Telephone: (613) 954-8585
Fax: (613) 990-1233
XXXXX Case: HQR0000653
XXXXX S. 5, P.V, Sch. VI, ss. 143(1), p. 142(2)(g)
XXXXX File: 11640-3
Dear Sir:
This is in reference to your letter of April 23, 1997 and subsequent telephone conversations with XXXXX of your office, concerning the application of section 5 of Part V of Schedule VI to the Excise Tax Act (the Act) to the following scenarios:
1. C Co., a GST registrant, operates as a call centre that provides hotel reservation and inquiry service from its facility located in XXXXX
2. C Co. answers telephone calls, initiates hotel reservations and provides a verbal confirmation to the individual placing the call.
3. C Co. has entered into a contract with US Co., an unregistered non-resident, who operates a central hotel reservation centre, to provide such services.
4. C Co. is structured to receive reservation inquiries from Canadian residents who will be able to obtain information on available accommodations as well as making a room reservation through C Co. in any hotel in Canada and outside Canada that is a member of the central reservation network.
5. C Co. will charge a fee to US Co. for the services it provides in connection with bookings of accommodations made in Canadian and non-resident hotels.
Interpretation Requested
The fee charged by C Co. to Us Co. would be zero-rated by virtue of section 5 of Part V of Schedule VI to the Act, as a service of arranging for or procuring a hotel reservation to an unregistered non-resident.
Interpretation Given
For purposes of the HST place-of-supply rules as contained in Schedule IX to the Act, a supply of a service is made in a province if all or substantially all of the Canadian element of the service is performed in the province.
The "Canadian element" of a service means the portion of the service that is performed in Canada. As such, a service that is all or substantially all performed in a participating province will be subject to the HST at the rate of 15%. Thus, registrants are required to collect the HST on supplies made in participating provinces (i.e., Newfoundland, Nova Scotia and New Brunswick) unless the supplies are zero-rated or exempt.
Section 5 of Part V of Schedule VI to the Act provides in part for the zero-rating of a supply made to a non-resident of a service, including that of arranging for or procuring orders for supplies by the non-resident, so long as the service is also in respect of a supply that is made outside Canada by the non-resident.
As mentioned in 4 above, C Co. receives reservation inquiries from Canadian residents who will be able to make a room reservation through C Co. in any hotel in Canada and outside Canada that is a member of the central reservation network. C Co. charges US Co. a fee for such bookings. US Co. charges its client-hotels a fee for bookings made by C Co. Accordingly, C Co., in essence, appears to be procuring orders to US Co., who in turn will make supplies to Canadian and non-resident hotels.
US Co. when making supplies to Canadian hotels may be viewed, however, as making supplies in Canada through C Co. who processes reservations from callers located in Canada. As such, subsection 143(1) of the Act provides in part that a supply of a service made in Canada by an unregistered non-resident shall be deemed to be made outside Canada provided that the supply is not made in course of a business carried on in Canada.
When making supplies of bookings to non-resident hotels US Co. would be deemed to be making supplies outside Canada. Such supplies would not be subject to tax under Division II of the Act. In both situations the services supplied by C Co. to Us Co. in respect to bookings supplied outside Canada would appear to be zero-rated by virtue of paragraph 5(b) of Part V of Schedule VI to the Act.
The foregoing comments represent our general views with respect to the subject matter of your letter. 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 GST Memoranda Series (1.4), do not bind the Department with respect to a particular situation.
Please contact the undersigned at (613) 957-8220 should you require additional information.
Yours truly,
Daniel Chamaillard
Senior Rulings Officer
Border Issues Unit
General Operations and Border Issues Division
GST/HST Rulings and Interpretations Directorate
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R. Nanner
D. Chamaillard |
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