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 0L5
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XXXXX
XXXXX
XXXXX
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XXXXX
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Case Number: 90125
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November 29, 2007
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Dear XXXXX:
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Subject:
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GST/HST INTERPRETATION
Registered Tour Operator
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Thank you for your fax XXXXX concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to supplies made by a registered tour operator. Your request has been transferred XXXXX to the Services and Intangibles Unit of the Excise and GST/HST Rulings Directorate for response. We apologize for the delay in responding to your enquiry.
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 CRA Web site at www.cra-arc.gc.ca/E/pub/gi/notice226/README.html.
This letter does not make any references to the HST, unless otherwise noted, since the tour packages take place in XXXXX (Canada) and in XXXXX (United States).
We understand that you have a client who is a Canadian tour operator (the Client) who is registered for GST/HST purposes.
You have submitted three sample sales invoices of tour packages that may be invoiced by your Client. All the tour packages to be sold by your Client will take place in Canada and the United States (US).
Your Client's invoices will show the amount of the GST payable as a separate amount on the invoices. In addition, if a customer is eligible for a rebate, your Client will choose to pay or credit an amount on account of the rebate under the Foreign Convention Tour Incentive Program (the FCTIP) and this amount will also be shown separately on your Client's sales invoices.
Your Client's sample invoices dated XXXXX are as follows:
Example 1:
• XXXXX days/XXXXXXXXX nights XXXXX.
• Packages to be assembled by your Client include: XXXXX night accommodation in a hotel in Canada ($XXXXX per night for XXXXX persons = $XXXXX and XXXXX nights accommodation in a hotel in XXXXX ($XXXXX per night for XXXXX nights for XXXXXXXXX persons = $XXXXX) and the remaining $XXXXX is for the service of a guide and the mark-up for a total all-inclusive price of XXXXX Canadian dollars.
• Sold to XXXXX, a non-resident non-registered tour operator in the XXXXX, who will resell the tour package to XXXXX the travellers), also non-residents residing in the XXXXX. The XXXXX will pay for their tour packages at a place outside Canada at which XXXXX is conducting business.
Example 2:
• Two Self Drive Tour Packages XXXXX.
• Packages to be assembled by your Client include: XXXXX nights accommodation in a hotel in Canada (XXXXX persons @ $XXXXXXXXX for XXXXXXXXX nights = $XXXXX) and XXXXX nights accommodation in a hotel in XXXXX (XXXXX persons @ $XXXXX for XXXXX nights = $XXXXX) and the remaining $XXXXX is the mark-up for a total all-inclusive price of XXXXX Canadian dollars.
• Sold to XXXXX, a GST registered Canadian tour operator, who will resell the tour package to XXXXX the travellers) who are non-residents from XXXXX.
• The travellers will rent a car at the airport upon arrival from another supplier.
Example 3:
• Two XXXXX experience packages, XXXXXXXXX-day trip XXXXX in Canada and XXXXX, for a total all-inclusive price of XXXXX payable in US dollars.
• Packages will be purchased from a GST registered Canadian tour operator at an all-inclusive price of $XXXXX including the GST. The tour packages include accommodation in tents or cabins XXXXX and the services of a tour guide.
• To be sold directly to XXXXX the travellers) who are non-residents from XXXXX for a total price of XXXXX payable in US dollars. Your Client's mark-up is included in the $XXXXX total price.
• The XXXXX will pay a $XXXXX deposit to your Client four weeks before arriving in Canada. The deposit was paid by that was drawn on an account from a foreign bank xxxxxxxxxx.
Interpretation Requested
You would like to know:
1. How the GST applies to the above example tour packages for travel in Canada and the United States.
2. Under what conditions may your Client pay or credit an amount on account of the rebate under the FCITP to its customers.
3. How to calculate and show the amount of tax payable and the amount of the rebate under the FCTIP on your Client's sample sales invoices (i.e., Examples 1 to 3).
Interpretation Given
1. Tour Packages - Combined Rates of Tax (i.e., at the rate of 0% and 6%):
There are special rules for taxable supplies of tour packages. A tour package means a combination of two or more services or of property and services, which are provided to a customer at an all-inclusive price. A tour package must include at least one of the following: a transportation service, a guide service, an interpreter's service, an accommodation (property) or a right to use a campground or trailer park (property).
