1 September 1999 GST/HST Ruling HQR0001873 - The Zero-Rating of Civil Litigation Services

Dear XXXXX

Thank you for your letter of April 6, 1999, addressed to our XXXXX Office, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the supply of your firm's professional services to non-resident individuals, under the Excise Tax Act. R.S., c. E-13, s. 1 (the Act). I have been asked to respond to your request.

Although you are requesting an interpretation, your question is in connection with the application of a specific provision of the legislation, as it relates to a clearly defined fact situation. Therefore, I am issuing, by these presents, an application ruling.

Statement of Facts

Our understanding of the facts and the transaction(s) are as follows:

XXXXX a GST/HST registrant, renders professional services in Canada (e.g., civil litigation services) to non-resident individuals;

•   These professional services are supplied by XXXXX on an ongoing and continuous basis;

•   The fee charged by XXXXX for the professional services rendered, is on a contingency basis;

•   Payment for the services rendered is made in a single lump sum, and only if a successful conclusion in the matter under litigation is reached.

Ruling Requested

Because XXXXX fee is on a contingency basis it can pro-rate the fee levied for litigation services between the taxable and zero-rated portions, based on the time spent prior to and after commencement of litigation, by virtue of paragraph 23(a) of Part V of Schedule VI to the Act.

Ruling Given

Based on the facts set out above, we rule that XXXXX can pro-rate its fee charged on a contingency basis in relation to its civil litigation services rendered to non-resident individuals, between the zero-rated and taxable services based on the time spent prior to (zero-rated) and after commencement of litigation (taxable at 7%), pursuant to paragraph 23(a) of Part V of Schedule VI to the Act.

Civil litigation is considered to commence on the day that the originating process (i.e., the statement of claim) is filed with the court, in accordance with the rules of civil procedure in the province of XXXXX[.] This ruling is subject to the general limitations and qualifications outlined in section 1.4 of Chapter 1 of the GST/HST Memoranda Series (copy enclosed). 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.

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
GST/HST Rulings and Interpretations Directorate

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