31 October 2007 GST/HST Ruling 95667 - GST/HST Status of Imported XXXXX Frames

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.

Excise and GST/HST Rulings Directorate Place de Ville, Tower A, 15th floor 320 Queen Street Ottawa ON K1A 0L5	XXXXX XXXXX XXXXX XXXXX XXXXX
XXXXX XXXXX XXXXX	Case Number: 95667
	October 31, 2007

XXXXX:

Subject:

GST/HST INTERPRETATION Tour Packages

Thank you for your XXXXX concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to tour packages. We apologize for the delay in responding to your enquiry.

Please note that all publications and forms referenced in this letter are available on our Web site at www.cra-arc.gc.ca.

We understand the following:

•   XXXXX (the Company) is a non-resident tour operator that is not registered for GST/HST purposes.

•   The Company has an office (i.e., a permanent establishment) in XXXXX from which it conducts its travel business.

•   The Company sells tour packages to non-residents XXXXX at an all-inclusive price for a skiing vacation in Canada.

•   The Company's tour packages may include:

–   accommodation;

–   ski lift passes;

–   ski lessons;

–   ski guides;

–   transfers (i.e., Airport or mountain); and

–   international and domestic air travel.

•   The Company has XXXXX to pay its Canadian suppliers. XXXXX does not sell ski packages to Canadians nor does it have a permanent establishment in Canada.

Interpretation Requested

•   Are the Company's tour packages eligible for a GST/HST rebate (the Rebate) under the Foreign Convention and Tour Incentive Program (the FCTIP)? If yes, what is the mechanism for obtaining a Rebate?

•   Is the Company required to register for GST/HST? Can the Company register voluntarily for GST/HST? What is the registration process?

Interpretation Given

Rebates on eligible tour packages 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 non-resident 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. 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 short-term 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, self-propelled 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 (e.g., ski guide) or interpreter services;

•   transportation services (i.e., 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; 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.

Eligibility for the Rebate:

The Company may be eligible for a Rebate if:

•   it purchased an eligible tour package (that includes short-term accommodation or camping accommodation) in Canada for sale in the ordinary course of its business of selling tour packages if eligible as detailed in the answer to Question 4.2 in the Notice; or

•   it purchased short-term accommodation (and/or camping accommodation) in Canada and sold it as part of an eligible tour package in the ordinary course of its business of selling tour packages that include the accommodation.

In addition to the above, the Company must meet the following conditions to qualify for the Rebate:

•   It sold the eligible tour packages to another non-resident person such as individuals or companies.

•   It made the short-term and/or camping accommodation (included in the tour package) available to a non-resident individual.

•   It received payments for its sales of tour packages at a place outside Canada at which it, or its agent, conducted business. Two factors that the Canada Revenue Agency (the CRA) would consider when determining if this criterion is met are where the payment is processed and where the payment is deposited.

•   It was invoiced a minimum totalling $200 for the cost of short-term and/or camping accommodation for which tax was charged.

•   It applied to the CRA for a Rebate within one year after the last day any tax to which the Rebate relates became payable. Generally, the day the tax became payable is the day the amount due was paid, or the date of the invoice, whichever comes first.

Note that these conditions are listed in the Notice starting at Question 5.1.

Calculating the Rebate Amount:

If the Company is eligible to claim a Rebate in respect of the tax paid on an eligible tour package it purchased and resold, it can claim a Rebate for part of the tax it paid on the tour package. However, if the Company received the amount of the Rebate directly from its Canadian supplier, it cannot apply to the CRA for a Rebate of that amount.

The Rebate for an eligible tour package is generally equal to 50% of the GST/HST paid on the package. The Rebate calculation is based on the number of nights of short-term and/or camping accommodation in Canada included in the package. However, the Rebate is reduced if there is ineligible accommodation provided in Canada included such as accommodation on a boat or train. For more details on calculating the Rebate amount, see Questions starting at 6.1 in the Notice.

If the Company is eligible to claim a Rebate for the tax paid on short-term accommodation it purchased and resold as part of an eligible tour package, it can claim a Rebate for the amount of GST/HST that it paid on the accommodation.

The Company may claim the Rebate on form GST 115, GST/HST Rebate Application for Tour Packages. The following documents must be sent with the Rebate claim:

•   original invoices showing the GST/HST the Company paid; and

•   itineraries or detailed descriptions for the eligible tour packages (group and individual).

The Company must also keep the following documents in its records and make them available if requested:

•   a list of names and addresses of the non-residents who purchased the tour packages;

•   the name(s) of the agent(s) through whom it sold the tour packages (if applicable);

•   copies of the original invoices issued to its clients; and

•   a list of the names and addresses of the non-resident individuals who stayed in the accommodation.

The CRA may accept other types of documents if those other documents allow us to confirm whether the eligibility requirements are met.

The information demonstrating that the eligibility requirements have been met could be on separate documents. Alternatively, all of the necessary information could be contained in only one or two documents. These could include electronic documents capable of being rendered into writing. For more information on books and records, see GST/HST Memorandum 15.1, General Requirements for Books and Records.

In addition, the Company must request permission from its tax services office to keep its records (relating to its rebate claims) outside Canada. For details about the request, see the section entitled "Books and Records" on page 12 of our GST/HST guide RC4027, Doing Business in Canada – GST/HST Information for Non-Residents.

Please note that the Company cannot apply to the CRA to have its GST/HST rebates deposited directly into its bank account.

