22 December 1999 GST/HST Ruling 8356/HQR0001962 - Tax Treatment of Disbursements and Professional Services Made Outside Canada

Dear XXXXX

Thank you for your letter of September 10, 1999 (with attachments), sent to our XXXXX concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST), pursuant to the Excise Tax Act (the Act), in connection with professional services and related disbursements supplied by unregistered non-resident XXXXX[.]

Interpretation Requested

You request that we confirm that the Goods and Services Tax (the GST) does not apply in respect of the following transactions, as I understand them following our telephone conversation of November 15, 1999:

1. The XXXXX has an agreement with XXXXX to prepare, file, issue, and renew patents and to prosecute offenders.

2. The XXXXX in order to supply such services in their capacity as agent of XXXXX may retain, in cooperation with XXXXX the services of XXXXX firms or individuals, for purposes of registering XXXXX worldwide.

3. In such a capacity the XXXXX incur disbursements outside of Canada for registering XXXXX etc. on XXXXX behalf, which are billed to XXXXX through the XXXXX that act as a conduit for such disbursements.

4. Also, the XXXXX would include on their invoice a fee for their professional services performed outside of Canada as XXXXX.

5. The invoice sent to the XXXXX by the XXXXX may or may not indicate XXXXX name as reference to being the customer (recipient) on whose behalf these supplies are being made.

Interpretation Given

Based on the information provided and in consideration of the place-of-supply rules provided for under the Act, the professional services performed by the XXXXX wholly outside Canada, are deemed, pursuant to paragraph 142(2)(g), to be made outside Canada and, therefore, not subject to tax under Division II of the Act. However, Division IV tax - self assessment of imported services - may be payable by XXXXX on the acquisition of such services, where these services, for example, are not acquired for consumption, use or supply exclusively in the course of XXXXX commercial activities.

Where the FPTA's invoice is sent directly to XXXXX or to the XXXXX and the latter merely passes it on to XXXXX being the recipient of the supply made by the XXXXX the XXXXX services would not be subject to tax under Division II of the Act.

However, as you are aware, the services provided in Canada by the XXXXX as agent of XXXXX are taxable either at 7% or 15% based on the place (i.e., the provinces) where the services are performed. Disbursements paid on your behalf by the XXXXX as agent of XXXXX are not taxable.

Also, should the agreement between XXXXX and the XXXXX provide that the XXXXX will register the intellectual property worldwide on your behalf, where the XXXXX subcontracts with the XXXXX the billing of the XXXXX services to the XXXXX would be considered to be an input acquired by the XXXXX for the taxable supply of its services to XXXXX[.] Consequently, when the XXXXX invoices XXXXX for consideration in respect of the XXXXX services, tax would apply at 7% or 15%, as described above. Disbursements paid on your behalf by the XXXXX as agent of XXXXX would not, as mentioned above, be taxable if identified as such in the invoice from the XXXXX to XXXXX[.] I understand you realize the tax treatment in such instances.

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/HST Memoranda Series, do not bind the Canada Customs and Revenue Agency with respect to a particular situation.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 957-8220.

Yours truly,

Daniel E.B. Chamaillard, Senior Technical Analyst
Border Issues Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings and Interpretations Directorate