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: 124097
Business Number: [...]
July 6, 2011
Dear [Client]:
Subject:
GST/HST INTERPRETATION
Place of Supply Rules and ITC Eligibility
Thank you for your letter of May 12, 2010, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to your supply of [...] [services]. We apologize for the delay in responding to your enquiry.
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 Excise Tax Act (ETA) unless otherwise specified.
We understand that:
• [...] (the "Company") is a GST/HST registered company located in [...] [Participating Province X] and engaged in [services]. The company provides [...] services in [...] for companies importing into Canada.
• The Company's clients include GST/HST registered non-resident importers that do not have a physical presence in Canada. These clients export their products into Canada and sell them to their clients at a landed cost, tax, duties etc. included.
• The company also has GST/HST registered clients located in non-participating provinces.
• The company performs most of the work included in providing its services from its office in [Participating Province X].
Interpretation Requested
You would like to know if the Company has to charge HST on its services and if so, how its clients would offset the provincial portion of the tax.
Interpretation Given
A taxable supply (other than a zero-rated supply) of property or a service made in Canada is subject to GST at 5% when it is deemed to be made in a non-participating province, and is subject to HST at the applicable rate when it is deemed to be made in a participating province. The participating provinces are Ontario, Nova Scotia, New Brunswick, British Columbia, and Newfoundland and Labrador. All references to supplies in this letter are to taxable (other than zero-rated) supplies unless otherwise indicated.
Generally, the supply of a service is made in Canada under subsection 142(1), if the service is, or is to be, performed in whole or in part in Canada.
The ETA has various places of supply rules to determine whether a supply that is made in Canada is made in a province. Under section 144.1, a supply that is made in Canada is also considered to be made in a particular province if it is determined to be made in the province under the place of supply rules in Schedule IX. In any other case, the supply is deemed to be made in a non-participating province. Pursuant to section 3 of Part IX of Schedule IX, notwithstanding any other Part of Schedule IX, a supply is made in a province if the supply is prescribed under the New Harmonized Value-Added Tax system Regulations (the "Regulations") to be made in the province. The place of supply rules set out in the Regulations apply to any supply made on or after May 1, 2010, and any supply made after February 25, 2010 and before May 1, 2010, unless any part of the consideration for the supply becomes due or is paid, before May 1, 2010.
The general place of supply rules for supplies of services are generally based on the home or business address in Canada of the recipient obtained by the supplier in the ordinary course of business of the supplier.
If the Company obtains an address of the recipient in Canada in the ordinary course of its business, the relevant place of supply rule in this case is found in subsection 13(1) of the Regulations. Subsection 13(1) generally provides that a supply of a service is made in a province if, in the ordinary course of business of the supplier, the supplier obtains an address (in this subsection referred to as the "particular address") in the province that is
(a) if the supplier obtains only one address that is a home or a business address in Canada of the recipient, the home or business address in Canada obtained by the supplier;
(b) if the supplier obtains more than one address described in paragraph (a), the address described in that paragraph that is most closely connected with the supply; or
(c) in any other case, the address in Canada of the recipient that is most closely connected with the supply.
The business address of the recipient from which the supplier is hired pursuant to the agreement for the supply (the "contracting address") will generally be the address that is most closely connected with the supply. This address will therefore determine the province in which the supply of the service is made where it is in Canada and is obtained by the supplier in the ordinary course of business.
If the supplier does not obtain an address in Canada of the recipient in the ordinary course of its business, the supply of the service can be deemed to be made in a province pursuant to the rule in subsection 13(2).
Subsection 13(2) provides that a supply of a service is made
(a) in a participating province if the Canadian element of the service is performed primarily in participating provinces and
(i) an equal or greater proportion of the Canadian element of the service is not performed in another participating province, or
(ii) if subparagraph (i) does not apply, the tax rate for the participating province is the highest among the participating provinces for which no greater proportion of the service is performed in another participating province; and
(b) in a non-participating province if the Canadian element of the service is not performed primarily in participating provinces.
Therefore, if the Canadian element of the service is, for example, performed primarily in [Participating Province X], the supply would be made in [Participating Province X].
Note that in certain circumstances, certain supply of services made to non-residents may be zero-rated under various sections of Part V of Schedule VI to the ETA. Additional information regarding the zero-rating of services may be found in GST/HST Memo 4.5.3 available on the CRA website at http://www.cra-arc.gc.ca/E/pub/gm/4-5-3/README.html.
Under subsection 169(1), if your clients are registered, they would be entitled to ITCs for the tax payable in respect of your services if they are acquiring them exclusively for consumption, use or supply in the course of their commercial activities. This would be regardless of whether they are making supplies that are subject to GST or HST.
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, 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 613-952-8530. 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,
Carolle Mercier
Unité des questions frontalières / Border Issues Unit
Division des opérations générales et des questions frontalières /
General Operations & Border Issues Division
Direction de l'accise et des décisions de la TPS/TVH /
Excise and GST/HST Rulings Directorate
UNCLASSIFIED
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