Your Client must first ensure that the above definition of a tour package has been met. When your Client makes a taxable supply of a tour package at combined rates of tax, the all-inclusive sale price must be separated into two parts: the taxable portion and the non-taxable portion. The taxable portion of the tour package is subject to GST at the rate of 6%. The non-taxable portion is taxable at the rate of 0%.
The taxable portion includes the components that if purchased separately by the customer would be taxable at 6 %. Examples of components or elements of a tour package that would be taxable at 6% if purchased directly by the customer are: domestic transportation services, accommodation, entertainment, meals, and other supplies made in Canada.
The non-taxable portion (taxable at the rate of 0%) includes the components on which no tax would be collected if purchased separately by the customer. Examples of such components or elements of a tour package are: international transportation services and accommodation, meals, entertainment and other supplies made outside Canada.
When your Client assembles a tour package by purchasing components/elements from suppliers, your Client is required to prorate the selling price of the tour package according to the value of the taxable and non-taxable components/elements in the package. The prorating is based on the relative cost of each element after claiming an input tax credit (ITC). Prorating is required to be done (i.e., by the person who first supplies the tour package in Canada) only once in respect of any given tour package. Thereafter, the taxable portion of that tour package will be a fixed percentage of the selling price as long as the mixture of input travel costs does not change significantly.
For further details and for examples on how to calculate tax on tour packages, see the section entitled "Tour Operators" starting on page 16 of our GST/HST guide RC4036, GST/HST Information for the Travel and Convention Industry, copy enclosed.
2. Rebates under the FCTIP:
Overview:
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.
A tour operator, for GST/HST purposes, means a supplier of a tour package and may include persons such as outfitters and lodge owners. This definition does not include a travel agent acting on behalf of a tour operator. See the answer to Question 2.7 in the Notice for additional information.
Definition of Tour Package:
The definition of a tour package is the same under the new FCTIP as it was under the previous VRP.
A tour package for GST/HST purposes is:
"a combination of two or more services, or of property and services, that includes transportation services, accommodation, a right to use a campground or trailer park, or guide or interpreter services, where the property and services are supplied together for an all-inclusive price, but does not include a tour package that includes a convention facility or related convention supplies".
Because of this definition, a tour package cannot consist solely of property for GST/HST purposes. Therefore, a package that includes accommodation, which is property, and other property, is not a tour package for GST/HST purposes.
Furthermore, for a tour package to be eligible for a GST/HST rebate under the FCTIP it must include shortterm and/or camping accommodation in Canada. Given that short-term and/or camping accommodation in Canada is property, the package must also include at least one service in order to be an eligible tour package under the FCTIP.
The definition of tour package and related terms as well as examples can be found in the Notice starting with Question 3.1.
Eligible Accommodation:
"Eligible" accommodation for the purposes of the FCTIP is short-term accommodation and camping accommodation.
Short-term accommodation means the rental of an accommodation unit in Canada as a place of lodging for an individual who will occupy it continuously for a period of less than one month and that costs more than $20 per night.
Specifically included in the definition for rebate purposes under the FCTIP is any type of overnight shelter that is part of a tour package that also includes food and the services of a guide. Specifically excluded is shelter on a train, trailer, boat or structure that is, or could be, selfpropelled and the rental of an accommodation unit under a timeshare arrangement.
Camping accommodation means a campsite at a campground or recreational trailer park in Canada that is rented continuously as a place of lodging for periods of less than one month for the same individual. It includes water, electricity and waste disposal services if accessed by means of an outlet or hook-up at the campsite, and if supplied with the campsite.
Accommodation that does not meet the definition of either short-term accommodation or camping accommodation, such as accommodation outside of Canada, is not "eligible" accommodation for rebate purposes under the FCTIP. These definitions are also provided in the answers to Questions 3.3 and 3.4 in the Notice.
