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: 133042
June 13, 2011
Dear [Client]:
Subject:
GST/HST INTERPRETATION
Tax status of supplies made by a non-resident
Thank you for your letter of January 28, 2011, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the operations of your client.
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.
You have provided the following information:
1. Your client, a registrant for GST/HST purposes, (the "Purchaser") is situated in [...] [Participating Province X] and regularly deals with a GST/HST registered non-resident supplier (the "Supplier") in the course of its commercial activity.
2. The Supplier regularly sells taxable goods and intangible personal property (IPP) to the Purchaser situated in [Participating Province X].
3. In all cases of supplies of goods, the Purchaser clearly indicates that the goods are to be shipped and billed to the Purchaser located in [Participating Province X].
4. In cases of IPP, the Purchaser clearly indicates that the billing address is in
[Participating Province X] and the IPP is acquired for use strictly in Canada.
Interpretation Requested
You would like to know the GST/HST status of the supplies described above.
Interpretation Given
A taxable (other than zero-rated) supply of property or a service is made in Canada is subject to GST at 5% if made in a non-participating province and is subject to HST at the applicable rate if made in a participating province.
As explained below, a taxable (other than zero-rated) supply of goods by way of sale that is made in Canada is deemed to be made in [Participating Province X] and is subject to HST at [...]% to be collected by the supplier if they are delivered or made available in
[Participating Province X]. Also as explained below, a taxable (other than zero-rated) supply of IPP that is made in Canada and can be used anywhere in Canada is generally deemed to be made in [Participating Province X] and subject to HST at [...]% to be collected by the supplier if in its ordinary course of business the supplier obtains a relevant address of the recipient that is in [Participating Province X].
Generally, 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 for GST/HST. This override rule does not apply if the non-resident is either registered for GST/HST or is carrying on business in Canada.
Whether a supply made in Canada is made in a participating province or non-participating province is determined by section 144.1 and Schedule IX. Section 144.1 provides that a supply is deemed to be made in a province if it is made in Canada and is, under the rules set out in Schedule IX, made in the province. Further, under section 144.1, a supply made in Canada that is not made in a participating province is deemed to be made in a non-participating province.
TPP
Pursuant to paragraph 142(1)(a), a supply by way of sale of tangible personal property (TPP) is deemed to be made in Canada (subject to sections 143, 144 and 179) if the TPP is, or is to be, delivered or made available in Canada to the recipient of the supply. Alternatively, a supply by way of sale of TPP is deemed to be made outside Canada, pursuant to paragraph 142(2)(a), if the TPP is, or is to be, delivered or made available outside Canada to the recipient of the supply.
Pursuant to section 1 of Part II of Schedule IX and subject to section 3 of Part II, a supply of TPP by way of sale is made in a province if the supplier delivers the property, or makes it available, in that province to the recipient of the supply.
For purposes of section 1 of Part II of Schedule IX (and paragraphs 142(1)(a) and 142(2)(a)) , the phrase "delivered or made available" has the same meaning as that assigned to the concept of "delivery" under the general law of the sale of goods. It is not based on the place where title to the goods transfers, although in some cases it may happen to also correspond to that place. The legal delivery of the goods can be affected by the actual delivery of the goods or affected by the constructive delivery of the goods depending on the facts.
Generally, the place where legal delivery of the goods occurs may be determined by reference to the delivery terms that the parties have agreed to. If an Incoterm is used in an agreement of sale in accordance with its intended circumstances then generally, subject to any evidence to the contrary, the place where legal delivery of the goods occurs can be determined by reference to the where delivery is considered to occur under that Incoterm.
Paragraph 3(a) of Part II of Schedule IX provides in part that TPP is deemed to be delivered in a particular province by a supplier, and is deemed not to be delivered in any other province by the supplier, if the supplier transfers possession of the property to a common carrier or consignee that the supplier has retained on behalf of the recipient to ship the property to a destination in that province.
Therefore, if a registered non-resident supplier makes a taxable (other than zero-rated) supply of goods by way of sale that is delivered or made available to the recipient in Canada and in [Participating Province X] based on the above rules, the supply is made in
[Participating Province X] and the supplier is required to collect HST at [...]% in respect of that supply.
Intangible Personal Property
Subparagraph 142(1)(c)(i) deems the supply of intangible personal property (IPP) to be made in Canada where the property may be used in whole or in part in Canada. Subparagraph 142(1)(c)(i) deems a supply of IPP to be made outside Canada if the IPP may not be used in Canada.
Section 3 of Part IX of Schedule IX provides that notwithstanding any other Part of Schedule IX, a supply of property or service is made in a province if the supply is prescribed to [be] made in the province.
Generally, the relevant place of supply rules for supplies of IPP included in sections 6 to 8 of Division 2 of Part I of the New Harmonized Value Added Tax System Regulations (the Regulations) and are set out below.
