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: 126382
March 29, 2011
Dear [Client]:
Subject:
GST/HST INTERPRETATION
Place of Supply of Services
Thank you for your letter of June 24, 2010, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the supply of human resources consulting services [...].
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 the following circumstances:
[...] (the "Company") is a human resources consulting company based in [...] [Province X].
The Company contracts to provide [its] services [...] to [...] [its client] with addresses in various provinces of Canada.
The Company has agreements with various self-employed individuals as sub-contractors to perform the human resource services. These self-employed individuals have addresses in various provinces of Canada.
You have provided the following: a sample agreement between a sub-contractor and the Company, a sample [...] between [its client] and the Company, an invoice from the Company to [its client], and a Deliverables Reports from the sub-contractor to the Company's client.
Interpretation Requested
I. What tax rate applies to the supplies of services made under agreements between the Company to [its client]?
II. What tax rate applies to the supplies of services made under the agreements between the sub-contractors and the Company?
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.
The supply of the services in this case [is] made in Canada under subsection 142(1), since they are performed in Canada.
The ETA has various place 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 the place of supply rules in 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.
Based on the information provided, the services that are supplied in this case would be subject to the general place of supply rules for services in section 13 of the Regulations. The general place of supply rules for services provided for in the Regulations rely less on the place of performance and supplier location as a criterion for determining where a supply of a service is made and provide greater emphasis on a recipient's location (i.e. an address of the recipient). (iFootnote 1)
The general place of supply rules for supplies of services are generally based on the home or business address of the recipient obtained by the supplier in the ordinary course of business of the supplier.
Based on the information provided, the Company has obtained multiple business addresses of the recipient in Canada in the ordinary course of its business. Therefore, 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.
With respect to the supply of services made by the Company to [its client], if the contracting business address of the recipient obtained by the Company in the ordinary course of its business is in Quebec, which appears to be the case based on the information provided, then the business address of the recipient that is most closely connected with the supply would be in Quebec. The supply of the services would therefore be made in Quebec and subject to GST at a rate of 5%.
With respect to an agreement between the Company and a sub-contractor located in a province such as Quebec for the supply of services to the Company at a location in a province such as Quebec, based on the information provided, the Company is the recipient under the agreement with the sub-contractor, and its only business address is in [Province X]. Since the only business address of the Company in Canada that the sub-contractor obtains in the ordinary course of its business would be in [Province X], the place of supply of the service supplied by the sub-contractor would be in [Province X] and subject to HST at a rate of 13%.
Further information on the HST place of supply rules including examples can be found in our publication; GST/HST Technical Information Bulletin B-103: Harmonized Sales Tax Place of Supply Rules for Determining Whether a Supply Is Made in a Province. A copy of this publication can be found on our Web site at http://www.cra-arc.gc.ca/E/pub/gm/b-103/README.html.
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.
A copy of GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service can be found at http://www.cra-arc.gc.ca/E/pub/gm/1-4/README.html.
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
Enc.: GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service
i 1 Under subsection 123(1) of the Act, the recipient of a supply is generally the person who is liable to pay the consideration payable for the supply under the agreement for the supply.
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UNCLASSIFIED
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