Characterization of Items as Property or Service:
A service means anything other than property, money, and anything that is provided to an employer by an employee in the course of employment. Some examples of services include:
• guide or interpreter services;
• transportation services (e.g., air travel);
• sightseeing excursions; and
• ski lessons.
See the answer to Question 3.5 in the Notice.
The following do not qualify as services as they are property:
• short-term and camping accommodation;
• meals;
• a right to enter or attend an event, such as tickets to a show or a hockey game;
• car rentals;
• ski rentals;
• ski lift passes;
• golf green fees; and
• park passes.
Note that property means any type of property and includes goods and a right or interest of any kind but does not include money. See the answer to Question 3.6 in the Notice.
Generally, an all-inclusive price means a single price for all property and services sold together in a package. See the answer to Question 3.7 in the Notice for additional information.
Examples of tour packages are provided in the Notice starting at Question 3.8.
Tour Package Rebates:
Under the FCTIP, certain persons who purchase an eligible tour package will be entitled to a rebate of up to 50% of the GST paid on the tour package under certain conditions. These persons are:
• a non-resident consumer;
• a non-resident non-registered tour operator; and
• a non-resident non-registered business or organization that is not a tour operator.
The conditions that these qualifying non-residents must meet to be eligible for a tour package rebate are set out in the Notice as follows:
• the answer to Question 4.2 of the Notice contains the requirements for a non-resident, nonregistered tour operator; and
• the answer to Question 4.3 contains the requirements for a nonresident consumer or non-resident, non-registered business or organization that is not a tour operator.
Also, these qualifying non-residents must meet the general requirements set out in the Notice beginning in Question 5.1.
Generally, the amount of the rebate available to these non-residents who purchase an eligible tour package is 50% of the GST 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 in Canada included in the eligible tour package such as accommodation on a boat or a train. More information on calculating the rebate can be found starting at Question 6.1 in the Notice.
These non-residents can receive the rebate by filing a rebate claim with the Canada Revenue Agency (CRA) or qualifying nonresidents can be paid or credited the amount by a GST/HST registrant such as a Canadian tour operator (i.e., your Client). Note that the documents to be provided with the rebate claim are detailed in the answer to Question 5.9.
Paying or Crediting the Tour Package Rebate
As indicated in Question 7.1 of the Notice, a qualifying non-resident is a non-resident that would be entitled to apply to the CRA for a GST rebate under the FCTIP if the person had paid the GST and met all of the requirements for the rebate.
In addition to meeting the requirements of a qualifying non-resident, certain conditions must be met by non-resident consumers or non-resident, non-registered businesses or organizations that are not tour operators for a GST/HST registrant to pay or credit an amount of the rebate under the FCTIP. These conditions are set out in the answer to Question 7.3 of the Notice.
When a registrant (i.e., your Client) decides to pay or credit an amount of the GST rebate on an eligible tour package under the new FCTIP to a qualifying non-resident, the registrant must show on the invoice the full amount of GST payable and the amount it has paid or credited the nonresident for the rebate.
The registrant must account for the full amount of GST/HST in its net tax by reporting the amount on line 103 of its GST/HST return and will recover the amount it has paid or credited by taking a deduction on line 107 of its GST/HST return.
Registrants are also required to file the Form GST106, Schedule 2 – Information on Claims Paid or Credited for Foreign Conventions and Tour Packages in respect of any eligible tour package that is sold for which:
• the GST charged on the eligible tour package becomes payable after March 2007; and
• the registrant claimed a deduction in its net tax for an amount paid or credited to a nonresident after March 2007.
Additional information on paying or crediting an amount on account of the rebate can be found in the Notice starting at Question 7.1.
See the answers to Question 7.11 and 7.12 that set out what happens if a registrant pays or credits an amount of the GST rebate under the FCTIP to a non-resident who is not a qualifying non-resident or the amount exceeds the amount that the qualifying non-resident was entitled to receive.
