15 June 1999 GST/HST Interpretation HQR0001680 - Carrying on Business in Canada

Gentlemen:

I refer to your letter of February 25, 1999, concerning the requirements for non-residents to register for purposes of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST). The issues raised in your letter concern whether two non-residents are considered to be carrying on business in Canada.

The following information was provided in your letter:

Scenario #1

XXXXX company that is neither incorporated nor continued in any jurisdiction in Canada. Its mind and management are located in the U.S. It does not have a fixed place of business in Canada and does not have any intention of carrying on business in Canada.

XXXXX licenses prewritten software programs that are used by manufacturers. XXXXX customers also have the option of purchasing annual maintenance and support contracts which allow the customers to receive new versions and updates of the software as well as on-site training and support via telephone, e-mail, fax, or in person at the customer's location.

•   Some of XXXXX customers are Canadian companies. When a Canadian company orders one of XXXXX programs, the licence agreement and maintenance and support agreement are accepted and executed by XXXXX in the U.S. The program, which is produced and manufactured at XXXXX issues all invoices from its office in the U.S. and all payments are due in U.S. dollars. XXXXX does not have a bank account in Canada.

•   Because XXXXX does not have any employees or fixed place of business in Canada, XXXXX fulfill some of the support services which XXXXX contracts to provide to its Canadian customers pursuant to the maintenance and support contract.

•   XXXXX provides the telephone, e-mail, fax and on-site support services to XXXXX Canadian customers, as well as on-site training. XXXXX software in Canada but the licence agreements, as stated above, are all accepted and executed by XXXXX in the U.S.

Scenario #2

XXXXX It is neither incorporated nor continued in any jurisdiction in Canada and both its mind and management are located in the U.S. It does not have a fixed place of business in Canada nor does it have the intention to carry on business in Canada.

XXXXX sells tangible personal property throughout North America. XXXXX also contracts with its customers to provide annual maintenance services to them in respect of the tangible personal property which it sells.

XXXXX does not have any presence in Canada in the form of either employees or a fixed place of business. Therefore, XXXXX

•   All contracts between XXXXX entered into in the U.S. All payments pursuant to those contracts are to be made in the U.S. in U.S. dollars. XXXXX does not have a bank account in Canada.

On page 1 of your letter you indicate that you are requesting a GST/HST interpretation regarding the above two scenarios. However, on page 3 you indicate that you are requesting a ruling. As you have not provided sufficient facts which would enable a ruling to be issued (i.e., the names of the parties involved), a GST/HST interpretation is being provided.

Interpretation Requested

XXXXX carrying on business in Canada and, as a result, required to register for GST/HST purposes?

Interpretation Given

Policy Statement P-051R outlines various factors to be considered when making a determination as to whether a non-resident person is carrying on business in Canada. The policy outlines two predominant factors as well as 10 other factors which should be considered.

Attached are two charts, one for each of the scenarios presented in your letter. You will note that by applying the factors contained in Policy Statement P-051R to the scenarios results in a determination that neither XXXXX re carrying on business in Canada. As a result, they are not required, under the provisions of subsection 240(1) of the Excise Tax Act (Act), to register for GST/HST purposes. I would, however, like to mention that both XXXXX could, under the provisions of clause 240(3)(b)(ii)(A) of the Act, apply to register voluntarily.

I would also like to confirm your understanding that the mere fact that an unregistered non-resident contracts with a resident to supply services to other residents does not, in and of itself, mean that the non-resident is carrying on business in Canada.

The foregoing comments represent our general views with respect to the subject matter of your letter. Unannounced or future amendments to the Act may result in changes to this interpretation. 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 Department 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) 952-6743.

Yours truly,

Garry L. Ryhorchuk
Technical Officer
Border Issues Unit
General Operations and Border Issues Division
GST/HST Rulings and Interpretations Directorate