24 December 1998 GST/HST Interpretation HQR0001422 - GST Applied to Billing of a Foreign Registered Cruise Ship

XXXXX:

I refer to your facsimile message of November 13, 1998, addressed to Mr. Garry Ryhorchuk and our subsequent telephone conversations concerning the application of the Goods and Services Tax/Harmonized Sales Tax (GST/HST) to XXXXX XXXXX Services provided by the XXXXX[.]

You advise that XXXXX provided XXXXX Services to XXXXX an unregistered non-resident owner/operator of the passenger cruise ship XXXXX during its stopover in XXXXX, on XXXXX[.] The stopover in XXXXX was for the purpose of picking up and dropping off passengers.

Interpretation Requested

The supply of XXXXX Services to XXXXX by XXXXX will be subject to GST/HST at 0% (i.e., zero-rated).

Interpretation Given

Under paragraph 2(a) of Part V of Schedule VI to the Excise Tax Act (Act), a supply of a service made to an unregistered non-resident person may be zero-rated provided the service is acquired by the non-resident for consumption use or supply, where the person carries on the business of transporting passengers or property to or from Canada or between places outside Canada by ship, aircraft or railway, in the course of so transporting passengers or property.

In addition to the other requirements of the zero-rating provision, in order for a supply to be zero-rated under paragraph 2(a) of Part V of Schedule VI to the Act, the service must be acquired by the person for consumption, use or supply in the course of transporting passengers or property. The words "in the course of" in the context of this provision are interpreted as imposing the following two requirements:

1. the person must be transporting passengers or property, whether the conveyance (i.e. ship) is mobile or immobile, at the time the person consumes, uses or supplies the service acquired by the person; and

2. the consumption, use or supply of the service by the person must be connected with or arise from the provision of the service of transporting the passengers or property.

Along with ensuring the above, XXXXX should verify and obtain evidence that the recipient XXXXX is a non-resident and not registered for purposes of the GST/HST. GST/HST Memoranda Series 4.5.1 Determining Residence Status has been attached for your information. This memorandum provides a description of the documentation that Revenue Canada will generally accept as proof that the customer is a non-resident and is not registered under the Act.

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%. The supply of XXXXX Services to persons in a participating province where all of the requirements found in paragraph 2(a) of Part V of Schedule VI to the Act are not met, to the extent that they are taxable supplies, would be taxable 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.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 952-8532.

Yours truly,

J. Frobel
Border Issues Unit
General Operations and Border Issues Division
GST/HST Rulings and Interpretations Directorate