10 July 2007 GST/HST Interpretation 86536 - Elimination of the GST/HST Visitor Rebate Program

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:

This is in response to the fax XXXXX from XXXXX (the Company), to XXXXX the Visitor Rebate Program at the Summerside Tax Centre. XXXXX raised some questions regarding the Notice of Ways and Means Motion of September 25, 2006, to amend the Excise Tax Act (ETA) to eliminate the Visitor Rebate Program (the VRP), effective April 1, 2007. The request has been forwarded to us for reply. We apologize for the delay in our response.

All legislative references are to the ETA and the regulations thereunder, unless otherwise specified. GST refers to the Goods and Services Tax and HST to the Harmonized Sales Tax.

XXXXX. You confirmed that the Company sells XXXXX to non-resident tour operators, and that the Company supplies accommodation separately as well as within tour packages.

Interpretation Requested

In the fax, the following questions were asked:

1. What is the current status of the proposed amendments to eliminate the VRP? Have the proposed amendments been discussed in Parliament? When will the proposed amendments become law?

2. How will the Company, its clients (i.e., non-resident tour operators) and the Canadian tourism industry be notified when the proposed amendments become law?

3. The proposed amendments state that if a written agreement for a supply to which the VRP applies was entered into prior to September 25, 2006, the VRP would generally continue to apply until April 1, 2009.

(a) Does this mean that the VRP will apply where the Company signed a contract with its client on September 24, 2006, and the accommodation included in the contract is made available to a non-resident individual travelling to Canada in March 2009?

(b) What is a "written agreement" as referred to in the proposed amendments? Does it refer to an agreement between the Company and its suppliers and/or between the Company and its clients?

4. Is the Company's confidential tariff, containing all of its 2007 prices, considered a written agreement? The confidential tariff was published and distributed to its worldwide tour operators in September and October of 2006.

5. How does the Company handle the daily quotation requests received from its non-resident clients for travelling into Canada in 2007 and 2008? For example, the Company made a proposal in June 2006 for a group travelling to Canada in 2007. The Company revised the quotation in October 2006, which was accepted, and now has to issue the final contract.

(a) Is the Company required to charge the GST on the supply?

(b) If the non-resident tour operator pays for the supply now, will the tour operator be relieved of paying the GST if the law is not enacted until after April 1, 2007?

Interpretation Given

Status of the Amendments (Response to Questions #1 and #2)

On March 19, 2007, Budget 2007 confirmed the cancellation of the VRP as announced on September 25, 2006, and announced the introduction of the new Foreign Convention and Tour Incentive Program (the FCTIP). Budget 2007 was introduced into Parliament as Bill C-52 on March 29, 2007, and received Royal Assent on June 22, 2007. The FCTIP provides GST/HST relief to non-registered non-resident tour operators that purchase tour packages that include eligible accommodation or that purchase eligible accommodation that is resold to non-residents as part of a tour package under certain conditions.

Once a particular bill is tabled in the House of Commons, you can enquire about the status of that bill at any time by visiting the Parliament of Canada Web Site at www.parl.gc.ca and selecting the "Bills" option from the main menu.

When a bill containing proposed amendments to the ETA receives Royal Assent, the CRA publishes an article in the Excise and GST/HST News to notify Canadians that the bill is now law. The Excise and GST/HST News is issued quarterly and is available on the CRA's Web Site at http://www.cra-arc.gc.ca/formspubs/type/gsthstnews-e.html.

Amendments With Respect to Tour Packages (Response to Question #3(a))

Under the amendments to the ETA, the VRP continues to apply to supplies of eligible accommodation and supplies of tour packages that include eligible accommodation purchased by a non-resident under an agreement in writing that was entered into before September 25, 2006, where the first night of eligible accommodation in Canada is made available before April 2009. Otherwise, the FCTIP applies to supplies of eligible accommodation and supplies of tour packages that include eligible accommodation purchased by a non-resident in which the first night of eligible accommodation in Canada is after March 2007. Therefore, the VRP will apply where the Company signed a contract with a client on September 24, 2006, and the accommodation included in the contract is made available to a non-resident individual travelling to Canada in March 2009.

