period that includes July 1, 2010. The purchaser, if a registrant, will be able to claim any eligible input tax credit in its GST/HST return for the reporting period that includes July 1, 2010.
Example 1:
An individual orders two tickets on May 15, 2010 costing a total of $100 and the Charity issues an invoice on that same day for the Admission Tickets to a Performance to be held on July 15, 2010.
The tax is due on the earlier of: the payment date (i.e., May 15, 2010) or the due date (i.e., May 15, 2010 which is the date of the invoice and the date it was issued). Therefore, the Charity must account for the 5% federal part of the HST (i.e., $5) in its net tax calculation in its GST/HST return for the reporting period that includes May 15, 2010, and the 8% provincial part of the HST (i.e., $8) in its net tax calculation in its GST/HST return for the reporting period that includes July 1, 2010.
Example 2:
A school orders Admission Tickets for a total of $1,000 on March 15, 2010, for a Performance to be held on August 1, 2010; the Charity issues an invoice dated March 15, 2010. The terms of payment are: a 30% payment is due on April 15, 2010 and the remaining 70% is due on July 1, 2010. The school pays $300 on April 20, 2010 and $700 on June 10, 2010.
The tax is due on the earlier of the payment dates (i.e., April 20, 2010 or June 10, 2010) or the due date (i.e., March 15, 2010 which is the date of the invoice and the date it was issued). Therefore, the tax is due on March 15, 2010 and the Charity must account for the 5% GST (i.e., $50) in its net tax calculation in its GST/HST return for the reporting period that includes March 15, 2010.
Further information can be found in the Ontario Ministry of Revenue's Information Notice No. 3, General Transitional Rules for Ontario HST available at: http://www.rev.gov.on.ca/en/formpub/topic/data.html?sid=171.
You can also obtain further information in GST/HST Info Sheet GI-058, Ontario and British Columbia: Transition to the Harmonized Sales Tax - Admissions. This info sheet is available at the CRA Web site at: http://www.cra-arc.gc.ca/formspubs/typ/menu-eng.html.
2. Special Net Tax Calculation for Charities (the Method)
The GST framework provides a separate Method for charities that they are generally required to use to account for tax on their taxable supplies. Under this Method, charities are not required to track the GST paid on inputs to most taxable supplies. The general rule is that charities remit 60% of the tax collected on their taxable supplies and keep the remaining 40% in lieu of claiming ITCs (there are certain exceptions, such as for real property and capital property, where ITCs may be claimed).
Under the proposed HST, Ontario will also accept this Method for use by certain charities.
Generally, the Charity will remit 60% of the provincial part of the HST it collects in addition to 60% of the GST on its taxable supplies.
Please refer to the Ontario's Tax Plan for Jobs Growth: Cutting Personal and Corporate Taxes and Harmonizing Sales Taxes, under the title "Special Net Tax Calculation for Charities" which may be obtained at: http://www.fin.gov.on.ca.
3. Rebates for Charities
Under the GST framework, generally, a charity may claim a 50% rebate of the amount of the GST or the federal part of the HST paid or owed on eligible purchases and expenses used in its activities. The charity may also be eligible for a rebate of some of the provincial part of the HST that it paid or owed if it is a charity that is not a selected public service body and is resident in a participating province.
The Province of Ontario will use the existing GST framework for the provincial part of the HST rebate for charities except that the proposed rate of the rebate of the provincial part of the HST would be 82%.
The foregoing comments represent our general views with respect to the transitional rules as announced in Information Notice No. 3, released by the Government of Ontario on October 14, 2009, as they relate to the subject matter of your request. Any change to the wording of these transitional rules or any regulations regarding the HST in Ontario, if made, could have an effect on the interpretation provided herein. 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 CRA with respect to a particular situation.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-954-9700. 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,
Michèle Routhier
Services and Intangibles Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate
UNCLASSIFIED
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