11 May 1998 GST/HST Interpretation HQR0001055 - Application of the GST/HST to Services Provided by Government Sponsored Tourism Associations

Thank you for your facsimile received January 15, 1998 concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to your operations.

Please note that all legislative references are to the Excise Tax Act (the Act) and Regulations thereunder, unless otherwise specified. This letter does not reflect any legislation regarding the provincial component of the HST. Further, any questions in respect of the Income Tax Act must be directed to the appropriate department within Revenue Canada.

Statement of Facts

The XXXXX has an office, either leased or owned, in XXXXX.

The XXXXX office of XXXXX is funded XXXXX.

The XXXXX office of XXXXX does not generate any income in Canada.

Rulings Requested

Does XXXXX qualify as a non-profit organization?

Is XXXXX eligible to claim any tax credits?

Rulings

Interpretations Given

Does XXXXX qualify as a non-profit organization?

The information you have submitted is not sufficient for us to issue a definitive ruling as to whether XXXXX qualifies as a non-profit organization. However, we trust that the following information concerning non-profit organizations will assist you in determining whether XXXXX is a non-profit organization for GST purposes.

Subsection 123(1) of the Act defines a non-profit organization as

"a person (other than an individual, an estate, a trust, a charity, a public institution, a municipality or a government) that was organized and is operated solely for a purpose other than profit, no part of the income of which is payable to, or otherwise available for the personal benefit of, any proprietor, member or shareholder thereof unless the proprietor, member or shareholder is a club, a society or an association the primary purpose and function of which is the promotion of amateur athletics in Canada".

Please note that national, government sponsored tourism associations generally do qualify as non-profit organizations in that they are organized not for profit, but rather to promote their respective countries. As well, they generally meet the other requirements set out in the above definition. If XXXXX is organized and operated in a similar manner, it will no doubt be considered a non-profit organization for GST purposes.

Please note as well that a non-profit organization is not precluded from earning a profit for some activities (for example, fundraising projects).

If you have any doubt as to whether XXXXX meets the above definition of a "non-profit organization", and you wish to receive an application ruling, please forward to us information concerning the activities, structure, purpose and constitution of your organization.

Is XXXXX eligible to claim any tax credits?

Again, since we do not have sufficient information regarding XXXXX and its activities, we are currently unable to determine whether XXXXX is required, or eligible, to register for GST purposes and thereby be eligible for input tax credits (ITCs). We will, therefore, provide you with general information regarding GST registration and the types of rebates available to non-profit organizations.

The GST is applied to the consideration paid for taxable goods or services (i.e. taxable "supplies") that are made in Canada, or in some cases, deemed to be made in Canada.

Persons who are registered for GST purposes will be required to charge and remit tax on taxable supplies that they provide. In turn, they will be entitled to recover the GST paid on purchases associated with the provision of their taxable supplies by claiming ITCs.

If a person is a "small supplier", then registering for GST purposes is optional. Registration is, however, required when a person exceeds the small supplier threshold. For a non-profit organization, the small supplier threshold is annual taxable supplies of $50 000. Persons, including small suppliers, are entitled to voluntary registration, pursuant to subsection 240(3) of the Act, provided they are engaged in a commercial activity. However, ITCs are available only with respect to purchases that are used to make taxable supplies for consideration.

The information you provided indicates that XXXXX does not "generate any income in Canada". Please note that if all of XXXXX supplies are made for no consideration, these supplies are exempt from the GST, and no ITCs can be claimed for purchases related to exempt supplies. In any case, on the basis that XXXXX does not make any taxable supplies for consideration in Canada, it would not be eligible for ITCs with respect to its purchases even if it were eligible to voluntarily register for the GST.

Some non-profit organizations are eligible for a 50% rebate of the tax paid on purchases in respect of which they are ineligible for ITCs. However, to qualify, the organization is required to receive at least 40% of its total funding from a Canadian government or municipality. It does not appear that XXXXX would meet this requirement.

The foregoing comments represent our general views with respect to the subject matter of your letter. Proposed amendments to the Excise Tax Act, if enacted, could have an effect on the interpretation provided herein. These comments are not rulings and, in accordance with the guidelines set out in section 1.4 of Chapter 1 of the GST Memoranda Series, do not bind the Department with respect to a particular situation.

For your convenience, find enclosed a copy of section 1.4 of Chapter 1 of the GST Memoranda Series.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 952-9214.

Yours truly,

Doris Rist
Charities, Non-Profit Organizations and Educational Services Unit
Public Service Bodies and Governments Division
GST/HST Rulings and Interpretations Directorate