27 October 2000 GST/HST Interpretation 8136/HQR0001742[1] - Entitlement to Input Tax Credit for Tax Paid on Importation of Tangible Personal Property

XXXXX

Thank you for your letter of August 21, 2000 concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to tangible personal property (TPP) supplied by non-residents and imported into Canada. Your letter pertains to the interpretation provided in our letters to you dated October 8, 1999 and June 21, 2000.

We notice that you disagree with our interpretation regarding the entitlement to the input tax credits (ITCs) for Division III tax paid on importation of TPP where TPP is sold by a registered non-resident supplier to a recipient in Canada.

Please note that our interpretation is based on the provisions of section 169 of the Excise Tax Act (the Act) and the scheme of the Act. You have suggested that the right to ITCs should be based on whether the person is liable and pays duties and taxes on importation of the goods pursuant to the Customs Act. However, the person paying duties and taxes under the Customs Act may be someone other than the person who is in reality the importer of the goods.

We have considered your position, however, we would like to confirm that CCRA's position, as outlined in our letter to you dated June 21, 2000 remains unchanged. Our interpretation can be summarized as follows.

1. Where TPP is sold by a registered non-resident supplier to a Canadian purchaser and the TPP is delivered or made available outside Canada to the purchaser, 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 and pays Division III tax, 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]) Where the registered non-resident supplier is the importer of record and pays Division III tax, the non-resident 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.

As the Department of Finance is responsible for amendments to the legislation, we have forwarded your suggestions for legislative amendments to Finance officials for their consideration.

As requested, we also wish to confirm that when determining whether a supply is made in Canada or outside Canada for GST/HST purposes, the place where the TPP is delivered or made available may be determined by reference to the place where the TPP is considered to have been delivered under the applicable sale of goods legislation.

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) 952-8810.

Yours truly,

Ivan Bastasic
Manager
Border Issues Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate