26 July 2007 GST/HST Interpretation 87219 - 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:

Thank you for your fax XXXXX to our XXXXX Tax Services Office, concerning the former Goods and Services Tax (GST)/Harmonized Sales Tax (HST) Visitor Rebate Program (VRP). Your request has been transferred to us for reply. We apologize for the delay in responding to you.

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

In your fax you gave an example of a non-resident who stayed at a fishing lodge in Canada during July 2006. Upon checking out of the lodge, the non-resident gave a deposit to the operator for a trip for the same week in July 2007. The operator gave the non-resident a receipt for the deposit. You stated that it is a normal industry practice for the operator to take a deposit to reserve a spot for the following year, and that full payment will be made when the non-resident arrives in July 2007.

Interpretation Requested

You would like to know whether the deposit and the receipt would be an agreement in writing for the purposes of the transitional rules relating to the cancellation of the former VRP.

Interpretation Given

Under the former VRP, subsection 252.1(2) provided a rebate to non-residents of the GST/HST paid on certain accommodation. Specifically, a rebate was available to non-resident persons who paid GST/HST on short-term accommodation, camping accommodation or eligible tour packages.

However, as part of the new Foreign Convention and Tour Incentive Program (FCTIP), subsection 252.1(2) was amended to limit the rebate to situations where a non-resident is the recipient of a supply of an eligible tour package. Generally, the amendment to subsection 252.1(2) applies in respect of any supply of short-term accommodation, camping accommodation or eligible tour packages for which the accommodation is first made available after March 2007. As a result, the VRP generally ceases to apply after March 2007, unless grandfathered under the transitional rules, as discussed below.

Please note, the term "eligible tour package" refers to a tour package that includes either short-term and/or camping accommodation in Canada and at least one service. More information on the meaning of "eligible tour package", "short-term accommodation" and "camping accommodation" can be found starting at Question 3.1 in GST/HST Notice 221, Questions and Answers on the Cancellation of the Visitor Rebate Program and the New Foreign Convention and Tour Incentive Program, a copy of which is enclosed.

2. Transitional Rules - Accommodation Included In An Eligible Tour Package

Generally, the former VRP ceases to apply, and the new FCTIP takes effect, in respect of a supply of an eligible tour package where the accommodation included in the package is first made available after March 2007. However, under the transitional rules, the VRP continues to apply if the first night of accommodation in Canada included in the eligible tour package is made available before April 2009 and the eligible tour package is supplied under an agreement in writing entered into before September 25, 2006.

If the operator of the fishing lodge in your example is supplying an eligible tour package, then the matter of whether a receipt would be an agreement in writing under the transitional rules is not an issue because either way the non-resident is entitled to a rebate of the GST/HST paid on the eligible tour package, provided that all of the eligibility requirements and conditions are met.

The eligibility requirements and conditions under the new FCTIP with respect to the rebate of the GST/HST paid on eligible tour packages are identical to those under the former VRP. Therefore, a non-resident purchasing an eligible tour package does not have to be concerned with whether there was an agreement in writing before September 25, 2006.

3. Transitional Rules - Accommodation Not Included In Eligible Tour Packages

Generally, the former VRP ceases to apply in respect of a supply of short-term or camping accommodation that is not included in an eligible tour package where the accommodation is first made available after March 2007. As previously mentioned, under the new FCTIP, subsection 252.1(2) is limited to supplies of eligible tour packages and does not apply in respect of supplies of short-term and/or camping accommodation first made available after March 2007, unless the accommodation is purchased by a non-resident non-GST/HST registered tour operator and resold as part of an eligible tour package.

However, under the transitional rules, the VRP continues to apply in respect of short-term and/or camping accommodation that is not included in an eligible tour package if the accommodation is first made available before April 2009 and is supplied under an agreement in writing entered into before September 25, 2006. Consequently, if the operator of the fishing lodge in your example is supplying accommodation that is not included in an eligible tour package, then the matter of whether a receipt would be an agreement in writing is important because only those purchases that are grandfathered under the former VRP are eligible for a rebate.

A deposit is an amount given by a recipient as security for the performance of an obligation by the recipient. This amount may or may not be refundable. Generally, a deposit in its own right does not qualify as an "agreement in writing" for the purposes of the transitional rules relating to the cancellation of the former VRP.

However, the non-resident in your example gives the deposit to the operator of the fishing lodge in conjunction with making a reservation. The term "reservation" is not defined in the ETA. For the purposes of section 252.1 of the ETA, the CRA considers the term to refer to the act of arranging in advance for the occupancy of short-term and/or camping accommodation.