Pursuant to subsection 6(1) of Division 2 of Part 1 of the Regulations, a supply of IPP (other than a supply of IPP that relates to real property or TPP), in respect of which the Canadian rights that can only be used primarily (more than 50%) in the participating provinces is made in a participating province if an equal or greater proportion of the Canadian rights cannot be used in another participating province.
Pursuant to subsection 6(2) of Division 2 of Part 1 of the Regulations, a supply of IPP (other than IPP that relates to real property or to TPP) in respect of which the Canadian rights can only be used primarily (more than 50%) in participating provinces is considered to be made in a particular participating province if:
(a) in the case of a supply for which the value of the consideration is $300 or less that is made through a specified location of the supplier in the particular participating province and in the presence of an individual who is, or who acts on behalf of, the recipient, the IPP can be used in the particular participating province;
(b) in the case of a supply that is not determined under paragraph (a) to be made in a participating province, the following conditions are satisfied:
(i) in the ordinary course of business of the supplier, the supplier obtains an address (in this paragraph referred to as the "particular address") 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 clause (A), the address described in that clause 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,
(ii) the particular address is in the particular participating province, and
(iii) the IPP can be used in the particular participating province; and
(c) in the case of a supply that is not determined under paragraph (a) or (b) to be made in a participating province, the tax rate for the particular participating province is the highest among the tax rates for the participating provinces in which the IPP can be used.
Where the Canadian rights in respect of a supply of IPP (other than a supply of IPP that relates to real property or TPP), can only be used primarily (more than 50%) in non-participating provinces, the supply of the IPP is deemed to be made in a non-participating province under section 7 of Division 2 of Part 1 of the Regulations.
Section 8 of Division 2 of Part 1 of the Regulations provides three place of supply rules where the Canadian rights in respect of a supply of IPP (other than a supply of IPP that relates to real property or TPP) in respect of which the Canadian rights can be used otherwise than only primarily in participating provinces and otherwise than only primarily outside participating provinces. If there are no restrictions with respect to where in Canada the IPP referred to in the scenario may be used, it would be this place of supply rule that would be relevant.
Under this provision, a supply of IPP is made in a particular province if:
1. In the case of a supply for which the value of the consideration is $300 or less that is made through a specified location of the supplier in the particular province and in the presence of an individual who is, or who acts on behalf of, the recipient, the IPP can be used in the particular province.
2. If Rule 1 does not deem the supply to be made in a province (i.e. where either the value of the consideration for the supply is more than $300 or the supply is not made through a specified location of the supplier), the supply is deemed made in a province if the supplier obtains an address of the recipient in the province in the ordinary course of its business. Specifically, the supply of the IPP is deemed to be made in a province if:
a) in the ordinary course of its business the supplier obtains an address that is:
• a home or a business address in Canada of the recipient if the supplier obtains only one such address, or
• if more than one such address is obtained, the home or business address in Canada of the recipient that is most closely connected with the supply, or
• if the supplier does not obtain a home or business address in Canada of the recipient, any other address in Canada of the recipient that is most closely connected with the supply, and
b) the address is in the province, and
c) the IPP can be used in the province.
Where multiple business addresses are obtained, 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 IPP is made where it is in Canada and is obtained by the supplier in the ordinary course of business. Another address in Canada of the recipient that the supplier obtains in the ordinary course of its business could be a billing address.
3. If the supply of the IPP is not deemed to be made in a province under Rule 1 or Rule 2, the supply is deemed to be made in the participating province for which the rate for the provincial component of the HST is the highest among the provinces in which the property can be used. If two or more of the participating provinces in this case have the same rate for the provincial component, HST will be required to be charged by the supplier using that particular rate.
Therefore, based on the application of section 8 of the Regulations, if a registered non-resident supplier makes a taxable (other than zero-rated) supply of IPP that may be used anywhere in Canada and obtains in the ordinary course of its business a relevant address of the recipient in [Participating Province X], the supply is deemed made in [Participating Province X] and the supplier is required to collect HST at [...]% in respect of the supply.
For more information related to the place of supply please refer to GST/HST Memoranda Series 3.3 Place of Supply and GST/HST Technical Information Bulletin B-103: Place of supply rules for determining whether a supply is made in a province available on the CRA website at:
GST/HST Memoranda Series 3.3 Place of Supply
http://www.cra-arc.gc.ca/E/pub/gm/3-3/README.html
GST/HST Technical Information Bulletin B-103 Place of supply rules for determining whether a supply is made in a province
http://www.cra-arc.gc.ca/E/pub/gm/b-103/b-103-e.pdf
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.
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 613-952-4294. 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,
Donato Licursi
Border Issues Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate
UNCLASSIFIED
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