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
Case Number: 120912
Attention: XXXXX XXXXX
May 11, 2010
Dear XXXXX:
Subject:
GST/HST RULING
GST on Supplies of Intangible Personal Property
Thank you for your XXXXX of XXXXX, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to license fees payable for rights to XXXXX.
All legislative references are to the Excise Tax Act (ETA) unless otherwise specified.
Statement of Facts
We understand from your incoming XXXXX and subsequent telephone conversation the following:
XXXXX. (the "Company") is a non-resident XXXXX. The Company enters into arrangements with XXXXX for the administration of their copyrights. The Company acquires the rights to market the works by the XXXXX. Clients (occasionally including those in Canada) enter into licensing agreements with the Company whereby consideration is paid (license fees) for the right to XXXXX.
The Company is not registered for the GST/HST.
The Company does not have any fixed place in Canada through which the Company makes supplies.
The Company has no employees or agents in Canada.
The Company has no bank accounts in Canada.
Solicitation is mainly via the internet. The Company website does not direct any solicitation specifically to the Canadian market.
Payments from recipients in Canada are made to the Company through XXXXX.
All contact with clients in Canada is made through XXXXX.
The Company is not making supplies in Canada as agent of a principal. The Company enters into licensing arrangements on its own account and is not arranging transactions for a principal.
Ruling Requested
You would like to know whether the GST/HST is exigible on the consideration for the supply of intangible personal property under the licensing agreements made by the unregistered Company..
Ruling Given
Based on the facts set out above, we rule that the Company is deemed to be making the supplies of the intangible personal property (IPP) outside Canada pursuant to subsection 143(1) of the ETA and hence, they do not have to charge or collect the GST/HST on those supplies.
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.
For your convenience, find enclosed a copy of GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service.
Explanation
Subsection 143(1) provides that a supply of personal property or a service made in Canada by a non-resident person is deemed to be made outside Canada, unless the supply is made in the course of a business carried on in Canada or the person is registered when the supply is made.
The supplies of intangible personal property by the Company that may be used in Canada are deemed to be made outside Canada under subsection 143(1).
Based on the facts, the Company is not considered to be carrying on business in Canada for purposes of the ETA. A non-resident person must have a significant presence in Canada to be considered to be carrying on business in Canada.
As set out in the enclosed GST/HST Policy Statement P-051R2: Carrying on Business in Canada, whether a non-resident is carrying on business in Canada for GST/HST purposes is a question that requires consideration of all relevant facts. The factors to consider in determining whether, for GST/HST purposes, a non-resident person is carrying on business in Canada in a particular situation include:
• the place where agents or employees of the non-resident are located;
• the place of delivery;
• the place of payment;
• the place where purchases are made or assets are acquired;
• the place from which transactions are solicited;
• the location of assets or an inventory of goods;
• the place where the business contracts are made;
• the location of a bank account;
• the place where the non-resident's name and business are listed in a directory;
• the location of a branch or office;
• the place where the service is performed; and
• the place of manufacture or production.
The importance or relevance of a given factor in a specific case depends upon the nature of the business activity under review, and, as always, the particular facts and circumstances of each case. Based on the facts, there are insufficient factors present in Canada to conclude that the Company is carrying on business in Canada for GST/HST purposes.
Please note that even if a non-resident person is not carrying on business in Canada, the non-resident may register voluntarily for GST/HST if in the ordinary course of carrying on business outside Canada, the non-resident regularly solicits orders for the supply by the non-resident of tangible personal property for export to, or delivery in, Canada, or has entered into an agreement for the supply by the person of services to be performed in Canada or of intangible personal property to be used in Canada.
In this case, as the Company is not carrying on business in Canada and has not elected to register, then pursuant to subsection 143(1) of the ETA, the supply of intangible personal property by the Company is deemed to be made outside of Canada and is not subject to tax imposed under Division II of the ETA.
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
613-957-8220/fax. 613-990-1233/TTY 1-800-665-0354
Senior Rulings Officer,
General Operations and Border Issues Division (GOBI),
Excise & GST/HST Rulings Directorate
Canada Revenue Agency (CRA), 320 Queen Street, Ottawa, ON, K1A 0L5
XXXXX
Enc. GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service
GST/HST Policy Statement P-051R2: Carrying on Business in Canada
UNCLASSIFIED
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