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XXXXX
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11680-6(RMcK)
HQR0000618
XXXXX PartV, Sch. IX
XXXXX June 19, 1997
XXXXX
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Subject:
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HST Place of Supply Situations
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This is in reply to your letter of XXXXX XXXXX concerning examples of services currently rendered by companies of XXXXX. In your letter you asked whether the HST or GST applies in each of the examples mentioned. Your letter has been directed to me for reply. The place of supply situations addressed in your letter are dealt with in the same order in which they occur in the letter. Our response in the form of an interpretation is based on the recent amendments to the place of supply rules found in section 144.1 and Schedule IX to the Excise Tax Act (the Act). Part V of Schedule IX sets out the place of supply rules for purposes of determining whether a supply of a service that is made in Canada is made in a particular province These amendments came into force on April 1, 1997.
In the response provided, the following terms are used:
"Canadian element" which is interpreted to mean that portion of the service that is performed in Canada.
"all or substantially all" has been interpreted to mean 90% or more.
"Place of negotiation" of a supply means the location of the supplier's permanent establishment at which the individual principally involved in negotiating for the supplier the agreement for the supply ordinarily works, or to which that individual ordinarily reports, in the performance of the individual's duties in relation to the activities of the supplier in the course of which the supply is made and, for the purpose of this definition, "negotiating" includes the making or acceptance of an offer.
Payroll Services rendered by XXXXX Description of the Service:
Payroll services consist of providing payroll calculations and reporting services (input, calculation, filing proper forms with tax authorities, making payments to customers, employees and tax authorities, sending employees payroll deduction slips, etc.) to customers. Customers provide the pay information by either telephone, PC, or through a local branch of the Bank. The information is processed in one of the XXXXX[.] The bank considers the customer location to be the place where the invoice is sent. In most cases this location is also the place of business of the head office of the customer.
Place of supply situations related to payroll services;
1. A customer located in a participating Province, communicates by phone or PC, payroll information to XXXXX. The pay (input, calculation, form printing, and preparation of payments) is processed in XXXXX. The employees of the customer report to a place of business of the customer located in a participating Province. The pay slips are delivered to the employees work place and the pay is deposited in employee accounts in branches within the participating provinces.
Interpretation
Paragraph 2 (a) of Part V of Schedule IX to the Act provides that a supply of a service is made in a province if all or substantially all of the Canadian element (i.e. the portion of the service performed in Canada) of the service is performed in the province. Therefore, if all or substantially all of the payroll service is performed in a particular province which is not a participating province, (which appears to be the case) the GST at the rate of 7% would apply.
2. A customer located in a participating Province, communicates by phone or PC, payroll information to the XXXXX[.] The pay is processed in XXXXX[.] The employees of the customer are located in various provinces (all across Canada). The pay slips are delivered across the country and the pays are deposited in various locations. The bank issues only one invoice which is sent to an address within the participating provinces (i.e. these services are provided pursuant to a single agreement with the customer).
Interpretation
The response in this instance is the same as that provided for situation number 1 of this section.
3. A customer located in a participating Province, communicates by phone or PC, payroll information to XXXXX. The pay is processed in XXXXX[.] The employees of the customer are in various provinces (about XXXXX report at a location within the participating provinces). The pay slips and the deposits are delivered/made across the country. The bank issues an invoice for services rendered to each of the employer work sites (i.e. services are provided under a master contract with the customer and each of its work sites can choose to purchase payroll services from the bank or do it on their own). The invoices are sent to an address in a participating province where the customer has a centralized account payable system.
Interpretation
The response in this instance is the same as that provided for situation number 1 of this section.
4. Same as 3 but the invoices are sent to different locations (one per work site).
Interpretation
The response in this instance is the same as that provided for situation number 1 of this section.
5. A customer located outside the participating provinces, communicates by phone or PC, payroll information to the XXXXX[.]The pay is processed in XXXXX The employees of the customer are located across Canada. About XXXXX of the employees report to a location within the participating provinces. One invoice is sent to the customer in XXXXX where its head office is located. Is the answer the same if the invoice is sent to a participating province?
Interpretation
The response in this instance is the same as that provided for situation number 1 of this section.
6. Same as 1 to 3, but the customer hand delivers the pay information to a branch within the participating provinces.
Interpretation
In general, the response in this instance would be the same as that provided for situation number 1 of this section. However, if the bank located in the participating province which receives the (hand delivered) information provides a service to the customer which represents at least 10% of the total service provided, then we would have to look towards the place of negotiation rules in paragraph 2(b) of Part V of Schedule IX of the Act in order to determine the place of supply of the services.
Custodial Services
Description of the Services:
Custodial services refers to the service of holding and guarding security certificates for safekeeping.
1. The bank provides custodial services to a customer residing in XXXXX[.] The custodial services are provided to the customer in XXXXX[.]
Interpretation
Section 2 (a) of Part V of Schedule IX to the Act provides that 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. Therefore, if all or substantially all of the custodial service is performed in a particular province which is not a participating province, the GST at the rate of 7% would apply.
2. Same as 1 but the customer is a national institution with permanent establishments across the country and its head office is in XXXXX[.] The custodial services are provided in XXXXX[.]
Interpretation
In general, the response to this place of supply situation would be the same as that provided for the previous response given to custodial services except where the service is performed in XXXXX then paragraph 142(2)(g) of the Act may apply to deem the supply to be made outside Canada and as such not subject to tax, under Division II of the Act.
3. Same as 2 but the head office is located in XXXXX[.]
Interpretation
The response in this instance is the same as that provided for situation number 1 of this section.
Services Rendered by XXXXX
1. Merger advisory services are provided to a client with a head office in XXXXX, all of the work is performed by XXXXX[.] The client has offices across Canada and the advice provided will affect the entire legal entity of the client.
Interpretation
Paragraph 2 (a) of Part V of Schedule IX to the Excise Tax Act provides that 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.
Therefore, if all or substantially all of the merger advisory service is performed in a particular province which is a non-participating province (e.g. XXXXX the GST at the rate of 7% would apply.
2. RRSP administration, withdrawal, and termination fees are charged to a client residing in XXXXX[.] All of the related work is performed in XXXXX (note: does the answer depend on the location of the branch at which the RRSP is subscribed?).
Interpretation
The Draft Place of Supply (GST/HST) Regulations made pursuant to section 3 of Part [I]X of Schedule [I]X to the Act provide that the supply of a service in respect of a trust governed by a registered retirement savings plan (RRSP), a registered retirement income fund (RRIF) or a registered education savings (RESP) (within the meaning assigned to these expressions by subsection 248(1) of the Income Tax Act) provided by a trustee of the trust is made in a province if the mailing address of the annuitant of the RRSP or RRIF or of the subscriber of the RESP is in the Province.
Based on the Draft Place of Supply Regulations it is the mailing address of the annuitant and not the location of the branch which will determine the place of supply. Therefore, if the mailing address of the annuitant is in a participating province, the HST would apply at the rate of 15%.
3. Investment Management fees are charged to a client residing in XXXXX[.] These fees include the following services:
XXXXX provides clients with proposal regarding investment objectives, risk tolerance, and assets allocation.
All of the client reporting, custody and record keeping are provided in XXXXX and sometimes in foreign locations.
The money managers responsible for investing the funds are located in different cities around the world.
Communication with the clients is achieved through monthly/quarterly mailings and person to person meetings provided by investment advisors. These advisors are sometimes located in the same province as the customer (in this case XXXXX) or are located in a different province XXXXX[.]
Interpretation
The response in this situation is the same as that provided for situation 1 of this section.
However, in those situations involving investment advisors where paragraph 2(a) would not apply, paragraph 2(b) of Part V of Schedule IX of the Act provides that a supply of a service is made in a province if the place of negotiation of the supply is in the province and it is not the case that all or substantially all of the Canadian element of the service is performed outside the province.
Therefore, if the place of negotiation of the service is in a participating province and it is not the case that all or substantially all of the service is performed outside the province, the place of supply of the service is determined to be the province of negotiation and tax at the HST rate of 15% would apply. Where the place of negotiation is outside the harmonized province then the rules would dictate that only the GST at the rate of 7% would apply.
4. Same as 3, except the client moves to XXXXX but continues to deal with the advisor in XXXXX[.]
Interpretation
Since the services would be all or substantially all performed in XXXXX the supply would be subject to the HST at the rate of 15%.
5. Management Services are provided to the XXXXX. These services are provided from XXXXX and all of the funds trust are located in XXXXX[.] Unit holders reside all across Canada and the management fees are collected from the mutual fund trust[.]
Interpretation
The response in this situation is the same as that provided for in situation number 1 of this section.
6. Deferred profit Sharing Plan administrative services and Group Retirement & Savings record keeping services to trust entities. These services are provided XXXXX to trust that could either reside in a participating province or not. The participants in those trust plan could either reside in a participating province or not. It is also possible that these services be invoiced directly to the employer head office that could sometime be in a participating province or not.
Interpretation
The response in this case is the same as that provided for in situation number 1 of this section.
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.
Roy Kain
Senior Rulings Officer
Border Issues Unit
General Operations and Border Issues Division
GST/HST Rulings and Interpretations Directorate HQR#0000618 GOBI
Policy and Legislation Branch
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Rob Allwright
Danielle Lafléche
Randy Nanner
Roy McKain
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