Telephone: (613) 954-8585
Fax: (613) 990-1233
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XXXXX
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File: 11640-4(on), Sch. VI/V/1(b), ss. 142(1), 143(1)
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Attention: XXXXX
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August 11, 1994
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I refer to the memorandum and attachments received in this office on June 24, 1994 from Ms. XXXXX of your staff. Forwarded with her memorandum were copies of a request for a ruling from XXXXX representing XXXXX, and the draft response prepared by Ms. XXXXX. The ruling pertains to the taxable status of a XXXXX sold to a non-resident who intends to export the dismantled XXXXX parts. Scrap parts will not be exported and will be sold in Canada by the non-resident. Ms. XXXXX has requested comments on the ruling, prior to its release.
I understand that:
1. XXXXX is a limited partnership and is a GST registrant.
2. XXXXX currently owns equipment, licences and miscellaneous interest which are components of a XXXXX located in XXXXX.
3. XXXXX[.]
4. XXXXX is a corporation resident in XXXXX and is currently not a GST registrant.
5. A small amount of miscellaneous piping, random pieces of structural steel, electrical wiring and other miscellaneous items will remain after the completion of the dismantling. The scrap metal will belong to XXXXX who may sell it in Canada. The value of the scrap value is estimated to be less than XXXXX % of the total price of the contract.
6. Mr. Carl Beck, formerly of the Real Property Unit, Tax Policy - Special Sectors, confirmed that the XXXXX is not considered real property once dismantling commences.
7. Mr. Serge Bernier of Taxing Provisions, General Tax Policy, was contacted on the issue of incidental supplies. Mr. Bernier confirmed that the salvage material is not considered incidental to the supply of the XXXXX pursuant to section 138 of the Act.
The question which has arisen is whether the XXXXX can be zero-rated as an export since the scrap metal will remain in Canada where it will be sold.
I agree with Ms. XXXXX proposed response that the supply of the XXXXX may be zero-rated pursuant to section 1 of Part V of Schedule VI. In order for section 1 to apply, four conditions must be met. Paragraph 1(b) requires that the property is not acquired by the recipient for consumption, use or supply in Canada before the exportation of the property by the recipient. You may wish to clarify that the requirement of paragraph 1(b) has been met, even though XXXXX will be supplying the scrap metal in Canada. Paragraph 142(1)(a) deems a supply of tangible personal property to be made in Canada where the property is, or is to be, delivered or made available in Canada to the recipient of the supply. This provision is subject to sections 143, 144 and 179. Subsection 143(1) deems a supply of personal property made in Canada by a non-resident person to be made outside Canada, unless the supply is made in the course of a business carried on in Canada or the non-resident is registered for GST purposes. XXXXX is not carrying on business in Canada and provided XXXXX is not registered at the time the supply of the scrap metal is made, the supply of scrap metal may be deemed to be made outside Canada.
Should you have any questions, please contact Owen Newell of my staff at (613) 954-4280.
H.L. Jones
Director
General Tax Policy
Excise/GST
Policy and Legislation
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