File: 11700-1 (gjor)
Subsection 240(6)
Telephone: (613) 952-9589
Facsimile: (613) 990-1233
Dear Mr. XXXXX
This is in reply to your letter of February 19, 1992, concerning whether a non-resident client would be required to post security as a condition of registering for the GST.
The security requirements of non-resident registrants has been the subject of an ongoing review for some time and we sincerely regret the delay in responding to your concern.
We understand that the non-resident corporation in question does not and will not have a permanent establishment in Canada. The corporation will be deemed to be a "builder" by virtue of the definition of that term in subsection 123(1) of the Excise Tax Act (the Act). Its only undertaking in Canada will be to acquire one or more newly constructed residential complexes from one or more developers and to resell those residential complexes to individual purchasers.
It would appear from the information supplied that the non-resident corporation will be carrying on business in Canada and that it will be making taxable supplies in Canada in the course of commercial activities engaged in Canada. If this is the case, the non-resident corporation will be required to be registered for GST purposes by virtue of subsection 240(1) of the Act unless it is a small supplier, in which case, it may voluntarily register pursuant to the provisions of paragraph 240(3)(a) of the Act.
Because paragraph 221(2)(a) of the Act provides that a non-resident supplier who makes a taxable supply of real property by way of sale is not required to collect tax under Division II of the Act payable by the recipient in respect of the supply, you feel that the non-resident supplier should not be required to post security as required under subsection 240(6) of the Act as a condition of registering.
Your point is well taken. However, the provisions of subsection 240(6) of the Act require that every non-resident registrant without a permanent establishment in Canada must post security with this Department in amount and form satisfactory to the Minister. The provision goes on to state the reason for the requirement to post security which is to ensure collection and remittance of tax as required. The fact that another provision alleviates a person from collecting and remitting tax with respect to specific transactions does not mean that the person will not be required to collect and remit tax under other provisions albeit, at a given time, their only commercial activity in Canada falls within the alleviating provision. It is, therefore, our view that your client must provide security with this Department as required by the provisions of subsection 240(6) of the Act.
This interpretation is based upon our current understanding of the Excise Tax Act and regulations thereunder in their present form and does not take into account the effects of any proposed or future amendments thereto or future changes in interpretation.
Further, while we trust that our comments are of assistance to you, we would advise that they do not constitute a GST ruling and are, therefore, not binding on the Department in respect of any particular fact situation.
Should you require further information on any matter covered by this letter, please do not hesitate to contact Gerry O'Reilley at (613) 952-9589. If you require clarification on any other matter, your local Revenue Canada tax services office can assist you.
Yours sincerely,
H.L. Jones
Director
General Applications Division
GST Rulings and Interpretations - XXXXX
| c.c.: |
G.J. O'Reilley
M. Bloom
All Regions |
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