File #: 11645-1 (gp)
ss. 169(1), 212
Dear Mr. XXXXX
I refer to your facsimile message dated March 7, 1996 addressed to Randy Nanner of my staff, concerning the importation of XXXXX[.] The following information was provided in your memorandum and in a subsequent telephone conversation with Gwen Preston of my staff:
• XXXXX[.]
• XXXXX receives an order for a XXXXX from a XXXXX dealer in Canada and installs the kit into a XXXXX[.]
• When the van conversion is complete, XXXXX ships the van to the dealer and invoices the dealer for the kit and the installation.
• At time of importation, XXXXX pays the duties and GST on the van, including the value of the kit with the entry for the van. In the supporting documentation for the import entry is a commercial invoice from XXXXX to XXXXX for the van and a separate commercial invoice from XXXXX to the XXXXX dealer in Canada for the XXXXX[.]
• XXXXX invoices the XXXXX dealer for the van.
You have requested confirmation that if XXXXX pays the duties and taxes, including GST, for the van on its own behalf and for the XXXXX on behalf of the dealer, that it would be entitled to claim the input tax credits (ITCs) for the total tax paid at time of importation. If XXXXX is not entitled to claim ITCs for the tax paid on the XXXXX you have requested confirmation that the dealer would be entitled to claim ITCs for the GST paid at time of importation on XXXXX XXXXX[.]
Interpretation Given
In order for a person to be eligible to claim an ITC in respect of the tax payable on a property or service, the Excise Tax Act requires the following conditions to be met:
1. the person must be the recipient of the property or service or the person must be the importer of the property or service;
2. the person must be a GST registrant during the reporting period in which the supply or importation is made;
3. tax must be payable by the person in respect of the supply or importation, or be paid by the person prior to its becoming payable;
4. the property or services must be acquired or imported for consumption, use or supply in the course of the commercial activities of the person; and
5. the person must have obtained sufficient documentation to establish the eligibility for the ITC before the claim is made.
At time of importation, Canada Customs requires the import entry to report the full value of the goods being imported. In this case, the value of the van has been increased by the installation of XXXXX and this total value must be included on the same import entry. While XXXXX would not meet the necessary conditions for claiming ITCs for the tax paid on the kit, since the kit is not for use in the commercial activity of XXXXX may meet the requirements for claiming ITCs for the tax paid on the value of the van, not including the kit XXXXX[.] That is, as a registered company, when importing the vans, XXXXX must pay the tax at time of importation on the van, the van must be for use in the commercial activity of the company, and it must have the necessary documentation to support the claim for the ITCs.
In order for the dealer to claim the ITCs for the tax paid on the kits at time of importation, all the necessary conditions for claiming ITCs must be met. The first condition to be met is whether the dealer is the importer of the kit. It is the dealer who ordered the XXXXX from XXXXX and thus triggers the shipment of the van to Canada. Therefore, the dealer would be considered the defacto importer, that is, the person who causes the importation of the van with the kit. If the person paying the tax at time of importation is unable to claim the ITCs for the tax paid on the goods, departmental policy would allow the de facto importer to claim the ITCs for the goods provided the other conditions for claiming ITCs are met, e.g. registration, payment of the tax and documentation.
If XXXXX is acting on behalf of the dealer in order to facilitate the importation of the van with the kits, then it would appear that the dealer had paid the tax on the kits through XXXXX as its agent. Further, provided the dealer obtains documentation acceptable to the Department to substantiate the claim, the dealer would be entitled to claim ITCs for the tax paid on the kits. Acceptable documentation would be a copy of the import entry, including the supporting documentation to the entry, a letter from XXXXX declaring that that company paid tax on the kits as an agent of the dealer, and any other documentation which would support the claim by the dealer.
The foregoing comments represent our general views with respect to the subject matter of your letter. Unannounced proposed or future amendments to the legislation may result in changes to our interpretation. These comments are not rulings and, in accordance with the guidelines set out in Section 1.4 of the GST Memoranda Series, do not bind the Department with respect to a particular situation.
If you require any further information on this issue, please contact XXXXX[.] Yours sincerely,
H.L. Jones
Director
General Applications Division
GST Rulings and Interpretations Directorate
Policy and Legislation Branch
GAD # 2823 (GEN)
| c.c.: |
R. Nanner
G. Preston |
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