3. Your Client's Sample Sales Invoices:
Example 1:
Calculation of GST Payable:
Purchases:
| Accommodation in Canada (in taxable portion) |
$ 200.00
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| Services of a guide in Canada (in taxable portion) |
300.00
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| Accommodation in U.S.A. (in non-taxable portion) |
500.00
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1,000.00
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| GST: 6% x $500.00 (paid to supplier) |
30.00
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1,030.00
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| ITC |
-30.00
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1,000.00
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| 20% mark-up |
200.00
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| Package price |
1,200.00
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| Taxable percentage for taxable portion = $ 500 $1,000 = 50% |
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| GST: 6% x 50% x $1,200.00 (charged to customer) |
36.00
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| Total paid by customer |
$1,236.00
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| Calculation of Rebate Amount: |
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| Total GST payable on the tour package |
$36.00
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| Rebate under the FCTIP: 50% x $36.00 |
$18.00 [i]*
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Amounts to be Shown on your Client's Sales Invoice:
The GST will be shown on your Client's tax return on line 103 and the rebate on line 107.
Your Client will file a GST106 for the period in which the deduction was taken.
Example 2:
Purchases:
| Accommodation in Canada |
$ 400.00
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| Accommodation in US |
1,800.00
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2,200.00
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| Mark-up |
200.00
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| Package price |
2,400.00
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| GST: 6% x $2,400.00 (charged to customer) |
144.00
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| Total paid by customer |
$2,544.00
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| Amounts to be Shown on your Client's Sales Invoice: |
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| GST at 6% |
$144.00
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Note that this is not a tour package for GST purposes. By definition, a tour package must include a combination of two or more services or of property and services. The package in this example includes only supplies of accommodation, which is property, but for GST purposes, a tour package must include at least one service.
There is no rebate available under the FCTIP because this is not an eligible tour package. To be eligible, a tour package must include either short-term and/or camping accommodation in Canada and at least one service. Also, your Client sold the tour package in this example to a Canadian registered tour operator and the rebate is only available to a non-resident.
Example 3:
Calculation of GST Payable:
Tour packages purchased from a GST registered tour operator (Operator B): $2,300.00 (assumed price)
Operator B gave your Client the taxable percentage for the taxable portion. Assumed 60% for this example.
| Package price |
$2,800.00
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| GST: 6% x 60% x $2,800.00 (charged to customer) |
100.80
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| Total paid by customer |
$2,900.80
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| Calculation of Rebate Amount: |
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| Total GST payable on the tour package |
$100.80
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| Rebate under the FCTIP: 50% x $100.80 |
$ 50.40 [ii]*
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| Amounts to be Shown on your Client's Sales Invoice: |
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| GST |
$100.80
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| Rebate |
$ 50.40
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The GST will be shown on your Client's tax return on line 103 and the rebate on line 107.
Your Client will file a GST106 for the period in which the deduction was taken.
In this example, your Client has billed its customer in US dollars. For information on invoicing in a foreign currency, see our previous letter to you on July 11, 2007.
Also, please note that whether a tour starts in Canada and ends in the US or the reverse (i.e., starts in the US and ends in Canada) does not affect the amount of GST payable or the amount of the rebate under the FCTIP in Examples 1 to 3.
Other Information:
In Example 2, your Client has combined both elements (i.e., the Canadian accommodation and the US accommodation) in the travel package and has sold the package at an all-inclusive price. If instead, your Client had sold separately the elements in the package, the US accommodation would not be subject to GST as this is a supply made outside Canada. For instance, if your Client had priced and sold each element separately and listed these elements on the same invoice, the CRA would generally consider that your Client has made multiple supplies.
It is the CRA's position that, for GST purposes, the determination of whether a transaction consisting of several elements is to be regarded as a single supply or multiple supplies is based on a determination of fact. It is up to your Client to determine whether a single supply or multiple supplies have been made. Also, your Client must have records available to document the transactions i.e., whether a particular supply is a single supply or multiple supplies. Further details are available in GST/HST Policy Statement P-077R2, Single and Multiple Supplies, copy enclosed.
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 Excise Tax Act, regulations, or our interpretative policy could affect this interpretation. We understand that you have a client who is a Canadian tour operator (the Client) who is registered for GST/HST purposes.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-954-9700. 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,
Michèle Routhier
GST/HST Rulings Officer
Services and Intangibles Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate
2007/12/10 — RITS 89629 — XXXXX Tax Status of Merger and Acquisition Services
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