Telephone: (613) 954-8585
Facsimile: (613) 990-1233
XXXXX File: 11640-3(on), Sch. VI/V/7
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Attention: Mr. XXXXX
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September 22, 1994
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I refer to several letters which were given to Owen Newell of my staff during his visit to your office on February 18, 1994. The letters generally discussed exported services.
At the time of Mr. Newell's visit, you requested that the letter be reviewed. In addition, my comments were requested for input into a letter being prepared for XXXXX, who are representing their client, the XXXXX. Comments on the XXXXX will be provided in a separate letter.
My comments on the cases submitted for review follow:
Facts:
XXXXX a registrant, recruits health care professionals for hospital management companies in XXXXX. The recruiting is based in Canada.
Comments:
The service of recruiting health care professionals for non-resident clients is not a professional service under section 23 of Part V of Schedule VI. It is necessary, therefore, to consider whether the service is primarily consumed, used or enjoyed in Canada for purposes of paragraph 7(a) of Part V of Schedule VI. Although the non-resident will benefit from this service when the successful applicant commences work in XXXXX, the immediate objective or purpose of the service of recruiting potential personnel, conducting interviews, reference checks, etc., was realized in Canada. Therefore, in my view, the service was primarily consumed, used or enjoyed in Canada by the non-resident and is taxable at the standard rate of 7 percent. This conclusion is not without doubt. I would appreciate your comments.
Facts:
Promotional services supplied to non-resident.
Comments:
The services are excluded from zero-rating under paragraph 7(a) of Part V of Schedule VI to the Act and are not considered advertising services for purposes of section 8 of Part V of Schedule VI. The promotional services are taxable at 7 percent.
Facts:
A Canadian company represents individuals in the entertainment industry. The non-resident performer pays a commission for services, including securing engagements for the non-resident either in or outside of Canada. The representative's services may be wholly or partly performed in or outside of Canada.
Comments:
I agree with the analysis of the place of supply rules and section 7 of Part V of Schedule VI. However, the response does not consider the possible application of section 5 of Part V of Schedule VI. Could the representative be regarded as providing a service of acting as an agent?
Facts:
A consulting firm provides tax recovery services to a non-resident. Non-resident paid provincial tax in error on exported goods.
Comments:
The services were not considered to be advisory, consulting or professional services. It was necessary to consider, therefore, whether the services were primarily consumed, used or enjoyed in Canada.
The response stated that, "when supplied to a non-resident person, the service in question is not considered to be primarily consumed, used or enjoyed in Canada by any person". I do not agree that the fact that the supply was to a non-resident is, in itself, sufficient rationale to make this determination.
In my view, this case is similar to the situation in XXXXX involving XXXXX[.] In both cases, the supply is of non-professional services, relating to the recovery of monies in Canada. However, in the XXXXX. case it was determined that the supply was not zero-rated.
Facts:
XXXXX provides promotional services in Canada on behalf of their parent, a non-resident. XXXXX promotes trade shows to be held in XXXXX. XXXXX is reimbursed for its expenses by the parent company and by the trade show organizers in XXXXX.
Comments:
This case was an internal request for an interpretation raised by Mr. XXXXX District Office.
In her reply to Mr. XXXXX on June 25, 1992, Ms. XXXXX of your staff states:
"As the trade show is held in XXXXX and not in Canada, the benefit to the recipient of the service (i.e., to the parent company), is realized outside Canada; therefore, the service to the parent company would fall under the zero-rating provision. ..."
On June 28, 1994, Mr. Newell spoke to Mr. XXXXX and obtained additional information, including reports from the audit file.
I note that paragraph 7(a) of Part V of Schedule VI , as it read prior to the passage of Bill C-112, specifically excluded from zero-rating a supply of a service that is primarily for consumption, use or enjoyment in Canada of any person.
The rationale employed by Ms. XXXXX appears to be inconsistent with how the Department has generally been treating promotional and representative services supplied to non-residents. For example, the Department has regarded promotional services supplied by tourist offices in Canada to non-resident tourist authorities — promotion of foreign tourist destinations to persons in Canada — as being primarily consumed, used or enjoyed in Canada. In these situations, it is true that the non-resident recipient will benefit if Canadians travel to the foreign destination — as would the trade show organizers in XXXXX in this case. However, the more immediate purpose or objective of the services may be regarded as effectively promoting the destination in Canada. Providing the supplier performs his services satisfactorily, whether or not the campaign results in the expected number of Canadian tourists travelling to the foreign destination, the supplier will be considered to have met his terms of the agreement with the non-resident.
Therefore, in my opinion, the better view is that the promotional services in Canada to encourage attendance by Canadians at trade shows in XXXXX is a service that is primarily consumed, used or enjoyed in Canada by the non-resident recipient and/or potential tourists in Canada. The service is taxable at 7 percent.
Facts:
Immigration consultant services are provided to non-residents and refugee claimants living in Canada. The advisory services provided to non-residents are zero-rated under section 9 of Part V of Schedule VI.
Comments:
If the services are not advisory, consulting or research services, and if the services are not professional services, then it is agreed that the exclusion in paragraph 7(a) of Part V of Schedule VI to the Act will generally apply.