Requirement to Register for GST/HST:

Every person who makes a taxable supply in Canada in the course of a commercial activity engaged in by the person in Canada must register for the GST/HST, except where:

•   the person is a small supplier (i.e., annual worldwide taxable sales, including those of the person's associates, do not exceed $30,000);

•   the only commercial activity of the person is the making of supplies of real property by way of sale otherwise than in the course of a business; or

•   the person is a non-resident person who does not carry on any business in Canada.

Whether a particular non-resident person is carrying on business in Canada is a question requiring consideration of all the relevant facts. The factors that will be considered in determining whether a non-resident person is carrying on business in Canada for GST/HST purposes in a particular situation include:

•   the place where agents or employees of the non-resident are located;

•   the place of delivery;

•   the place of payment;

•   the place where purchases are made or assets are acquired;

•   the place from which transactions are solicited;

•   the location of assets or an inventory of goods;

•   the place where the business contracts are made;

•   the location of a bank account;

•   the place where the non-resident's name and business are listed in a directory;

•   the location of a branch or office;

•   the place where the service is performed; and

•   the place of manufacture or production.

The importance or relevance of a given factor in a specific case depends upon the nature of the business activity under review and the facts and circumstances of each case. Generally, a non-resident person must have a significant presence in Canada to be considered to be carrying on business in Canada.

Based on the information provided, the Company does not appear to be carrying on business in Canada, and therefore the Company is not required to register for the GST/HST. There are no factors in this case to support a conclusion that the Company is carrying on business in Canada for GST/HST purposes. In particular, the Company does not sell ski packages to Canadians nor does it have a permanent establishment in Canada.

Even if a person does not have to register for GST/HST (i.e., because the person does not carry on business in Canada), the person may choose to register voluntarily if:

•   The person is engaged in a commercial activity in Canada. This would include small suppliers or a non-resident who, while not carrying on business in Canada, is engaged in an adventure or concern in the nature of trade in Canada.

•   The person is a non-resident person who in the ordinary course of carrying on a business outside Canada:

–   regularly solicits orders for the supply by the person of goods for export to or delivery in Canada even though those activities may not constitute the carrying on of business in Canada.

–   has entered into an agreement for the supply by the person of:

•   services to be performed in Canada, or

•   intangible personal property that is to be used in Canada, or that relates to:

•     real property situated in Canada,

•     tangible personal property ordinarily situated in Canada, or

•     services to be performed in Canada.

In our opinion, the Company is entitled to register voluntarily for GST/HST.

If the Company Chooses to Register for GST/HST:

Application of GST/HST on Tour Packages:

While the Company does not have to register, it may choose to register voluntarily. Generally, as a GST/HST registrant (i.e., a person that is registered or has to be registered for GST/HST), the Company would have to collect GST/HST on all its taxable (other than zero-rated) supplies of goods and services that it makes to its customers. For example, if the Company becomes a registrant and sells a tour package for a skiing vacation in Canada to a resident of XXXXX, this sale is treated as being made in Canada. Note that the Company has to stay registered for at least one year before it can ask the CRA to cancel its registration.

There are special rules for taxable supplies of tour packages. For details and for examples on how to account for 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.

Input Tax Credits:

Registered tour operators may recover the GST/HST that they pay or owe to their suppliers by claiming ITCs on their tax return. For further details on claiming ITCs, see the section entitled "Calculating GST/HST" on page 8 of the GST/HST guide RC4027.

Paying or Crediting a Rebate under the FCTIP:

For information on how a registrant supplier, such as a tour operator, may pay or credit an amount on account of the rebate to a qualifying non-resident, see Questions 7.1 to 7.12 in the Notice.

Business Number:

If the Company chooses to register for GST/HST, see the section entitled "Business Number" on page 8 of the GST/HST guide RC4027 for details on how to proceed with registration.

Security Deposit:

Since the Company does not have a permanent establishment in Canada, it must provide the CRA with security when it applies to be registered for GST/HST. See the section entitled "Security Deposit" on page 8 of the GST/HST guide RC4027.

Please note that if the XXXXX issues a bond on behalf of the Company, this is an acceptable form of security provided that all of the conditions under the bond requirements are met.

Books and Records:

Every person who is required to file a tax return for GST/HST purposes should keep records in English or French in Canada. Otherwise, the Company must request permission from its tax services office to keep its records (relating to its tax returns) outside Canada. For details about the request, see the section entitled "Books and Records" on page 12 of our GST/HST guide RC4027.

Filing your GST/HST returns:

When you register for GST/HST, the CRA gives you a reporting period for filing your GST/HST returns and remitting your payments. For details on how your Company's reporting period would be determined, see the section entitled "Filing Your GST/HST Returns – Reporting Periods" on page 11 of our GST/HST guide RC4027.

Direct Deposit:

If the Company obtains a Business Number and it expects to receive refunds or rebates when it files its GST/HST returns, it can complete and send in form GST 469, Direct Deposit Request, to ask the CRA to deposit the refunds or rebates directly to its bank account.

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 Excise Tax Act, 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 613-954-9700. Should you have additional questions on the interpretation and application of GST/HST, please contact the Vancouver tax services office at 1-604-691-4308.

Yours truly,

Michèle Routhier
GST/HST Rulings Officer
Services and Intangibles Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate

2007/11/06 — RITS 95869 — XXXXX – Employer Expenses Relating to Pension Plan Trusts and TIB-032R