7 February 2006 GST/HST Interpretation 77859 - XXXXX Entitlement to input tax credits on isolated location allowances

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.

Dear XXXXX:

This is further to our GST/HST interpretation letter to you XXXXX and our subsequent telephone conversation during which you confirmed that you would like an interpretation regarding the availability of ITCs to XXXXX for tax on XXXXX imported and accounted for prior to October 3, 2003, in the circumstances described in our previous interpretation letter.

Interpretation Given

Where XXXXX that are imported in the circumstances described in our previous interpretation letter are imported and accounted for prior to October 3, 2003, proposed section 178.8 of the Excise Tax Act (the "Act") and section 180 of the Act do not apply. However, XXXXX would still be entitled to an ITC under subsection 169(1) of the Act in this case for the tax paid on the importation of the XXXXX.

As indicated in our previous interpretation letter, proposed section 178.8 of the Act only applies to goods imported on or after October 3, 2003, and to goods imported before that day that were not accounted for ^[xxxix]1 before that day. As a result, proposed section 178.8 of the Act does not apply where the XXXXX are imported and accounted for before October 3, 2003.

For the same reasons set out in our previous interpretation letter, section 180 of the Act would not apply with respect to XXXXX that are imported and accounted for before October 3, 2003, in the circumstances described in the letter.

Subsection 169(1) of the Act sets out the general rule regarding the entitlement of a person to an ITC with respect to tax on acquisitions and importations of goods and services. Generally, a registrant is entitled to an ITC 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.

With respect to goods imported and accounted for prior to October 3, 2003, in a case such as this, it is only the de facto importer who may be considered to have imported the goods for consumption, use or supply in the course of its commercial activities. The de facto importer is essentially the person who is considered to have caused the goods to be imported. A key factor in determining the person who is the de facto importer is the place of supply of the goods. As a general rule, the de facto importer who imports the goods for consumption, use or supply in the course of its activities will be the last recipient of a supply of the goods made outside Canada. This reflects the fact that goods that have already been supplied by a supplier outside Canada may not then be considered to have been imported by the supplier for consumption, use or supply in the course of its commercial activities.

It is important to note that the person who is considered to be the constructive importer under proposed section 178.8 of the Act with respect to goods imported and accounted for on or after October 3, 2003, will generally be the same person who would be considered to be the de facto importer with respect to goods imported and accounted for prior to October 3, 2003.

In the circumstances described in our previous interpretation letter, XXXXX is considered to be the de facto importer with respect to XXXXX imported and accounted for before October 3, 2003, and is therefore the person who is entitled to an ITC for the tax paid on the importation of the XXXXX. For the same reasons set out in our previous interpretation letter, XXXXX is the last recipient of a supply of the XXXXX made outside Canada. As the de facto importer, XXXXX is the only person for purposes of subsection 169(1) of the Act who is considered to have imported the XXXXX for consumption, use or supply in the course of its commercial activities. As previously indicated, XXXXX is considered to have acquired possession of the XXXXX.

XXXXX may claim an ITC for the tax on the importation of the XXXXX imported and accounted for before October 3, 2003, provided it obtains a copy of the import documentation from XXXXX in order to satisfy the ITC documentation requirements under subsection 169(4) of the Act.

The foregoing comments represent our general views with respect to the subject matter of your letter. These comments are not rulings and, in accordance with the guidelines set out in section 1.4 of Chapter 1 of the GST/HST Memoranda Series, do not bind the Canada Revenue Agency with respect to a particular situation. Future changes to the Act, regulations, or our interpretative policy could affect this interpretation.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 952-6743.

Yours truly,

Cheryl R. Leyton
Border Issues Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate

2006/01/27 — RITS 44598 — Carrying on Business in Canada XXXXX