19 October 2007 GST/HST Ruling 92317 - Application of GST to the Supply of Real Property via Tax Sale

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 XXXXX, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to supplies of accommodation in Canada purchased by XXXXX (the Company).

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

Statement of Facts

We understand that the Company is a XXXXX-based tour receptive company that purchases accommodation in various cities and locations in Canada. These accommodations are either offered for sale as part of a package assembled by the Company or are offered for sale by the Company's parent company XXXXX (the Parent Company).

The Company is a separate entity from the Parent Company, and it sells both accommodation and assembled packages to the Parent Company. Neither the Company nor the Parent Company are registered for GST/HST.

For the XXXXX, the Company facilitates all aspects of the tour in Canada, including hotels and guide services. The Company offers city tours through this business line. The Company sells the city tours to the Parent Company, which the Parent Company sells to non-resident individuals.

For the XXXXX, the Company sells the elements of a package to the Parent Company, which in turn offers them to individual clients in XXXXX. The clients create their own packages by choosing their preferred hotel and services as part of the Parent Company's XXXXX. For example, clients can select their choice of accommodation, transfers and tours at the time of reservation. The client pays the Parent Company in XXXXX for the entire package, and the Company receives payment from the Parent Company for any accommodation and services that have been booked through the Company. The Company invoices the Parent Company for the supplies that the Company makes to the Parent Company.

The Company has to retain original invoices with their proof of payment for XXXXX purposes.

The Company has also purchased accommodation that falls under the grandfathering clause for the Visitor Rebate Program (VRP), with contracts signed prior to September 25, 2006, and the eligible accommodation being made available prior to April 2009.

Interpretation Requested

You would like to know if the Company qualifies for a rebate under the new Foreign Convention and Tour Incentive Program (FCTIP) for the GST/HST paid on accommodation if the Company booked the accommodation, but non-resident clients put together their own package with services through the Parent Company.

You have also requested clarification about the timing and documentary requirements for supporting a rebate claim under FCTIP, and direction on handling invoices that relate to accommodation supplied under the VRP but received for the period starting after April 1, 2007, where a hotel has not deducted the amount of the rebate from its invoice.

Interpretation Given

Based on the information provided, where non-resident clients put together their own package through the Parent Company, the GST/HST paid on accommodation purchased by the Company and sold to the Parent Company would not qualify for a rebate under the FCTIP.

On September 25, 2006, the Government of Canada announced the cancellation of the VRP effective April 1, 2007. Budget 2007 confirmed the cancellation of the VRP and introduced the new FCTIP as its replacement. The legislative amendments received Royal Assent on June 22, 2007. Among other provisions, the FCTIP provides a GST/HST rebate to non-GST/HST-registered non-resident tour operators that purchase tour packages that include short-term and/or camping accommodation, or that purchase short-term and/or camping accommodation in Canada for resale to non-residents as part of a tour package, under certain conditions.

A non-GST/HST-registered non-resident tour operator that bought short-term and/or camping accommodation in Canada will be entitled to a rebate of the GST/HST paid on the accommodation if:

•   the tour operator bought the short-term and/or camping accommodation in Canada in the ordinary course of its business and resold it as part of an eligible tour package;

•   the tour operator sold the eligible tour package to another non-resident and payment for the sale of that tour package was made at a place outside Canada where the tour operator or its agent was conducting business; and

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

Under the FCTIP, an eligible tour package must include short-term and/or camping accommodation and at least one service, and it must be sold for an all-inclusive price.

The Company is a non-GST/HST-registered non-resident tour operator and the accommodation that the Company purchases from hotels in Canada is short-term accommodation under the ETA. However, the Company would not qualify for a rebate with respect to accommodation that it sells to the Parent Company separately, as the requirement that the accommodation is resold in an eligible tour package by the Company would not be met.

Therefore, where non-resident clients put together their own tour package through the Parent Company, the accommodation purchased by the Company and sold to the Parent Company will not qualify for the rebate.

The Company is eligible for a rebate with respect to accommodation that the Company resells as part of an eligible tour package provided it meets all the other eligibility requirements. However, under the FCTIP, a registrant supplier cannot pay or credit the rebate amount with respect to supplies of accommodation.