Please note that non-resident tour operators will be entitled to a rebate of all of the GST/HST they pay for eligible accommodation, and a rebate of generally 50% of the GST/HST they pay for tour packages that include eligible accommodation, under either the VRP or the FCTIP, regardless of the date they entered into written agreements or the date they purchased the accommodation or the tour package that includes eligible accommodation.

Written Agreements (Response to Questions #3(b) and #4)

The CRA has recently issued GST/HST Notice 221, Questions and Answers on the Cancellation of the Visitor Rebate Program and the New Foreign Convention and Tour Incentive Program, Q&A 1.6 of which addresses what will be considered a written agreement for the tourism industry (a copy of GST/HST Notice 221 is enclosed). GST/HST Notice 221 is also available on the CRA's Web Site at http://www.cra-arc.gc.ca/E/pub/gi/notice221/notice221-e.pdf. The Company's confidential tariff alone would not be considered a written agreement for purposes of the VRP; documentation outlining the details of the relationship between the parties to the written agreement would also be required.

The "written agreement" referred to in the amendments to the ETA is the agreement for the supply of accommodation or a tour package between a GST/HST registrant and a non-resident person (e.g., between the Company and a non-resident tour operator) and not between two GST/HST registrants (e.g., between the Company and its suppliers).

Quotations and Contracts (Response to Question #5)

The supply of accommodation or a tour package including accommodation is a taxable supply, and as a result, the Company is required to charge and account for the tax on the supply of accommodation or a tour package made to a non-resident tour operator.

In the example provided, the Company made a proposal in June 2006 to a non-resident tour operator with respect to a group of non-resident individuals travelling to Canada in June 2007. The Company revised the quotation in October 2006, which was accepted by the non-resident tour operator, and now has to issue the final contract. The CRA cannot provide a definitive answer with respect to whether the rebate applies to this particular scenario, given that the documents surrounding this transaction were not submitted for review. However, assuming that all the existing legislative conditions that give rise to the rebate are met:

•   if the Company entered into a written agreement with the non-resident tour operator before September 25, 2006, and the revised quotation did not modify, vary or otherwise materially alter the agreement to the extent that it was terminated, then the VRP would continue to apply to that transaction;

•   if the Company entered into a written agreement with the non-resident tour operator before September 25, 2006, and the revised quotation did modify, vary or otherwise materially alter the agreement to the extent that it was terminated, then the FCTIP would apply to that transaction; or

•   if the Company did not enter into a written agreement with the non-resident tour operator before September 25, 2006, and is just entering into the written agreement now, then the FCTIP would apply to the transaction.

If the supply is of a tour package that includes eligible accommodation, the Company may pay or credit the qualifying non-resident tour operator an amount equal to the rebate, whether it is the VRP or the FCTIP that applies to the supply. The Company may take a deduction from its net tax for the amount it pays or credits. If the FCTIP applies, the Company will be required to file a prescribed information schedule no later than the due date for the GST/HST return in which they claimed the deduction. This information schedule, i.e., form GST106, Schedule 2 - Information on Claims Paid or Credited for Foreign Conventions and Tour Packages, is intended to provide the CRA with information regarding the amounts the registrant paid or credited. Please see the questions and answers under the heading Tour package rebate paid or credited by a registrant of the enclosed GST/HST Notice 221 for more details about filing form GST106.

If the supply is of eligible accommodation that is not part of a tour package, the Company may pay or credit the qualifying non-resident tour operator an amount equal to the rebate if the VRP applies. If the FCTIP applies, the non-resident tour operator must apply directly to the CRA for the rebate, or enter into an agreement to have another person (e.g., the Company or a third party) complete and file the rebate claim on the non-resident tour operator's behalf (the requirements for this method are outlined under the heading Filing a rebate claim on behalf of a qualifying non-resident in the enclosed GST/HST Notice 221).

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 ETA, regulations, or our interpretative policy could affect this interpretation.

XXXXX If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-957-8253.

Yours truly,

Jacqueline Russell, CGA
Services and Intangibles Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate

2007/07/26 — RITS 87219 — Cancellation of the GST/HST Visitor Rebate Program