24 December 1998 GST/HST Ruling HQR0001285 - Supplies to a Non-resident Film Company

XXXXX

Thank you for your letter of August 5, 1998 (with attachments), requesting an application ruling in relation to the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) in respect of production services to be provided by XXXXX Studios in relation to the transaction(s) described below. We apologize for the delay in responding.

Our understanding of the facts, is as follows:

Statement of Facts

1. XXXXX (the Studio) is a non-resident of Canada and does not carry on a business in Canada. In addition, the Studio does not make any GST/HST taxable supplies in Canada and is not registered for GST/HST.

[2.] XXXXX Productions Inc. (the Producer) is a Canadian resident and a GST/HST registrant.

3. The Studio has entered into a production services agreement (the Agreement) with the Producer to produce a made for television movie based on the XXXXX (the film).

4. The Studio wants to produce the film in whole or in part in Canada for distribution and commercial exploitation internationally.

5. Under the Agreement, the Producer will provide certain production services [defined in paragraph 1.1(aa), of the Agreement] in Canada to Studio in respect of the film [section 2.0] of the Agreement.

6. In the Agreement, "Production services" means all things and services required in Canada to produce the film including the supply, provision or application in Canada of the services of personnel, and appropriate facilities, equipment and supplies, where expenses incurred for such things qualify as Production Expenses, [defined in paragraph y] of the Agreement, but excluding, unless otherwise agreed to by the parties to the agreement, any services provided by any person that is not resident in Canada for purposes of applicable Income Tax Legislation and all such other things and services as Studio shall request and Producer may agree to provide.

7. The Producer will deliver the elements of the completed film, which it is producing, to the Studio outside of Canada upon completion.

8. The Studio is the owner of the copyright to the film [page 1, Article A] of the Agreement. The Producer has no interest in the film rights [section 8.1] of the Agreement.

9. The Studio will pay to the Producer a fee as compensation for all Production Services rendered by the Producer [section 7.1] of the Agreement.

10. The Producer is an independent contractor in connection with the provision of the Production Services.

Ruling Requested

1. Are the production services provided by Producer to Studio zero-rated under section 7 or section 23 of Part V of Schedule VI to the Act?

2. If the Production Services are zero-rated, will the Production Services still qualify for zero-rating even if Producer and Studio are related to each other?

Ruling Given

1. Based on the facts set out above, we rule that the production services provided by the Producer to the Studio in the production of the film are zero-rated under section 7 of Part V of Schedule VI to the Act. The fact that the Studio and the Producer are related to each other has no bearing on this ruling.

This ruling is subject to the general limitations and qualifications outlined in section 1.4 of Chapter 1 of the GST/HST Memoranda Series. 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) 952-4294.

Yours truly,

Roy McKain
Senior Rulings Officer
Border Issues Unit
General Operations and Border Issues Division
GST/HST Rulings and Interpretations Directorate