1 March 1996 GST/HST Interpretation I1690-8 - Voluntary Registration for Non-resident Persons Carrying on Business in Canada

This is in reply to your memorandum dated March 15, 1996, sent by Telefax. Your concern is whether XXXXX XXXXX would qualify for registration under Part IX of the Excise Tax Act for GST purposes.

We understand that XXXXX is a non-resident XXXXX specializing in the transportation of XXXXX. In Canada, XXXXX clients include XXXXX A non-resident person who, in the ordinary course of carrying on business outside Canada, has business activities in Canada may, be required to, or may voluntarily, register for GST purposes provided that the non-resident person is also carrying on business in Canada. Whether a non-resident person is carrying on business in Canada is a question of fact based on criteria established by the courts. Those criteria are outlined in GST Guide "Doing business in Canada-A guide for Non-Residents" a copy of which is enclosed. The two main criteria are:

•   The place where the contract is concluded[;] and

•   The place where the operations that produce the profit takes place.

From the information provided in your memorandum, it would appear that XXXXX may be carrying on business in Canada and, therefore, qualify for voluntary registration. The contract with their Canadian customers may or may not have been concluded in Canada but it would appear that XXXXX is earning its profits from its Canadian customers in Canada since they would be transporting XXXXX both internationally and domestically. This being the case, it would appear that XXXXX would be carrying on business in Canada.

Another question which should be addressed is whether XXXXX is required to register for GST purposes, as opposed to being eligible to voluntary registration. Subsection 240(1) of the Excise Tax Act (the Act) provides that every person who makes taxable supplies in Canada in the course of a commercial activity engaged in by the person in Canada is required to register, unless the person is a small supplier or a non-resident person who does not carry on business in Canada. If, in fact, XXXXX is carrying on business in Canada, which would appear to be the case, the fact that XXXXX makes taxable supplies in Canada XXXXX to both its Canadian and foreign customers would mean that XXXXX would be required to register when they first made a taxable supply in Canada otherwise than as a small supplier. This means that the effective date of registration would have to be backdated to the date of that first supply. Supplies made in Canada after the effective date of registration may be subject to GST at the rate of 7%. However, the tax status of a particular supply is a question of fact based on the circumstances of the transaction. The contracts would have to be examined in order to determine whether a particular supply to a non-resident customer of XXXXX can be zero-rated or not.

You also ask what terms and conditions must be met, prior to and subsequent to registration. The enclosed guide should answer your questions. If you need further information please feel free to contact Gerry O'Reilley at (613) 952-9589.

Sincerely,

H.L. Jones
Director
General Application Division
GST Rulings and Interpretations

Att.      GAD #: 2820 (GEN)
M. Bloom (signoff)

c.c.:      Adam Belyea