Facts:
Immigration consultant services are provided to non-residents.
Comments:
See comments above — G92-176
Facts:
A foreign bank has a representative office XXXXX in Canada. The XXXXX is restricted in the banking functions which it can perform, and for this reason only promotes the services of the foreign bank and acts as a liaison for potential clients of the foreign bank.
Comments:
See comments below in XXXXX
Facts:
A foreign bank has a representative office (xx) in Canada. The xx is restricted in the banking functions which it can perform, and for this reason only promotes the services of the foreign bank and acts as a liaison for potential clients of the foreign bank.
Comments:
The issue of Representative Offices (XXXXX) was addressed by Financial Institutions in their letter to your office on June 20, 1994. A revised letter was issued to XXXXX by your office on August 16, 1994.
Facts:
Canadian marketing services company provides consultation services and non-consultational services to non-registered non-resident.
Comments:
Whether the services outlined in the Statement of Facts are supplied separately or together may be important in characterizing the supply for purposes of sections 7, 8 and 23 of Part V of Schedule VI.
The approach in the response was essentially to consider the elements separately. I would point out that depending on how the service elements are bundled, a different result might be obtained. Taken together, could the entire package of service be regarded as a service of advertising for purposes of section 8 of Part V of Schedule VI?
Facts:
This case involves a registrant, XXXXX which operates travel assistance centres and provides assistance to insured travelers when travelling both in and outside of Canada. The travelers are insured with both resident and non-resident insurers. When contacted by a traveler, XXXXX arranges for third parties to provide services to travelers as required by the traveler's insurance policy. XXXXX invoices the insurer a flat fee and a case fee based on the number of cases and type of claim. XXXXX receives compensation from the insurer for costs reimbursed to the traveler on behalf of the insurer and those costs incurred by XXXXX in acquiring third party services.
Comments:
respect to the flat fee, I refer to Policy Statement P-144, Travel Assistance Services Supplied to Non-resident Tour Operators, which was recently placed on the internal database. You may wish to refer to this With policy statement when determining whether the services for which a flat fee was charged are zero-rated when supplied to a non-resident.
With respect to the case fee, although not addressed in the policy statement, the GST status of the fee might depend on whether the arrangements relate to third party services provided in Canada. For example, if the case fee relates to arranging medical attention outside of Canada, then the fee may be zero-rated, even though the arrangements were made from Canada. I would appreciate your views on this approach.
Facts:
A registrant supplies training services in Canada to clients of a non-registered non-resident. The non-resident sells computer products to Canadian recipient.
Comments:
The response focuses on section 7 of Part V of Schedule VI to the Act. It is concluded that the services are excluded from relief under section 7 of Part V of Schedule VI because the services are primarily consumed, used or enjoyed in Canada.
The letter does not consider the possible application of section 18 of Part V of Schedule VI which zero-rates training services under certain specified circumstances.
Facts:
Promotional services supplied to non-resident.
Comments:
The activities of the supplier, XXXXX are described as simply promoting XXXXX in Canada.
The Department's response focuses on sections 5, 7 and 8 of Part V of Schedule VI to the Act and strongly suggests that the services may be zero-rated as services of advertising.
It is not possible to draw any conclusions respecting the possible application of any of these provisions without additional facts as to the nature of the services/activities engaged in by the supplier. In my view, however, promotional services may generally be distinguished from services of advertising. Reference may be made to XXXXX and XXXXX above.
Facts:
Management fees charged to a non-registered non-resident. The recipient is engaged in commercial real estate development outside of Canada. The services do not lead directly to an anticipated supply or delivery of property or a service in the Canadian market.
Comments:
It was concluded in the response that the services may be zero-rated under section 7 of Part V of Schedule VI. This appears to be the correct response, assuming the services are not in relation to real property situated outside of Canada for purposes of paragraph 142(2)(d). If this were the case, the supply would be deemed to be made outside of Canada and it would not be necessary to consider the zero-rating provision.
Facts:
Debt collection service supplied to non-resident bank. The debt collection service is not considered to be an advisory, consulting or professional service. The incoming letter does not indicate whether the debt was secured or unsecured. Also, the letter does not describe the debt collection services undertaken in Canada.
Comments:
Based on the information provided, it appears that the services are excluded from zero-rating under paragraph 7(a) of Part V of Schedule VI to the Act. The debt collection services are taxable at 7 percent.
Facts:
Canadian sales representative's commission charged to non-resident.
Comments:
See comments below — XXXXX
Facts:
Canadian sales representative's commission charged to non-resident.
Comments:
XXXXX[.] The area of export services, particularly non-physical, non-professional services, is a difficult area. The inventory of cases you provided illustrates, in particular, the difficulties associated with determining where a supply of a service is primarily consumed, used or enjoyed.
As many of the above suggestions are not without doubt, we would appreciate any comments that you or your staff may have. In this regard, please contact R. Allwright at (613) 952-8810 or G. Ryhorchuk at (613) 952-6743.
H.L. Jones
Director
General Tax Policy
Excise/GST
GTP: XXXXX
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