5 December 2007 GST/HST Ruling 97229 - Application of GST/HST to products sold by XXXXX

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 fax XXXXX concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to tour packages under the Foreign Convention and Tour Incentive Program (FCTIP).

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 will 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 Canada Revenue Agency (CRA) Web site at www.craarc.gc.ca/E/pub/gi/notice226/README.html.

We understand that XXXXX (the Company) is a receptive tour operator that sells tours to non-resident tour operators. Most often the Company conducts business with XXXXX tour operators offering fly/drive packages. The Company does any booking that is required for the items included in the tour, pays for the items, and provides the travellers with vouchers for these items. Before the travellers come to Canada, the Company sends a package for the traveller to the nonresident tour operator that can include a detailed itinerary, road maps, brochures and vouchers for the various items of the tour such as accommodation, excursions and ferry passage.

With respect to ferry passage, the Company is not acting as an agent of the ferry operator, XXXXX, but rather purchases the ferry passage and supplies it to the non-resident tour operator as a principal supplier. XXXXX. The Company prints a voucher that is given to the traveller. XXXXX. The ferry passage is for the travellers and a vehicle, usually a standard-size car. The vouchers are in the names of the travellers and are for a particular date as per the itinerary that the traveller is following.

Interpretation Requested

You would like to know if the following packages, sold for an all-inclusive price, are eligible tour packages for the purposes of the GST/HST rebate under the FCTIP:

•   short-term accommodation in Canada and a city tour;

•   short-term accommodation in Canada and a XXXXX excursion; and

•   short-term accommodation in Canada and a sailing with XXXXX.

If the above are eligible tour packages, you would also like to know if the Company can pay or credit the GST/HST rebate under the FCTIP to non-resident tour operators for these packages.

Interpretation Given

The FCTIP, a new rebate program that replaces the Visitor Rebate Program (VRP), came into effect April 1, 2007. The FCTIP continues to provide GST/HST relief to non-residents for:

•   all of the GST/HST paid on accommodation sold to non-resident tour operators that are not registered for the GST/HST and that include the accommodation in eligible tour packages for non-residents, and

•   generally 50% of the GST/HST paid on eligible tour packages that are sold to nonresident consumers and non-resident organizations or businesses that are not registered for the GST/HST, including tour operators.

It also continues to provide relief for certain properties and/or services used in the course of conventions held in Canada.

We have recently published GST/HST Notice No. 221, Questions and Answers on the Cancellation of the Visitor Rebate Program and the Implementation of the New Foreign Convention and Tour Incentive Program (the Notice), which is a comprehensive series of questions and answers on the elimination of the VRP and the introduction of the new FCTIP. A copy has been enclosed for your convenience. Reference to the relevant questions and answers from the Notice will be made where applicable in this interpretation.

Eligible tour packages

As indicated in the answer to Question 3.1 of the Notice, an eligible tour package must include short-term and/or camping accommodation in Canada and at least one service, and it must be sold for an all-inclusive price.

The packages that the Company supplies and for which you have requested our interpretation, include short-term accommodation and either a city tour, a XXXXX excursion or ferry passage respectively. The Company is not acting as an agent XXXXX in respect of the supply of the ferry passage. The packages are sold for an all-inclusive price.

It is our view that the packages for which you have requested our interpretation are eligible tour packages for the purposes of the tour package rebate under the FCTIP.

Paying or crediting the rebate amount

Under the FCTIP, a GST/HST registrant, such as a Canadian tour operator, can pay or credit a non-resident non-registered tour operator the amount of the tour package rebate that the nonresident would be entitled to receive from the CRA if the non-resident had paid the tax and met the eligibility conditions, as outlined in the answer to Question 4.2 of the Notice.

Additional information on paying or crediting the rebate amount can be found starting at Question 7.1 of the Notice.

Calculating the rebate amount

Generally, the amount of the rebate available to non-resident non-registered tour operators that purchase eligible tour packages is 50% of the GST/HST paid on the tour package. The rebate calculation is based on the number of nights of short-term and/or camping accommodation in Canada included in the eligible tour package. However, the amount of the rebate is reduced if there is ineligible accommodation included in the eligible tour package such as accommodation on a boat or train. Questions 3.3 and 3.4 of the Notice address the definitions of short-term and camping accommodation, respectively.

Information on calculating the rebate amount with examples can be found in the Notice starting at Question 6.1. Note that when paying or crediting a rebate amount, registrants must use the general calculation method to calculate the amount.

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 CRA 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 XXXXX.

Yours truly,

XXXXX
Services and Intangibles Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate

2007/12/10 — RITS 96111 — [Application of the GST/HST on Basic Groceries]