11645-1/
11590-9/11645-3-1(sjm)
Ss. 123(1), 213, Sec. 8, Sch VII, ETA
XXXXX August 3, 1995
This is in reply to your facsimile transmission of July 19, 1995, addressed to Susan Mailer of the GST Imports Unit, wherein you asked for our assistance in the determination of the GST tax status of the above-noted importation proposed by XXXXX
You have identified five types of products which could be imported. I will repeat each one here, followed by our comments:
1. Gold concentrates from black sands alluvial deposit, of which, is processed from a complex ore into raw gold faction (not dore).
2. Gold concentrates from black sands alluvial deposit, of which, is processed from a complex ore into a dore' bar at
(i) less than 995 pure;
(ii) more than 995 pure.
3. Platinum and palladium concentrates from black sands alluvial deposit, of which is processed from a complex ore into a raw faction (not dore').
4. Platinum and palladium concentrates from black sands alluvial deposit, of which, is processed from a complex ore into a dore bar at :
(i) less than 995 pure;
(ii) more than 995 pure.
5. Gold, platinum, palladium strategic minerals, and rare earths concentrates in raw form to be shipped form Alaska to a processing facility in Canada.
Section 213 of the Excise Tax Act (ETA) states that no tax on imported goods is payable in respect of goods included in Schedule VII of the ETA. Section 8 of Schedule VII prescribes certain goods imported in prescribed circumstances and under prescribed terms and conditions to be non-taxable. The following goods are prescribed:
3. (a) precious metals imported under any circumstances;
(b) unwrought silver, gold or platinum, waste and scrap of precious metal or of metal clad with precious metal, and concentrates of silver, gold or platinum where imported for the purpose of being refined into precious metal
"Precious metal" is defined in subsection 123(1) to mean
a bar, ingot, coin or wafer that is composed of gold, silver or platinum and that is refined to purity level of at least
(a) 99.5% in the case of gold and platinum, and
(b) 99.9% in the case of silver;
A precious metal, as that term is used in the Excise Tax Act is distinguished from bullion in that a precious metal is one that comes in
1. one of four specific forms, and
2. that is composed of one of three specific metals, and
3. that is refined to the specific purity level that corresponds to that metal.
Bullion, on the other hand, includes precious metals and everything outside the scope of that definition. So, while a precious metal is undoubtedly bullion or a bullion product, bullion is not necessarily a precious metal.
The status of a precious metal is conveyed by way of various marks stamped on a bar, coin, ingot or wafer which indicate the fineness (purity) of the product, the refinery that issued the product and the serial number of the product. Together, the stamps represent a guarantee of the product's quality, purity, accuracy and, most important for traders in the financial markets, liquidity. Only 58 refineries worldwide have been approved by the LBMA as having London Good Delivery Status and, without the guarantee implicit in the stamps of these refiners, a bullion product is "not acceptable for delivery" and is not very liquid.
The Department of Finance has also confirmed that it was never intended that a gold "bar", for example, that was cut rather than cast into that form would be captured in the definition of precious metal. Given the nature of the environment of financial markets, it is appropriate that the import of the individual words "bar, coin, ingot or wafer" be taken beyond their ordinary dictionary meanings and considered in the context of financial instruments.
It is the Department's current position that the definition of a precious metal in the Excise Tax Act requires that a gold, silver or platinum bar, coin, ingot or wafer be refined into that form and have a purity level of at least 99.5% in the case of gold and platinum, and 99.9% in the case of silver in order to qualify as a precious metal. The effect of this position is that only those bullion products in the required forms and of the required purity levels that are generally recognized as financial instruments by Canadian financial institutions shall be considered to have met the requirements of the definition of a precious metal. Typically, these products will bear markings that indicate the purity level of the metal and have an identification of the issuing financial institution or refinery.
Gold, silver or platinum in the form of a bar, coin, ingot or wafer that has merely been cut into that shape from bullion that has been refined to the required purity level is considered not to meet the definition of a precious metal. In addition, bullion that has been manufactured from precious metals or pieces thereof that have simply been melted and re-cast by a person who is not considered to meet the Canadian financial industry's standards also does not qualify as a precious metal. Such products will be treated as taxable supplies under the Excise Tax Act.
XXXXX is not known in the financial community as a recognized refiner. It is therefore unlikely that any of the products mentioned above in 1 - 5 would meet the appropriate marking standards to qualify as a precious metal. However, it would be a question of fact as to whether the products identified in 1 - 5 would meet these criteria. We would also note that other minerals, such as palladium, would not qualify as one of the three specific minerals - being: gold, silver and platinum.
Should you have further questions on the application of the GST to imported precious metals, please contact Susan Mailer at (613) 952-9579.
H. L. Jones
Director
General Applications Division
GST Rulings and Interpretations
Doc: 1353 (REGL)
| c.c.: |
S. J. Mailer
Imports Unit (copy to circulate)
L. Burroughsford / D. Jones, Financial Institutions x Division XXXXX |
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