20 June 2001 GST/HST Interpretation 35058 - LETTER Relief of GST on the Temporary Importation of a Yacht

Dear XXXXX:

Thank you for your letters dated March 5, and April 9, 2001, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) on a yacht (vessel) your client, XXXXX, will be importing into Canada.

Facts

Based on the information in your letters along with subsequent telephone conversations between Cathy Evans of this office and XXXXX, the following describe the circumstances of the importation:

XXXXX, a Canadian resident of XXXXX has entered into a lease agreement to charter a XXXXX motor yacht (vessel) with the XXXXX from XXXXX with the option to purchase the yacht on execution of the agreement.

TheXXXXX is a non-resident organization and is not registered for the GST/HST.

The yacht is a XXXXX vessel built by the XXXXX complete with two XXXXX diesel engines. Throughout the term of the lease agreement the yacht will be registered in the U.S. XXXXX.

According to the lease agreement, the yacht is located in the United States and will be delivered to XXXXX, U.S.A.

Following delivery of the vessel to XXXXX plans to import the vessel into Canada each May (for the duration of the lease) for personal/private use XXXXX and plans to export the vessel to the United States each September for the duration of the lease.

However, as stated by XXXXX on April 5, 2001, the vessel may not be exported in September - this will depend on whether or not the vessel requires repairs following use from May to September.

Interpretation Requested

I understand that you are seeking an interpretation on whether the vessel your client XXXXX will be importing into Canada qualifies for any GST/HST relief provisions given the above-noted facts.

I also understand from our telephone conversation of April 5, 2001, that clarification on the value the GST will be calculated on the vessel upon importation is sought and more specifically, the amount XXXXX will be paying for the duration of the charter XXXXX or the full value of the vessel (XXXXX ) as stated in the lease agreement that was forwarded on April 9, 2001.

Interpretation Provided

In view of the foregoing and as discussed with you on April 5, 2001, the following provisions of the Excise Tax Act (ETA) apply in this case:

1) pursuant to sections 212 and 214 of Division III of Part IX of the ETA, the GST is imposed and payable on the vessel upon importation into Canada;

2) when imported, the GST on the vessel will be calculated on the excise and duty paid value of the vessel as outlined in section 215 of the ETA. In other words, the value for tax (GST) will be the value for duty of the vessel determined in accordance with the relevant sections of the Customs Act (and not the amount XXXXX will be paying to charter the vessel for the two year period), in addition to the amount of any customs duties payable under the laws relating to customs and any taxes (other than the GST) payable under the ETA;

3) as the vessel will be imported for XXXXX personal/private use, the vessel does not qualify for any relief from the payment of the GST provided in the Vessel Duties Reduction or Removal Regulations or the Non-Taxable Imported Goods (GST) Regulations;

4) upon exportation of the vessel on the termination of the lease (charter), XXXXX being a resident of Canada and the recipient of the supply (vessel) is not entitled to a rebate of the GST pursuant to section 252 of the ETA; also

5) should XXXXX export the vessel from Canada in September 2001 to have work performed on the vessel and re-imports the same vessel in May 2002, the vessel may qualify for the provisions outlined in the Value of Imported Goods (GST/HST) Regulations and tariff item 9971.00.00 in the List of Provisions to the Customs Tariff. According to these regulations and the tariff item, the GST/HST and customs duties would be payable only on the value of the work done abroad on re-importation into Canada and not on the value of the vessel. For your information and assistance, I have attached a copy of Customs Memorandum D8-2-25 and the Value of Imported Goods (GST/HST) Regulations.

Please note that the foregoing comments represent our general views with respect to the subject matter of your letter. Proposed amendments to the ETA, 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.

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

As discussed in our telephone conference call of April 27, 2001, your request for relief from the requirement to pay GST on the full value of the yacht is a tax policy matter that is within the purview of the Department of Finance.

Should you have any further questions or require clarification on the above matter, please contact me at (613) 952-8810 or by facsimile at (613) 990-1233.

Yours sincerely,

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