16 March 1999 GST/HST Interpretation HQR0000745 - Non-Resident Person Ceasing to be a Registrant

Dear XXXXX

 Thank you for your letter of June 18, 1997, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to a non-resident person who ceases to be a registrant. I apologize for the delay in responding to your enquiry.

Background

Further to a conversation you had with Mr. Chris White, formerly of our office, you were looking to confirm the Department's position with respect to the application of subsection 171(3) of the Excise Tax Act (ETA) to a non-resident person who ceases to be a registrant.

I gather from your letter that your conversation with Mr. White touched on the definition of "tax" for the purposes of subsection 171(3) of the ETA, as well as how "tax" is imposed under subsection 165(1) of the ETA on recipients of taxable supplies "made in Canada".

Interpretation Requested

You requested confirmation that a non-resident person who deregisters for GST/HST purposes will only be liable for the GST/HST with respect to a supply of property that would be deemed to be made in Canada pursuant to subsection 142(1) of the ETA.

Interpretation Given

Subsection 142(1) of the ETA does deem certain supplies to be "made in Canada" for the purposes of Part IX of the ETA. To clarify the Department's current administrative position, at the time a non-resident person ceases to be a registrant, that person will be required to self-assess "tax" on the supply of property (including capital property) only where the supply is deemed to have been "made in Canada" at that particular time.

Analysis

Paragraph 171(3)(a) of the ETA provides that, for the purposes of Part IX of the ETA, where a person ceases at any time to be a registrant, the person shall be deemed to have made, immediately before that time, a supply of each property of the person ("other than capital property") that immediately before that time was held by the person for consumption, use or supply in the course of commercial activities of the person.

The person who ceases to be a registrant shall be deemed to have collected, immediately before that time, "tax" in respect of the supply, calculated on the fair market value of the property at that time. As well, the person shall be deemed to have to have received, at that time, a supply of the property by way of sale and to have paid, at that time, tax in respect of the supply equal to the amount determined under subparagraph 171(3)(a)(i) of the ETA.

Paragraph 171(3)(b) of the ETA provides that where the person was, immediately before that time, using capital property of the person in commercial activities of the person, the person shall be deemed to have, immediately before that time, ceased using the property in commercial activities. When this is the case, the "change in use" rules found under the ETA would have to be considered for "self-assessment" purposes.

The Department has taken the administrative position that upon ceasing to be a registrant, a non-resident person that has no permanent establishment in Canada is not required to account for any "tax" in respect of property (including capital property) that is located outside Canada, and not used in its commercial activities in Canada immediately prior to that time.

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.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 954-9699.

Yours truly,

Douglas Wood
A/Rulings Officer
General Operations Unit
General Operations and Border Issues Division
GST/HST Rulings and Interpretations Directorate