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.
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Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 15th floor
320 Queen Street
Ottawa ON K1A 0L5XXXXX
XXXXX
XXXXXXXXXX
XXXXX
XXXXX
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Case Number: 60810February 8, 2006
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Subject:
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GST/HST RULING
ITC for Tax on Imported XXXXX
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Dear XXXXX:
Thank you for your letters XXXXX concerning the availability of an input tax credit ("ITC") for the Goods and Services Tax ("GST") on the importation of XXXXX.
All legislative references below are to the Excise Tax Act (ETA).
Statement of Facts
We understand that:
1. XXXXX.
2. XXXXX.
3. XXXXX.
4. XXXXX:
- XXXXX.
- XXXXX.
- XXXXX.
- XXXXX.
5. XXXXX has a similar agreement with XXXXX. The following are some of the relative terms in this excerpt:
- XXXXX.
- XXXXX.
- XXXXX.
- XXXXX.
6. XXXXX.
7. You have provided us a copy of an agency agreement XXXXX, between XXXXX, XXXXX "the Owners" and XXXXX (referred to in the agreement as "the Agent") whereby XXXXX agrees to arrange for the shipment (both importation and exportation) of the XXXXX on behalf of the Owners. The following are relative terms concerning the importation of the XXXXX:
- XXXXX.
- XXXXX.
- XXXXX.
8. XXXXX charges the XXXXX owners for these services, including an amount for all costs incurred by XXXXX in respect of the import and export of the XXXXX.
9. The Customs broker acting for XXXXX invoices XXXXX for duty and GST on the import of the XXXXX. XXXXX is the person named on the B3 Canada Customs Coding Form.
10. XXXXX reimburses XXXXX for the amount of duty and GST paid by XXXXX on the importation of the XXXXX.
Ruling Requested
You have requested the following ruling:
That, pursuant to section 180, the GST paid on the XXXXX may be flowed through to and claimed as input tax credits by XXXXX, a Canadian company providing "commercial services" in respect of the XXXXX.
Ruling Given
Based on the facts set out above, we rule that although XXXXX is not supplying a commercial service in respect of the XXXXX, if the XXXXX owners provide XXXXX with satisfactory evidence that GST was paid on the importation of the XXXXX, section 180 will apply to deem XXXXX to have paid GST equal to the amount of GST that was paid on the importation of XXXXX. As a result, XXXXX will then be entitled to an ITC in respect of the tax.
Explanation
For the reasons explained below, section 180 will apply in this case, resulting in XXXXX being entitled to an ITC under subsection 169(1) for an amount equal to the tax on the importation of the XXXXX.
Generally, a registrant is entitled to an ITC under subsection 169(1) with respect to tax on the importation of goods that is paid or payable by the registrant if the registrant imports the goods for consumption, use or supply in the course of its commercial activities.
Section 180, which applies for purposes of determining an ITC of a person under section 169, is intended to provide for the flow-through of an ITC to a registrant for unrecoverable tax that is paid by an unregistered non-resident on the importation of goods in certain circumstances. The provision applies where an unregistered non-resident pays tax on the importation of goods:
• the physical possession of which the non-resident causes to be transferred in Canada to a registrant in order for the registrant to make a taxable supply of a commercial service in respect of the goods to the non-resident, or
• that the non-resident supplies to a registrant and delivers, or makes available, in Canada to the registrant before they are used in Canada by or on behalf of the non-resident.
Once the non-resident provides the registrant in either of the circumstances described above with satisfactory evidence that the tax has been paid on the importation of the goods (a copy of Customs Form B3), the registrant is deemed, at the time the non-resident paid the tax, to have paid tax in respect of a supply of the goods to the registrant equal to the tax paid on the importation.
The registrant described above who acquires physical possession of the imported goods to perform a commercial service in respect of the goods is also deemed to have acquired the goods for use exclusively in its commercial activities, resulting in the registrant satisfying all of the conditions necessary to become entitled to an ITC for the tax that the registrant is deemed to have paid.
The registrant described above who is a recipient of a supply of the imported goods made by the non-resident must in fact have acquired the goods for consumption, use or supply in the course of its commercial activities in order to be entitled to an ITC for the tax that the registrant is deemed to have paid.
