31 October 1996 GST/HST Interpretation 11640-3[5] - Application of the GST to Services Supplied by an International Call Centre

Attached is a copy of an interpretation letter dated March 5, 1996 XXXXX, written to the above-referenced firm. The letter concerns the application of the Goods and Services Tax (GST) to services supplied by an international call centre, XXXXX to a company based in XXXXX[.] The bills for this service are sent to XXXXX[.] I understand that XXXXX has changed its name to XXXXX[.] The interpretation provided by the TIS officer to XXXXX states that any service performed on real property in Canada is deemed to be made in Canada and, as a result, subject to the GST. However, that is not the question that was asked by XXXXX wants to know if the call centre services (i.e., telemarketing services) supplied by XXXXX to the company based in XXXXX are subject to the GST at 7%.

The XXXXX company in XXXXX referred to by XXXXX is XXXXX[.] The following facts have been obtained concerning the transactions between XXXXX and XXXXX

•   XXXXX is a non-resident corporation incorporated in the XXXXX.

•   XXXXX provides XXXXX services on behalf of XXXXX

•   XXXXX contracts with a Canadian company, XXXXX to provide telemarketing services.

•   These telemarketing services consist of XXXXX contacting people throughout XXXXX to solicit orders for XXXXX[.] When telemarketing calls are successful, they are relayed to the appropriate office in XXXXX and the applicable XXXXX is carried out by the operator responsible for that market.

•   When XXXXX invoices XXXXX for the supply of the telemarketing services, the totals are shown in XXXXX XXXXX pays for these services XXXXX[.]

•   Although XXXXX has an administrative office in XXXXX all the services are performed in XXXXX and all revenue is generated in XXXXX[.] Before determining the tax status of the telemarketing services supplied by XXXXX to XXXXX a determination must first be made regarding the residency status of XXXXX is incorporated in XXXXX is, therefore, not deemed, under the provisions of paragraph 132(1)(a) of the Excise Tax Act (Act), to be resident in Canada. Although XXXXX has an administrative office in Canada, XXXXX is not making any supplies through that office. The XXXXX office is not a permanent establishment of XXXXX 132(1)[.] As XXXXX does not have a permanent establishment in Canada, XXXXX is not deemed under the provisions of subsection 132(2) of the Act to be resident in Canada. For GST purposes, XXXXX is a non-resident.

XXXXX is providing a service of soliciting orders for supplies of XXXXX services to be performed by XXXXX in XXXXX XXXXX[.] Under the provisions of paragraph 142(2)(d) of the Act and, depending upon the circumstances XXXXX XXXXX paragraph 142(2)(g) of the Act, XXXXX services are deemed to be made outside Canada. Therefore, because of the proposed amendment to Schedule VI, Part V, section 5 to the Act contained in the Notice of Ways and Means Motion dated April 23, 1996, the telemarketing services supplied by XXXXX to XXXXX (a non-resident) are zero-rated.

I would also like to mention that, prior to April 24, 1996 (the effective date of the proposed amendment to Schedule VI, Part V, paragraph 7(f) of the Act contained in the Notice of Ways and Means Motion dated April 23, 1996), the telemarketing services could have qualified for zero-rating under Schedule VI, Part V, section 7.

The letter to XXXXX should be amended.

For your information, the XXXXX Tax Services office is in the process of writing XXXXX and advising it that XXXXX telemarketing services are zero-rated.

Please contact me at (613) 952-6743 if you have any questions or 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
Attachment

11735-15
11783-2/Ss.167(1) & (1.1)
HQR0000316