21 January 2002 GST/HST Interpretation 37469 - Visitor Rebate Discounters

This memorandum is in response to your e-mail query dated September 18, 2001, wherein you enquire whether discounting companies that are resident in Canada (discounters) are required to charge the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to eligible non-resident rebate claimants (non-residents) when they file a Visitor Rebate application on their behalf.

Please note that all legislative references are to the Excise Tax Act (the Act) and regulations thereunder, unless otherwise specified.

Pursuant to our conversation of October 30, 2001 and the limited information provided, our understanding of the situation is as follows:

1. Discounters are filing rebate applications under the Visitor Rebate Program on behalf of non-residents.

2. Typically, the discounter prepares and files the Visitor Rebate application on behalf of the non-resident and processes the resulting rebate payment. The discounter requests that the non-resident claimant complete the discounter's form and provide supporting documentation, including receipts. The discounter also obtains a Power of Attorney allowing the discounter, on behalf of the non-resident, to sign and file the Visitor Rebate application and to receive and process the resulting rebate. The rebate cheque paid by the Canada Customs and Revenue Agency (CCRA) is payable in the name of the non-resident claimant and the Power of Attorney allows the discounter to deposit the cheque in the discounter's bank account.

3. A service charge, usually a percentage of the rebate, is charged to the non-resident by the discounters. Certain discounters may pay an amount of the expected rebate amount to the non-resident before a payment of the rebate is made by CCRA.

4. The discounters are located in various provinces across Canada. Some of the discounters have a post office box address outside of Canada to which they request the rebate cheques be mailed, others may actually have an existing office outside of Canada.

You would like to know if the discounters are required to be registered for GST/HST purposes and whether they are required to charge the GST/HST on their services.

As the information provided is limited, we will provide you with general information regarding the application of the GST/HST to services provided by the discounters.

Generally, registration for GST/HST purposes is required under subsection 240(1) when a person makes a taxable supply in Canada in the course of a commercial activity engaged in by the person in Canada otherwise than as a small supplier or as a non-resident who does not carry on any business in Canada. Generally, pursuant to section 148, a person is considered a small supplier if the consideration for the person's total annual worldwide taxable supplies do not exceed $30,000. Persons who are registered, or are required to be registered, are required under subsection 221(1) to collect tax on their taxable (other than zero-rated) supplies. The GST/HST collectible or collected must be accounted for in their net tax calculation under subsection 225(1) and any positive amount of net tax must be remitted under subsection 228(2). In turn, they may be entitled to recover the GST/HST paid or payable on their business inputs as input tax credits.

By preparing, signing and filing the rebate application for the Visitor Rebate on behalf of the non-residents, it appears that the discounters are making a supply of a service of acting as an agent on behalf of the non-residents.

Generally, a taxable (other than zero-rated) supplies of services made in Canada are subject to the GST at a rate of 7% when made in a non-participating province, and to the HST at the rate of 15% when made in a participating province (Nova Scotia, New Brunswick, or Newfoundland).

Paragraph 142(1)(g) deems the supply of a service that is, or is to be, performed in whole or in part in Canada to be made in Canada. Paragraph 142(2)(g) deems the supply of a service that is, or is to be, performed wholly outside Canada to be made outside Canada. Based on these rules, the supply of the service by the discounters would be considered made in Canada if any part of the service is performed in Canada.

To determine whether a supply is made in a province, the relevant provisions are section 144.1 and Part V of Schedule IX. Section 144.1 proves 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. Paragraph 2(a) of Part V of Schedule IX deems a supply of a service to be made in a province if all or substantially all of the Canadian element of the service is performed in that province. The "Canadian element" is the portion of the service performed in Canada.

Part V of Schedule VI zero-rates certain supplies made to non-residents. Section 7 of Part V, which generally zero-rates the supply of service made to a non-resident person, specifically excludes, among other services, the service of acting as an agent of the non-resident person. Section 5 of Part V zero-rates the supply made to a non-resident person of a service of acting as an agent of the person in certain circumstances. Specifically, the service is zero-rated if it is in respect of either a supply to the non-resident that is zero-rated elsewhere in Part V or a supply made outside Canada by or to the non-resident person. As the services supplied by the discounters do not involve either of these circumstances, their services would not be zero-rated under section 5.

Based on the information provided, there is no other provision in Part V, nor elsewhere in Schedule VI (which deals with zero-rated supplies) that would zero-rate the supply made by the discounters. There is also no provision in Schedule V (which deals with exempt supplies) that would appear to exempt the supply made by the discounters.

In conclusion, if the discounters are registered or required to be registered, and on the basis that the supply of the service that they are making is one of acting as an agent on behalf of the non-residents, the discounters would be required to collect tax on the supply of their service if it is supplied in Canada.

As previously indicated, based on the limited information provided, this response is intended to be a general response regarding the GST/HST treatment of supplies made by discounters and not a definitive response with respect to the GST/HST obligations of a particular discounter. Whether a particular discounter is in fact required to register is an issue to be resolved on a case-by-case basis taking into account all relevant circumstances. Also, whether a particular discounter is making a particular type of supply or even several different supplies (which can have a different tax status) can vary depending on the specific terms of the agreement between the discounter and the rebate claimant. Should a situation arise with respect to the GST/HST obligations of a specific discounter, we would be pleased to provide you with a definitive response regarding that situation at that time.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613)952-9588.