Fax for XXXXX
XXXXX
January 1995
XXXXX
The following comments relate to XXXXX (re-printed below) and its implications for the GST and freight and passenger transportation services
XXXXX
Comments:
The Goods and Services Tax (GST) is a value added tax on consumption in Canada. Under Part IX of the Excise Tax Act (Act), every recipient of a taxable supply made in Canada is required to pay tax equal to 7% of le value of consideration of the supply unless the supply is zero-rated (i.e., subject to the GST at 0%) or exempt (i.e., listed in Schedule V to the Act).
As stated above, the GST is calculated on the consideration and not on the cost. However, in very non-technical terms and from the perspective of a purchaser, the GST could appear to be based on some type or element of cost. In this sense the agreement is satisfied.
The remaining comments are tech[n]ical comments.
Registered Airlines
The Act provides that fuel supplied to airlines (resident or non resident) that are registered for GST purposes, is zero-rated if the fuel is for use in the course of providing international transportation services.
All other supplies of property and services, such as beverages, liquor, lubricants, spare parts (including engines), ground equipment, landing fees, repair and maintenance services, advertising brochures, office equipment, etc., made to these airlines (resident or non-resident) are subject to the GST at 7%. If the property is imported, the GST is paid to Canada Customs at the time of customs clearance.
Provided the property or services are acquired by these airlines (resident or non-resident) for use exclusively in their commercial activities, the airlines are entitled to claim input tax credits equal to the GST paid or payable on the acquisition. In this way, the spirit of the agreement is met in that the tax is effectively removed from these supplies.
Unregistered Airlines
Under the Act, a supply of property, such as fuel, (other than a supply of real property by way of sale) or a service made to an unregistered non-resident airline may be zero-rated provided the property or service is acquired by the non-resident for consumption, use or supply, where the person carries on the business of transporting passengers or property to, from or through Canada, in the course of so transporting passengers or property.
In order for the zero-rating provision to apply, the non-resident airline must be transporting passengers or property, whether the aircraft is mobile or immobile, at the time the non-resident consumes, uses or supplies the property or service it acquired. For example, an airline may purchase property for consumption on the aircraft while the aircraft is at the airport for a fueling stop but not physically moving (i.e., immobile). In addition, the consumption, use or supply of the property or service must be connected with or arise from the provision of the service of transporting the passengers or property.
The distinction between unregistered non-residents and registered persons exists only to have all persons involved in commercial activities in Canada treated on the basis of competitive equity and is not based on nationality of the person. Some foreign based airlines may be required to register.
Email this Content