3 March 1999 GST/HST Interpretation HQR0001425 - Foreign Conventions

Dear XXXXX

Thank you for your letter of November 13, 1998, addressed to XXXXX concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to incentive travel. where possible).

The following example was provided in your letter. XXXXX head office is situated in XXXXX and the company is arranging incentive travel for its salespeople, who are resident in XXXXX[.] The incentive travel is being given to those individual salespeople who generated the most sales. Therefore, the incentive travel is actually a prize for the top salespeople. As part of the incentive travel, XXXXX is sponsoring a convention, at which all of the attendees will be salespeople, resident in XXXXX[.] Due to the fact that the convention is being offered as part of the incentive travel, there is no charge, to the salespeople, for the admissions to the convention.

XXXXX has contracted with a tour operator, resident in Canada, who has experience in organizing large groups. The tour operator would be responsible for paying for all supplies and would bill XXXXX for costs plus some handling or co-ordination fee. The tour operator would, therefore, co-ordinate the convention which would include arranging for meals, accommodation, meeting venues, ground transportation and occasional entertainment.

Interpretation Requested

The definition of "foreign convention" in subsection 123(1) of the Excise Tax Act ("the Act") states that in order to qualify as a "foreign convention" at least 75% of the admissions must be reasonably expected to be supplied to non-resident persons at the time the consideration for the admissions to the convention is determined and that the sponsor of the convention is an organization whose head office is outside Canada, or if there is no head office, the member or majority of members having management and control of the organization, is or are non-resident. You have requested the following interpretations.

1. Must the sponsor of the "foreign convention" charge a fee to the convention attendees in order to qualify as "supplying admissions"?

2. Must the sponsor directly engage all arrangements on their own for the sponsor to be deemed to have arranged the "supply for admissions"?

3. If a sponsor, such as XXXXX, contracts with a tour operator (organizer) to organize the convention, is the organizer entitled to claim the rebates on behalf of the sponsor?

4. What constitutes a "convention" or "foreign convention" according to the Act?

Interpretation Given

Based on the information provided, XXXXX is considered to be providing incentive travel to its salespeople. If the incentive travel includes a convention, the convention may qualify as a "foreign convention", if all of the criteria listed in the definition of "foreign convention" in subsection 123(1) of the Act are met. Please find below the responses to your questions.

1. It is not necessary for the sponsor to charge a fee for the admission to the convention in order to be considered to be supplying an admission. Subsection 123(1) of the Act defines an admission in respect of a place of amusement or a seminar, an activity or an event, as a right of entry or access to, or attendance at, the place of amusement or the seminar, activity or event. Furthermore the definition of "supply" in the same subsection of the Act, means the provision of property or a service in any manner, including, sale, transfer, barter, exchange, licence, rental, lease, gift or disposition. Therefore, there is no requirement in the definition of "foreign convention" that a charge be made for the supply of admissions.

2. The sponsor of a convention is the person who convenes the convention and supplies the admissions. There is no requirement that the sponsor must be responsible for all aspects relating to the organization of the convention.

3. An "organizer" of a convention means a person who acquires the convention facility or related convention supplies and who organizes the convention for another person who is the sponsor of the convention. Pursuant to subsection 252.4(2) of the Act, in cases where an organizer of a foreign convention, who is a registrant, pays to or credits the sponsor an amount equal to the amount of rebate the sponsor would have been entitled to in respect of the supply made by the organizer, the organizer may claim a deduction in the calculation of the net tax under subsection 234(2) of the Act, in respect of the amount paid or credited to the sponsor. The sponsor is therefore, not entitled to any rebate, refund or remission in respect of the tax. If the organizer is not registered, the organizer is entitled to claim a rebate of the amount of tax paid on a supply of a convention facility and related convention supplies.

4. Subsection 123(1) of the Act defines "convention" as a formal meeting or assembly that is not open to the general public. The definition of "convention" does not include a meeting or assembly the principal purpose of which is to provide any amusement, entertainment or recreation or to conduct contests or games of chance. Furthermore, the purpose of the convention cannot be to transact the business of the convenor or attendees unless it is in the course of a trade show that is not open to the general public. There is no stipulation on the number of attendees or the composition of the group.

For your information, I am enclosing the following booklets and memorandum which will provide you with additional information on conventions and incentive travel:

GST/HST Information for Providers of Accommodation and Meeting Facilities
GST/HST Information for Travel Agencies and Tour Operators
GST/HST Information for Non-Resident Incentive Travel Organizers
GST/HST Information for Non-Resident Meeting Planners and Convention Organizers
GST/HST Memorandum 27.2, Conventions

On April 1, 1997, the harmonized sales tax (HST) replaced the goods and services tax (GST) and the provincial sales tax (PST) in the three participating provinces of Nova Scotia, New Brunswick and Newfoundland with a harmonized tax rate of 15%. For supplies made in these participating provinces, to the extent that they are taxable supplies (which are not zero-rated), tax must be collected at the harmonized rate.

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 Department with respect to a particular situation.

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

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 954-5124.

Yours truly,

Cheryl R. Leyton
Services and Intangibles Unit
General Operations and Border Issues Division
GST/HST Rulings and Interpretations Directorate