18 September 2007 GST/HST Interpretation 94842 - Application of Section 232

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 required documentary evidence when paying or crediting an amount on account of the short-term accommodation rebate (the Rebate) under the Visitor Rebate Program (the VRP). We apologize for the delay in responding to your enquiry.

XXXXX is registered for GST/HST and operates XXXXX (the Hotels). The Hotels have clients that are non-registered non-resident tour operators (the Tour Operators).

The Hotels have entered into written agreements with the Tour Operators before September 25, 2006, to supply short-term accommodation that is not included in a tour package. The accommodation is first made available to non-resident individuals before April, 2009.

Consequently, you have determined that the Tour Operators are eligible for a Rebate under the VRP provided that they meet all of the requirements. The Hotels are planning to pay or credit an amount on account of the Rebate to the Tour Operators.

Interpretation Requested

You would like to know if the Hotels are required to keep documentary evidence that the guests are non-residents. Is a letter from the Tour Operators stating that all the guests are non-residents acceptable as proof of the individuals non-residency status? Must the Hotels keep copies of non-resident guests' passports?

Interpretation Given

The Hotels should obtain the following information in order to confirm that they can pay or credit an amount on account of the Rebate to a Tour Operaror:

•   the name of the Tour Operator,

•   confirmation that the Tour Operator is a non-resident,

•   confirmation that the Tour Operator is not registered for GST/HST purposes,

•   confirmation that the Tour Operator supplies the short-term accommodation in the ordinary course of its business to another non-resident person,

•   confirmation that payment for the accommodation was made at its business address or at the address of its agent outside Canada,

•   the name of the non-resident person who acquired the accommodation from the Tour Operator if that person is not a non-resident individual, and

•   the name(s), physical address(es) and arrival and departure dates of the non-resident individual(s) to whom the accommodation was made available. Note, a post office box is not a physical address.

To assist a Hotel in obtaining the needed information from a Tour Operator, Appendix 1 provides an example of a form that could be used to help determine if a non-resident Tour Operator qualifies for the Rebate. This is not a Canada Revenue Agency (CRA) form. The CRA will determine at the time of audit whether a Hotel could pay or credit an amount on account of the Rebate to a particular Tour Operator and claim a deduction from its net tax.

A Hotel's invoice to a Tour Operator has to show that the Hotel has charged the tax and paid or credited the Tour Operator with the amount on account of the Rebate. This provides evidence to support the amount of tax included as tax collected or collectible in the Hotel's net tax calculation and also provides evidence to support the Hotel's deduction of the amount it paid or credited from its net tax.

When non-resident individuals check into the Hotels, documentary evidence of their non-residence status must be provided. An example of a form that could be completed by the non-resident guest is shown in Appendix A of GST/HST Memorandum 4.5.1, Exports - Determining Residence Status (copy attached). Please note that a statement/letter from a Tour Operator stating that all the guests are non-residents is not acceptable as proof of their non-residency. Also, a copy of a passport does not provide the required proof.

When accepting the information provided by a Tour Operator, a Hotel must exercise due diligence. A person will be considered by the CRA to have exercised due diligence where it can be clearly demonstrated that, to the best of their ability, they have taken reasonable care in ensuring that the information obtained was correct.

If a Tour Operator would not have been entitled to the Rebate if it had paid the tax and satisfied the filing criteria for a Rebate application, and the Hotel pays or credits an amount on account of the Rebate and claims a deduction from its net tax, the Hotel may be jointly and severally liable with the Tour Operator to repay to the Receiver General the amount paid or credited to the Tour Operator. Similarly, both parties may be liable to repay any excess amount paid or credited if the amount paid or credited exceeded the amount that would have been eligible for the Rebate. However, the Hotel is only jointly and severally liable to pay these amounts if it knew or should have known that the Tour Operator did not satisfy the eligibility conditions for the Rebate.

All publications referenced in this letter are available on our Web site at www.cra-arc.gc.ca/gsthsttech.

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 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

APPENDIX 1

The following is an example of a form that could be used to help determine if a non-resident non-registered Tour Operator would qualify for the Rebate. It is not a CRA form. The CRA will determine at the time of audit whether a registrant Hotel could pay or credit an amount on account of the Rebate to a Tour Operator and claim a deduction from its net tax.

To ________________________________________________________________________

 ________________________________________________________________________

 ________________________________________________________________________

(Name and address of Hotel)

We hereby certify that we ordered the following supply of short-term accommodation from you:

(Detailed description of the accommodation to be provided by the Hotel)

We confirm that we would be entitled to the short-term accommodation rebate under subsection 252.1(3) of the Excise Tax Act if we had paid the GST/HST and filed a rebate claim with the CRA. We have met all of the following requirements:

•   We are not a resident of Canada.

•   We are not registered for GST/HST.

•   We supplied the short-term accommodation or tour package in the ordinary course of our business to another non-resident.

•   Payment for the short-term accommodation or tour package was made at:

–   our business address (see below) outside Canada, or,

–   the address(es) outside Canada of our agent(s) which is (are) attached.

•   The short-term accommodation or tour package being supplied to the other non-resident was made available to a non-resident individual.

•   The individual using the room was a non-resident (verified at check-in).

We will provide any additional information required to verify the above.

We will pay any GST/HST for any accommodation purchased found not to be eligible for the short-term accommodation rebate.

Dated at: _________________ this _____________ day of _______________, 20____.

(Name and address of the tour operator)

(Name of authorized officer of the tour operator)

(Signature of authorized officer of the tour operator)

2007/08/30 — RITS 94916 — XXXXX Fruit Juice XXXXX