27 October 2000 GST/HST Interpretation 31954 - Entitlement to Input Tax Credits for Division III Tax Paid on Importation of Goods

XXXXX

Thank you for your message sent to us by fax on June 29, 2000 (with attachments) concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to tangible personal property (TPP) supplied by a non-resident and imported into Canada.

Interpretation Requested

You asked for confirmation of our interpretation regarding the entitlement to input tax credits (ITCs) under subsection 169(1) of the Excise Tax Act (the Act), for Division III tax paid on importation of TPP in the following situations:

1. TPP sold by a registered non-resident supplier to a purchaser in Canada is delivered or made available outside Canada to the Canadian purchaser and

a) The Canadian purchaser is the importer of record and pays Division III tax.

b) The registered non-resident supplier is the importer of record and pays Division III tax.

2. TPP sold by a registered non-resident supplier to a purchaser in Canada is delivered or made available in Canada to the Canadian purchaser and

a) The Canadian purchaser is the importer of record and pays Division III tax.

b) The registered non-resident supplier is the importer of record and pays Division III tax.

Interpretation Given

1. Where TPP is sold by a registered non-resident to a Canadian purchaser and the TPP is delivered or made available outside Canada to the purchaser, it is our opinion that, in such situations, only the purchaser would be entitled to claim ITCs under subsection 169(1) of the Act.

a) Where the Canadian purchaser is the importer of record, the Canadian purchaser is entitled to claim ITCs under subsection 169(1) of the Act provided that the other conditions for claiming ITCs are met.

b) The registered non-resident supplier is not entitled to claim ITCs under subsection 169(1) of the Act in such circumstances. If evidence is maintained that the non-resident paid Division III tax as an agent of the Canadian purchaser, the Canadian purchaser may claim ITCs provided that the other conditions for claiming ITCs are met.

2. Where a registered non-resident brings TPP into Canada for sale to Canadian purchasers on a "delivered in Canada" basis, depending on the particular facts and circumstances concerning the importation, either the registered non-resident supplier or the Canadian purchaser may be entitled to claim ITCs under subsection 169(1) of the Act. Where TPP is sold by a registered non-resident supplier to a purchaser in Canada and the TPP is delivered or made available in Canada to the Canadian purchaser such that Division II tax is payable on the supply of the TPP, our interpretation is as follows.

a) Where the Canadian purchaser is the importer of record and pays Division III tax, the purchaser would be entitled to claim ITCs under subsection 169(1) of the Act provided the purchaser is a registrant and the other relevant conditions for claiming ITCs are met. Where the purchaser pays Division III tax and Division II tax on the same TPP, the purchaser would be entitled to claim ITCs for both Division III and Division II tax paid.

b) Where the non-resident supplier is the importer of record and pays Division III tax, the non-resident supplier would be entitled to claim ITCs under subsection 169(1) of the Act provided the other conditions for claiming ITCs are met.

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 Canada Customs and Revenue Agency 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) 954-4291.

Yours truly,

B. Mulinda
Border Issues Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate