22 December 1998 GST/HST Ruling HQR0001141 - Application of the GST/HST to the Reimbursement of Salaries and Benefits

Dear XXXXX

Thank you for your letter of April 9, 1998, (with attachments), concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the transaction(s) described below.

Statement of Facts

Our understanding of the facts, the transaction(s), and the purpose of the transaction(s) is as follows:

1. XXXXX entered into a XXXXX (Agreement), under which XXXXX was seconded, on a part-time basis (two days per week) XXXXX to XXXXX from XXXXX[.]

2. The Terms and Conditions of the Agreement states that the secondment will take effect for a XXXXX period beginning XXXXX and ending XXXXX, with provision for the secondment to be extended, shortened or the number of days per week increased or decreased, with two weeks notice, upon agreement of both parties.

3. Pursuant to the Agreement, XXXXX will be required to provide a wide range of policy and legal advice to XXXXX[.] She is expected to work mainly on the projects listed in the Schedule to the Agreement. These projects are listed as XXXXX XXXXX[.] XXXXX will be considered part of XXXXX and will formally report to the XXXXX.

4. XXXXX will remain an employee of XXXXX will pay to XXXXX a total of XXXXX to cover a portion of her salary and related benefits. XXXXX will invoice XXXXX[.] Vacation time taken by XXXXX will be compensated by working more days for XXXXX in other weeks.

5. XXXXX will work primarily out of XXXXX office, but will be expected to spend some of her time in XXXXX will reimburse travel and accommodation expenses relating to this project according to Treasury Board Guidelines. Unless otherwise agreed between the parties, the total of these expenses shall not exceed XXXXX[.]

6. If XXXXX is injured in the performance of her duties, she shall be compensated by her provincial health insurance plan, by XXXXX or by any other insurance applicable to her. If XXXXX is deemed liable to third parties as a result of an action in the performance of her duties, she shall be treated in the same way as the employees of the Public Service of Canada, and the Acts applicable to the said employees shall apply to her. XXXXX shall also receive the same protection under the same conditions as the employees of the Public Service of Canada if she travels in the performance of her duties.

Ruling Requested

Is the reimbursement of salaries and benefits paid by XXXXX under the Secondment Agreement of XXXXX subject to GST/HST?

Ruling Given

Based on the facts set out above, we rule that the reimbursement of salaries and benefits paid by XXXXX under the Secondment Agreement of XXXXX is not subject to GST/HST.

This ruling is subject to the general limitations and qualifications outlined in section 1.4 of Chapter 1 of the GST/HST Memoranda Series. We are bound by this ruling provided that none of the above issues is currently under audit, objection, or appeal; that there are no relevant changes in the future to the Excise Tax Act, or to departmental interpretative policy; and that you have fully described all necessary facts and transaction(s) for which you requested a ruling.

Explanation

As XXXXX is an employee of the federal Crown, the service she provides in the course of her employment does not fall within the definition of "service" and is therefore not a "supply" for purposes of Part IX of the Excise Tax Act. Accordingly, the reimbursement of XXXXX salary and benefits paid by XXXXX to XXXXX are not subject to GST/HST.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 954-7952.

Yours truly,

Lynn F. Renner
Rulings Officer
Governments Unit
GST/HST Rulings and Interpretations Directorate