A non-GST/HST-registered non-resident tour operator must file a rebate application for the rebate within one year after the last day any tax to which the rebate relates became payable using Form GST115, GST/HST Rebate Application for Tour Packages (copy enclosed, also available from the CRA Web site at http://www.cra-arc.gc.ca/E/pbg/gf/gst115/README.html). At the time the application is made, the person must be a non-resident to qualify for the rebate, and the total of the taxable (at 6%/14%) consideration for supplies of accommodation included in the rebate application must be at least $200. The Company may include one or more supplies of accommodation in a rebate claim, as long as the total consideration for taxable (at 6%/14%) supplies of accommodation totals $200 or more. These conditions apply to both the FCTIP and the old VRP.

As indicated on Form GST115, when a non-resident tour operator provides invoices or receipts as part of the proof that the tour operator is eligible for a rebate, those invoices or receipts must be the original invoices or receipts. However, the receipts will be returned to the tour operator once the rebate has been processed.

A non-resident tour operator is required to maintain additional documentation to support its eligibility for the rebate (e.g., a list of names and addresses of the clients who purchased tour packages from the tour operator). The supporting documentation must be kept in Canada, unless the non-resident gets permission to keep the records at a place outside Canada. Non-resident tour operators must write to a Canada Revenue Agency (CRA) Tax Services Office to get permission to keep their supporting documents at a place outside Canada.

Generally, the new FCTIP applies to purchases of short-term and/or camping accommodation resold as part of an eligible tour package made by non-resident non-GST/HST-registered tour operators when the first night of short-term or camping accommodation in Canada is after March 2007. However, the rules under the former VRP with respect to the rebate of the GST/HST continue to apply if the short-term and/or camping accommodation was purchased under an agreement in writing entered into before September 25, 2006, and the first night of short-term or camping accommodation in Canada is made available before April 2009. The VRP also continues to apply to accommodation made available after March 2007 if it is part of a continuous accommodation at the same facility that started before April 1, 2007.

Under the VRP, a rebate was available for the tax paid on accommodation purchased by a non-GST/HST-registered non-resident. Where the non-resident acquired the accommodation for supply in the ordinary course of a business of the non-resident of making such supplies, the non-resident would be eligible for a rebate if a supply of the accommodation was made to another non-resident person and payment of the consideration for that supply was made at a place outside Canada at which the supplier, or an agent of the supplier, conducted business, and the accommodation was made available to a non-resident individual.

Under the transitional rules for the VRP, the Company may be eligible for a rebate with respect to the accommodation that it resells to the Parent Company, if the accommodation was supplied to the Company under a written agreement entered into before September 25, 2006, and the accommodation is first made available before April 2009, or if the accommodation is part of a continuous accommodation at the same facility that started before April 1, 2007.

A registrant supplier can pay or credit the rebate amount to a non-resident tour operator in respect of supplies of accommodation under the VRP if the tour operator provides sufficient evidence to the supplier to prove that it would be entitled to the rebate if it had paid the tax and filed a claim with the CRA.

This evidence would include proof that the accommodation was acquired for supply in the ordinary course of a business of the tour operator of making such supplies, a supply of the accommodation was made to another non-resident person and payment of the consideration for that supply was made at a place outside Canada at which the tour operator, or an agent of the tour operator, conducted business, and that the accommodation was made available to a non-resident individual.

Where the supplier chooses not to pay or credit the rebate amount to the tour operator under the transitional rules, the tour operator may claim the rebate from the CRA by filing Form GST177, Refund Application for Non-Resident Travel Organizers (copy enclosed, also available from the CRA Web site at http://www.cra-arc.gc.ca/E/pbg/gf/gst177/README.html). The tour operator will have to provide documentation to support its claim, including the original receipts or invoices showing the tax paid and a copy of the written agreement or a CRA GST/HST ruling letter. These receipts will be returned.

We have also enclosed a copy of 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, for your information.

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 (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

2007/10/19 — RITS 93132 — Foreign Convention and Tour Incentive Program