Also, for the purposes of section 252.1, the CRA considers a reservation to be a simple agreement. The supplier promises to hold the short-term and/or camping accommodation for the person, and the person agrees to pay the charges. That being said, the matter of whether a reservation made before September 25, 2006, would be an agreement in writing for the purposes of the transitional rules relating to the cancellation of the VRP is a question of fact and would have to be determined on a case-by-case basis. However, we are pleased to provide you with the following general comments.

(i) Reservations made by telephone or in person

Generally, for the purposes of section 252.1 of the ETA, when a person makes a reservation by telephone or in person, the person is entering into a verbal agreement with the supplier. Although the supplier may enter the reservation in a journal or electronic system, there is nothing physical to evidence the agreement between the parties. Therefore, by itself a reservation made by telephone or in person is not an agreement in writing.

That being said, if the supplier mails, faxes, e-mails or gives a document to the person confirming the reservation (i.e., confirming the details of their agreement), then the document would be regarded as physical evidence of the agreement, and thus the arrangement would be an agreement in writing. The following details with respect to a particular reservation might be included in a confirmation document:

•   the person's name, address and contact information;

•   the arrival and departure dates;

•   the type of accommodation required (e.g., single or double room);

•   the charges for that type of accommodation;

•   information regarding how long the accommodation will be held on the arrival date; and

•   a confirmation number.

Alternately, in some cases the supplier may mail, fax, e-mail or give a document to the person that only includes a confirmation number. However, the supplier would have entered the above noted details with respect to the reservation in its records. In this situation, we would accept that the document provided to a person that only contained the confirmation number as physical evidence of an agreement in writing.

Given that the former VRP continues to apply, in part, where the supply of the short-term and/or camping accommodation is made under an agreement in writing entered into before September 25, 2006, the confirmation documents must be dated before that particular date.

(ii) Reservations made by fax

Generally, for the purposes of section 252.1 of the ETA, when a person makes a reservation by fax, the faxed document is part of an agreement in writing. If the supplier mails, faxes or e-mails a document to the person confirming the reservation (i.e., confirming the details of their agreement), then the faxed document and the confirmation document would be regarded as physical evidence of the agreement, and thus the arrangement would be an agreement in writing. Please refer to the heading "Reservations made by telephone or in person" for the types of details regarding the reservation that might be included in the faxed document and/or the confirmation document.

Given that the former VRP continues to apply, in part, where the supply of the short-term and/or camping accommodation is made under an agreement in writing entered into before September 25, 2006, the confirmation document must be dated before that particular date.

(iii) Reservations made using the Internet

Generally, for the purposes of section 252.1 of the ETA, when a person makes a reservation using the Internet (either by e-mail or using an on-line reservation system), the e-mail or on-line request, as the case may be, can be rendered into writing and therefore is part of an agreement in writing. If the supplier e-mails a document to the person confirming the reservation (i.e., confirming the details of their agreement), then these electronic documents would be regarded as physical evidence of the agreement, and thus the arrangement would be an agreement in writing. Please refer to the heading "Reservations made by telephone or in person" for the types of details regarding the reservation that might be included in the electronic documents.

Given that the former VRP continues to apply, in part, where the supply of the short-term and/or camping accommodation is made under an agreement in writing entered into before September 25, 2006, the confirmation document must be dated before that particular date.

(iv) Reservations made when checking-out of an establishment

Generally, for the purposes of section 252.1 of the ETA, when a person makes a reservation for another stay at the time of checking-out of an establishment, the person is entering into a verbal agreement with the supplier.

However, if the supplier:

•   confirms the new reservation (i.e., confirms the details of their agreement) on the folio (i.e., invoice) or receipt given to the person when he or she checks-out, or

•   mails, faxes, e-mails or gives a separate document to the person confirming the new reservation,

then that folio/receipt or confirmation statement would be regarded as physical evidence of the agreement and thus the arrangement would be an agreement in writing. Please refer to the heading "Reservations made by telephone or in person" for the types of details regarding the reservation that might be included on the folio or in the confirmation document, as the case may be.

Given that the former VRP continues to apply, in part, where the supply of the short-term and/or camping accommodation is made under an agreement in writing entered into before September 25, 2006, the invoice or confirmation document, as the case may be, must be dated before that particular date.

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.

For your convenience, find enclosed a copy of GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service.

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-957-8224.

Yours truly,

Christopher Lewis
Services and Intangibles Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate

2007/06/27 — RITS 88216 — Application of GST/HST to Amounts Paid Under an Agreement