XXXXX is not considered to have supplied a commercial service in respect of the XXXXX to their owners. In accordance with subsection 123(1) of the Act, a "commercial service", in respect of tangible personal property, means any service in respect of the property other than
(a) a service of shipping the property supplied by a carrier, and
(b) a financial service.
Our interpretation of a "service in respect of property" is set out in enclosed GST/HST Policy Statement P-151, Interpretation of "Commercial Service" and enclosed GST/HST Memoranda Series 4.5.3 Services and Intellectual Property.
In order to determine whether a service is in respect of tangible personal property, it is necessary to determine the requisite degree of relationship between the service and the property. To be considered a commercial service, there must be a functional relationship between the service and the property.
A functional relationship exists between the service and the property where the purpose of the service arises from, or relates to, the property itself. It is also necessary to establish whether a functional relationship between the service and the property is more direct than indirect based on the particular circumstances of the case. Generally, a direct functional relationship exists between a service and property if the service is performed to or on the property.
Based on the information provided, the filling of the XXXXX with XXXXX would not be considered a supply of a service in respect of the XXXXX. Specifically, for purposes of section 180 of the Act, XXXXX is not considered to have acquired physical possession of the XXXXX for the purpose of making a taxable supply of a commercial service in respect of the XXXXX as a result of filling the XXXXX with XXXXX. Rather, it appears that XXXXX acquired physical possession of the XXXXX for the overall purpose of using the XXXXX in the course of making a taxable supply to the XXXXX owner of a service of XXXXX.
As previously indicated, section 180 also applies where the non-resident supplies goods to a registrant and delivers the goods, or makes them available, in Canada to the registrant before they are used in Canada by or on behalf of the non-resident.
A "supply" as defined in subsection 123(1) means, "subject to sections 133 and 134, the provision of property or a service in any manner, including sale, transfer ... licence ... gift or disposition."
Based on the information provided, each respective XXXXX owner is considered to have made a supply of the XXXXX to XXXXX, and the XXXXX were delivered to XXXXX in Canada. XXXXX was given possession of the XXXXX in Canada by the XXXXX owner so that XXXXX could use the XXXXX in the course of making its supply of the XXXXX service to the owner.
For purposes of section 180, in this case XXXXX is considered to have paid the tax on the importation of the XXXXX on behalf of the XXXXX owner. Since each respective XXXXX owner delivered the containers in Canada to XXXXX and is considered to have paid the Division III tax, section 180 will apply to deem XXXXX to have paid tax on a supply of the XXXXX for purposes of subsection 169(1) if it is provided with satisfactory evidence that the tax was paid on the importation of the XXXXX.
Finally, for your additional information, proposed section 178.8 was announced in a Notice of Ways and Means Motion tabled on October 3, 2003, and applies to goods imported on or after that day and to goods imported before that day that were not accounted for [xxxvi]1 before that day.
Proposed section 178.8 applies in circumstances where section 180 does not apply and a "specified supply" of goods is made. A "specified supply" is defined to include a supply of goods [xxxvii]2 that "are to be imported" [xxxviii]3. Where a specified supply of goods is made outside Canada and the goods are imported for consumption, use or supply by a "constructive importer" of the goods, subsection 178.8(2) deems the goods to have been so imported, and any amount payable as or on account of tax on the importation to have been paid or payable, by or on behalf of the constructive importer and not by or on behalf of any other person. The "constructive importer" of the goods is the last person to whom a specified supply of the goods is made outside Canada before their release.
Proposed section 178.8 would not apply in the circumstances of this case. Pursuant to proposed subsection 178.8(9), subsection 178.8(2) does not apply in respect of goods imported in circumstances to which section 180 applies.
This ruling is subject to the qualifications in GST/HST Memorandum 1.4, Goods and Services Tax Rulings. We are bound by this ruling provided that none of the above issues is 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.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at (613) 954-4291.
Yours truly,
Michael Place
Border Issues Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate
2006/02/20 F — RITS 61872 — Application de la TPS/TVH aux biens et aux services de cimetière
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