Telephone No.: (613) 957-8224
Fax No.: (613) 990-3602
File No.: 11680-7(cav)
subsections 169(2), 179(3), 180
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Subject:
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Registration Requirements for Non-Residents of Canada
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Dear Mr. XXXXX
I refer to your request to Mr. XXXXX Tax Services to forward your letter dated October 12, 1995 and his response to you dated December 7, 1995 to the General Applications Division, Rulings and Interpretations, for review and comment. I apologize for the delay in responding.
I agree with Mr. XXXXX opinion that in order for your non-resident client to be eligible for registration for GST purposes the non-resident must be providing taxable goods or services in Canada in the course of carrying on a business in Canada. Our understanding, based on your facts, is that there are no supplies being made in Canada by your client. Accordingly, registration would not be allowed.
With respect to your statement that the Department is treating unregistered non-residents unfairly by not allowing them to recover the GST at time of importation, I wish to point out, as did Mr. XXXXX that there are methods by which the non-resident could effectively resolve this issue. These approaches allow for the recovery of the GST paid by the non-resident.
As Mr. XXXXX stated, were the assembler to act as importer of the kits and perform a commercial service in respect of the goods owned by the non-resident, the GST paid at the border could be claimed by the assembler as an input tax credit, thereby removing any Division III liability from the non-resident company. Also, the assembler could apply for tax relief where it meets the criteria set out in the attached Technical Information Bulletin B-069 respecting exporters of processing services.
As an alternative, the 'flow-through' approach would allow your non-resident client to recover tax paid at time of importation. Section 180 of the Excise Tax Act permits a person to claim an input tax credit for the tax paid by the non-resident under Division III. In this case, as long as the non-resident provides the registrant with satisfactory evidence that GST has been paid on the goods, the registrant may be considered to have paid that tax and would be able to claim an input tax credit to the same extent as would have been the case if the registrant had been the importer of record and had actually paid the tax. Generally, the Department considers a copy of the B3 Customs Coding Form and its supporting documentation to be sufficient evidence for purposes of section 180 to establish that tax under Division III was paid in respect of the importation of property. Finally, as Mr. XXXXX stated either of these arrangements requires the consent of your client's assembler in Canada.
Should you require further clarification or information please do not hesitate to contact Mr. XXXXX or Carol Ann Villeneuve at (613) 957-8224.
H.L. Jones
Director
General Applications Division
GST Rulings and Interpretations
Policy and Legislation Branch
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