3 December 2007 GST/HST Interpretation 98844 - FCTIP Rebate Claims

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:

Thank you for your letter XXXXX, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to supplies of accommodation made by hotels to non-resident tour operators.

All legislative references are to the Excise Tax Act (ETA) and the regulations thereunder, unless otherwise specified.

Effective January 1, 2008, the rate of the GST will be reduced from 6% to 5% and the rate of the HST from 14% to 13%. The new rates will apply to supplies for which the GST/HST is paid on or after January 1, 2008, without having become payable before that date. Specific transitional rules apply to certain supplies, for example, real property. For more information on the transitional rules for the reduction of the GST/HST rate, please refer to GST/HST Notice 226, Proposed GST/HST Rate Reduction in 2008 on the CRA Web site at www.craarc.gc.ca/E/pub/gi/notice226/README.html.

We understand that XXXXX is requesting clarification of a hotel's responsibilities with respect to the rebate for accommodation sold to a foreign tour operator under the new Foreign Convention and Tour Incentive Program (FCTIP).

You understand that a supplier of accommodation such as a hotel may pay the rebate at source using a power of attorney. The hotel would then have to advance the rebate amount to the purchaser and wait for the rebate cheque from the CRA. However, you understand that the CRA will only send the rebate cheques to a foreign address, and the hotels do not have a foreign address.

XXXXX has indicated that it is disappointed in the wording of the legislation, and that it believes that the use of the power of attorney creates a greater workload and more responsibility for the hotels.

Interpretation Requested

You would like to confirm that the foreign tour operators must apply directly for the rebate, as hotels cannot collect it for them based on the fact that the rebate can only be sent to a foreign address.

Interpretation Given

Under the new FCTIP, a rebate amount is only available with respect to supplies of short-term and/or camping accommodation sold to non-resident tour operators that resell the accommodation as part of an eligible tour package. However, section 252.1 of the ETA no longer permits the GST/HST registrant supplier to pay or credit the rebate amount with respect to such supplies.

As the supplier cannot pay or credit the rebate amount, the non-resident tour operator is required to pay the tax to the supplier and file a rebate claim with the CRA to recover the tax.

However, the non-resident tour operator can choose to have another person file the rebate claim on its behalf. This would be a private arrangement between the non-resident and the other person that is not governed by the ETA or any other Act of Parliament.

Before entering into such an arrangement, GST/HST registrants should seek legal advice to make sure they understand the impact of acting on behalf of another person and to ensure that their interests are protected. Non-resident tour operators should also seek legal advice to ensure that they understand the impact of granting authority to another person to act on their behalf and advice as to how much authority should be granted.

For example, under the former VRP, some non-residents opted to authorize another person to sign and submit rebate applications on the non-resident's behalf, open and respond to any correspondence addressed to the non-resident from the CRA, and contest, settle and appeal any assessment or decision made by the CRA respecting the rebate.

If a person enters into such an arrangement, the CRA requires proof that the person is authorized to act on behalf of the non-resident tour operator in addition to the documentation required to validate the rebate claim. Such proof may be a power of attorney, which is a document whereby one person appoints another person as its attorney and confers authority to perform certain specified acts on its behalf.

In order to accept and act on a power of attorney, the CRA requires that the power of attorney contain the following information:

•   a statement that the authorized person is not affiliated with the Government of Canada or the CRA;

•   complete upfront disclosure of any fees charged by the authorized person to the qualifying non-resident to file the rebate application on behalf of the qualifying nonresident;

•   a statement that the qualifying non-resident is authorizing the other person to act on its behalf;

•   a statement that the power of attorney is for a rebate of the GST/HST under the new FCTIP;

•   the qualifying non-resident's name, address, telephone number, e-mail address if applicable, and signature;

•   the authorized person's name, address, telephone and fax numbers, and e-mail address if applicable.

How a qualifying non-resident would get the GST/HST rebate under the new FCTIP where the qualifying non-resident authorizes a registrant to act as its attorney is a private matter between these two persons. They may agree that the authorized person may advance funds equal to the estimated rebate amount to the non-resident and recover the funds when the rebate is processed by the CRA. Some power of attorneys also included clauses outlining procedures by means of which the other person could recover the amounts it advanced from its own funds to the nonresident if the CRA determined that the non-resident was not entitled to all or some of the rebate amount claimed. Alternatively, the authorized person may complete the rebate application on behalf of the non-resident, and the non-resident receives its money when the rebate claim has been processed by the CRA.

GST/HST Notice 221, Questions and Answers on the Cancellation of the Visitor Rebate Program and the Implementation of the New Foreign Convention and Tour Incentive Program, addresses several common questions with respect to this situation in section 10, Filing a rebate claim on behalf of a qualifying non-resident. We have enclosed a copy of GST/HST Notice 221 for your convenience.

There is no requirement under the ETA that a hotel that sells accommodation to a nonresident tour operator must enter into a third party arrangement to file a rebate claim on the non-resident's behalf. There is also no requirement under the ETA that the hotel must pay an amount equal to the expected rebate if it does enter into a private arrangement with the non-resident to do so. These arrangements and their terms are strictly private arrangements between the parties involved.

Please note that under the former VRP, the rebate cheque, payable to the non-resident, was only sent to a foreign address. A person acting on behalf of the non-resident therefore had to have an address outside Canada if, in accordance with the power of attorney, the rebate cheque was mailed to the person rather than directly to the non-resident. Under the new FCTIP, the rebate cheque is still only payable to the nonresident, but it will be sent to the address indicated on the rebate application form, whether the address is in Canada or a foreign country.

We have noted your concerns regarding the legislation. The CRA is responsible for administering and enforcing the legislation as enacted by Parliament. Matters relating to tax policy and amendments to the ETA are the responsibility of the Department of Finance. We will ensure that officials at the Department of Finance are made aware of your concerns.

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.

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at (613) 952-7909. 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,

Jacqueline Russell, CGA
Services and Intangibles Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate

2007/12/10 — RITS 98193 — XXXXX Snack Mix