13 January 2000 GST/HST Interpretation 15315 - GST Filing Procedures

Dear XXXXX

Thank you for your facsimile transmission of December 2, 1999, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to your client's operations.

Please note that as of November 1, 1999, Revenue Canada became the Canada Customs and Revenue Agency.

All references are to the Excise Tax Act, unless otherwise specifically noted.

Interpretation Requested

According to your facsimile transmission, you would like advice on the following situation as presented to you by a prospective client. The facts as provided are as follows:

1. Company A is incorporated in Canada with a Business Number (BN) and accounts i.e., registered for GST/HST and import/export, etc.

2. Additional GST/HST and import/export accounts were registered under the existing BN of Company A. The additional accounts named a 'division' of Company A.

3. The 'division' of Company A paid GST on imported goods, collected GST on sales to Canadian customers, claimed input tax credits (ITCs) and remitted the difference (all separately from Company A - the necessary forms to permit separate branch returns were also filed).

4. However, the division was actually a division of a non-resident, non-registrant corporation, Company B. The division sold the goods directly to Canadian customers from outside of Canada. Company A never took title to the imported goods.

You would like to know whether these are the correct procedures, and if not, what should be done in terms of voluntary disclosure to correct the situation.

Interpretation Given

Our administrative policy P-125, "Importer and ITC Entitlement" discusses who is the de facto importer. The de facto importer is the person who has caused the property to be brought into Canada. That person can claim an ITC if they are liable to pay GST on the importation under section 212 (Division III tax) and if the property is for consumption, use or supply in the course of commercial activities of that person.

Where a supply of property is made by a non-resident supplier to a recipient who is in Canada, the de facto importer can be the supplier or the recipient depending on the circumstances. If the property is delivered or made available outside Canada to the recipient, the recipient is the de facto importer and only the recipient would be entitled to claim an ITC for Division III tax. If the agreement provides that the property will be delivered or made available to the recipient at their place of business or residence in Canada, we will consider the supplier to be the de facto importer and only the supplier would be entitled to claim an ITC for Division III tax.

If the person liable to pay tax under section 212 ("importer of record" for Customs purposes) is not the de facto importer of the property, that person would not be entitled to claim an ITC for Division III tax paid as the person is not considered to have imported the property into Canada. However, the de facto importer could be entitled to claim an ITC for Division III tax paid by the "importer of record" if it is determined that the tax was paid on behalf of the de facto importer.

This interpretation is consistent with our administrative policy regarding the place of supply rules (P-078R, "Meaning of the phrase delivered or made available in (or outside) Canada to the recipient"). According to that policy, a supply made by a non-resident supplier outside Canada to a recipient in Canada is deemed to be made outside Canada if the goods are delivered or made available outside Canada to the recipient.

A non-resident supplier who is registered for GST/HST purposes and making a supply in such circumstances would not be required to charge Division II tax. If the supplier were also allowed to claim an ITC for Division III tax paid on the importation, Canadian recipients (including consumers, small suppliers and other recipients not entitled to claim ITCs) would be able to acquire a taxable supply from a registered supplier without paying neither Division II nor Division III tax.

With the addition of voluntary disclosure to Revenue Canada's Fairness Initiative (point 6 of the 7-Point Plan for Fairness), jurisdiction over voluntary disclosure was transferred from the Audit Branch to the Appeals Branch in April of 1999. In order to make a voluntary disclosure, please contact the Voluntary Disclosure Officer of the Appeals Division in your client's local Tax Services Office.

On April 1, 1997, the HST replaced the 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 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.

For your convenience, find enclosed a copy of section 1.4 of Chapter 1 of the GST/HST Memoranda Series.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 952-0419.

Yours truly,

Catherine Séguin
General Operations Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate