18 August 1998 GST/HST Interpretation HQR0001220 - Residence of a Charity in a Participating Province

                                                                        GST/HST Rulings and Interpretations
Directorate
Place Vanier, Tower C, 9th Floor
25 McArthur Road
Ottawa ON
XXXXX
XXXXX
XXXXX                                                                                 Case: HQR0001220
XXXXX                                                                                 Business Number: XXXXX

Dear XXXXX

This in reply to your E-mail message sent to Michael Place of this Unit, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to XXXXX a registered charity.

XXXXX has its headquarters in XXXXX XXXXX. A representative, XXXXX travels XXXXX to look after the camps. The representative works from an office in his home, except when travelling. He then works out of his car, hotels, and the camps. The representative receives a salary, plus a travel budget established by XXXXX[.] As well, he has authority to make financial decisions on behalf of the organization. Expenditures in excess of the budget require approval from XXXXX headquarters.

There is no published address for XXXXX in the XXXXX; all written correspondence is directed to its headquarters in XXXXX. However, some of the camps in each province have a listing in the local telephone directories. The organization has a constant "presence" in each XXXXX to the extent that the representative is an employee. There are others who are volunteers in each province.

Interpretation Requested

You are asked whether, based on the information provided, it is our view that XXXXX is a resident of a participating province and thus entitled to claim a rebate of the provincial portion of the HST. As we discussed on the telephone earlier, the information provided does not contain the facts required to make such a conclusion or to issue a ruling; therefore we are providing you with an interpretation on determining whether a person is resident in a province.

Interpretation Given

Pursuant to subsection 259(3) of the Excise Tax Act (the "ETA"), charities are entitled to rebate equal to a prescribed percentage (i.e., 50%) of the non-creditable tax charged that they paid on their purchases of goods and services. Please note that while subsection 259(4.2) prohibits a rebate of the provincial component of the HST, under subsection 259(4.21), a charity that is not a public service body and that is resident in a participating province is able to claim a rebate of 50% of the provincial component of the HST.

Subsection 132.1 of the ETA provides that a person is deemed to be resident in a province if the person is resident in Canada and:

a) if a corporation, the corporation is incorporated or continued under the laws of that province and not continued elsewhere;

b) if a partnership, an unincorporated society, a club, an association or an organization, or a branch thereof, the member, or a majority of the members, having management and control thereof is or are resident in that province;

c) if a labour union, it is carrying on activities as such in that province and has a local union or branch in that province; or

d) in any case, the person has a permanent establishment in that province.

The meaning of "permanent establishment" is described in subsection 132.1(2) of the ETA which provides that in this section and Schedule IX, a permanent establishment, [i] in the case of a corporation that carries on business, as well as, [ii] in any other case (other than an individual, estate of a deceased individual, trust, or a particular partnership), means a permanent establishment as defined for the purposes of Part IV of the Income Tax Act (the "ITA") Regulations. Thus, to determine in such cases [i] or [ii], if an organization has a permanent establishment in a province, it is necessary to verify whether the organization meets the criteria in Part IV of the ITA Regulations.

Part IV of the ITA Regulations reads, in part:

"400(2) For the purpose of this Part, "permanent establishment" in respect of a corporation means a fixed place of business of the corporation, including an office, a branch, a mine, an oil well, a farm, a timberland, a factory, a workshop, or a warehouse, and

(a) where the corporation does not have any fixed place of business it means the principal place in which the corporation's business is conducted;

(b) where a corporation carries on business through an employee or agent, established in a particular place, who has general authority to contract for his employer or principal or who has a stock of merchandise owned by his employer or principal from which he regularly fills orders which he receives, the corporation shall be deemed to have a permanent establishment in that place; ...

(d) where a corporation, otherwise having a permanent establishment in Canada, owns land in a province, such land shall be deemed to be a permanent establishment;

(e) where a corporation uses substantial machinery or equipment in a particular place at any time in a taxation year it shall be deemed to have a permanent establishment in that place;

(f) the fact that a corporation has business dealings through a commission agent, broker or other independent agent or maintains an office solely for the purchase of merchandise shall not of itself be held to mean that the corporation has a permanent establishment;"

As stated above, on the basis of the information provided, the Department cannot make a determination as to whether XXXXX has a permanent establishment in a participating province. Since the existence of a permanent establishment in a participating province is a question of fact, the onus is on XXXXX to demonstrate that it does have such an establishment. For instance, XXXXX would have to demonstrate that it has in fact an employee or agent established in a particular place, and that this employee or agent has general authority to contract for XXXXX[.] Furthermore, if XXXXX owns land in a particular province, that land would be deemed to be a permanent establishment.

If XXXXX requires a ruling on whether it has a permanent establishment in a participating province, it should write to us and include factual evidence of its representative's responsibilities and the extent of the representative's authority to contract on behalf of XXXXX[.]

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 952-6761.

Yours truly,

Susan Eastman
Charities and Non-Profit Organizations Unit
Public Service Bodies and Governments Division