19 December 1996 GST/HST Interpretation 11640-3[3] - Real Estate Referral

                                                                        Telephone #: (613) 954-8585
Fax #: (613) 990-1233
XXXXX                                                                                 File #: 11640-3(glr)
XXXXX                                                                                 HQR0000371
XXXXX                                                                                 Sch. VI/V/7

I refer to XXXXX E-mail messages of October 16, 1996, and October 25, 1996, concerning the application of the Goods and Services Tax (GST) to a fee paid to a realtor in XXXXX (resident realtor) for a referral.

I understand that resident realtor with XXXXX provided a referral over the telephone to a non-resident individual who was moving from XXXXX[.] The non-resident individual was a friend of the resident realtor. The individual was referred to XXXXX in XXXXX (non-resident realtor). The individual subsequently purchased a house from the non-resident realtor. The non-resident realtor sent a sum of money to the resident realtor as a referral fee. There is nothing contractual obligating the payment of the fee and the actual making of the payment by the non-resident realtor was voluntary.

There are two possible answers relating to the referral fee, as follows:

(1) There is a supply of a referral service being made by the resident realtor to the non-resident realtor. The supply is deemed to be made in Canada under the provisions of paragraph 142(1)(g) of the Excise Tax Act. The supply qualifies for zero-rating (i.e., subject to the GST at 0%) under the provisions of Schedule VI, Part V, section 7 to the Act. The exclusion in proposed paragraph (a.1) does not apply because the service was rendered to an individual while that individual was outside Canada.

(2) There is no supply being made by the resident realtor to the non-resident realtor. Therefore, the fee the resident realtor received from the non-resident realtor will not be subject to the GST.

Notwithstanding (2) above, I believe the more correct answer is that as outlined in (1). The referral service supplied by the resident realtor to the non-resident realtor is zero-rated.

Please contact me at (613) 952-6743 if you require further information.

Garry L. Ryhorchuk
Senior Policy Officer
Border Issues Unit
General Operations and Border Issues Division
GST Rulings and Interpretations
Policy and Legislation Branch