5 November 2003 GST/HST Ruling 45348 - Application of the GST/HST to the Interchange Canada Agreement with

Please note that the following documents, although correct at the time of issue, may not represent the current position of the Agency. / Veuillez prendre note que ces documents, bien qu'exacts au moment émis, peuvent ne pas représenter la position actuelle de l'Agence.

Dear XXXXX:

Thank you for your letter XXXXX, with attachments, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the Interchange Canada Agreement XXXXX (the participant) from XXXXX. (the sponsoring organization) to XXXXX (the host organization), a federal government department.

Statement of Facts

Our understanding of the facts, from your letter, is as follows:

The participant is an employee of the sponsoring organization, an independent consultancy group XXXXX that operates for profit by providing engineering, economics and environmental consulting services to clients worldwide.

The host organization, the sponsoring organization and the participant entered into an agreement that sets out the terms and conditions covering the assignment of the participant from the sponsoring organization to the host organization. The assignment is arranged under the auspices of the Government of Canada's Interchange Canada program. The assignment period took effect on XXXXX, and will terminate on XXXXX, with provision for extension subject to the agreement of all parties or to early termination with three months' notice in writing from any of the parties.

The participant will be performing the duties of XXXXX reporting to XXXXX.

The participant will continue to receive XXXXX salary and employer-paid benefits from the sponsoring organization. The host organization undertakes to reimburse the sponsoring organization the sum of $XXXXX per annum plus XXXXX% for employer-paid benefits, and to increase this amount by any increase that may become due to the participant during the period of assignment, under the sponsoring organization's salary system. The sponsoring organization will provide XXXXX% for employer-paid benefits to the participant with no reimbursement sought from the host organization. Other job related costs such as training and travel will be borne by the host organization. Travel entitlements shall be "traveller" provisions for non-public servants, in accordance with the Treasury Board Travel Directive, rates and allowances, and the Special Travel Authorities.

The participant is entitled to take annual leave and sick leave earned during the period of assignment in accordance with the Terms and Conditions of Employment or the Collective Agreement applicable toXXXXX in the sponsoring organization. Annual leave arrangements will be worked out in cooperation between the participant and XXXXX in light of operational requirements and personal needs. The host organization will cover any entitled vacation or sick days taken by the participant without asking for any reductions in the reimbursements provided to the sponsoring organization. A report of any leave taken by the participant will be provided on a quarterly basis by the host organization to the sponsoring organization.

If the participant is injured in the performance of XXXXX duties, XXXXX shall be compensated by the applicable Worker's Compensation Act to which the host organization is subject. If the participant is deemed liable to third parties as a result of an action in the performance of assigned duties, XXXXX shall be treated in the same way as employees of the host organization and the acts applicable to said employees shall apply to XXXXX. The participant shall also receive the same protection under the same conditions as employees of the host organization when travelling on duty.

The host organization will provide the sponsoring organization, upon request, with a written evaluation report on the performance of the participant on an annual basis or at the end of the assignment, if shorter.

The assignment shall be considered "employment" for the purposes of the Official Secrets Act of the Government of Canada and the participant will be bound by Section 4 of the Act regarding wrongful communication of information, etc. In addition, articles 49 and 50 of the Conflict of Interest and Post Employment Code for the Public Service, Government of Canada, shall apply to the participant and that declaration of actual or potential conflict of interest shall be made prior to the commencement of the assignment. Further, while on assignment, the participant will perform XXXXX duties so as to respect the principles and intent of the Conflict of Interest and Post Employment Code for the Public Service.

All material supplied to the participant will be returned to the host organization on termination of this assignment. It is agreed that all documents, reports and other productions made by the participant or anyone acting on XXXXX behalf, for the purpose of fulfilling or carrying out any duty related to the assignment are the property of Her Majesty in Right of Canada and shall not be released to any person other than representatives of the host organization, unless written permission is obtained from the Deputy Head or XXXXX delegate.

At the end of the assignment the participant will return to a position equivalent to XXXXX current one and at a rate of remuneration of not less than XXXXX salary plus any increases that may become due to XXXXX during the period of the agreement, according to the sponsoring organization's salary system unless other arrangements have been agreed to by all parties concerned. If the sponsoring organization is subject to workforce reduction during or at the end of this assignment, the participant will be accorded the same treatment and entitlements as all other sponsoring organization employees.

Ruling Requested

You would like to know if the host organization is required to pay the GST/HST on the reimbursement payments to the sponsoring organization under the Public Service Commission of Canada's Interchange Canada program.

Ruling Given

Based on the facts set out above, we rule that the host organization is not required to pay the GST/HST on the reimbursement payments to the sponsoring organization under the Public Service Commission of Canada's Interchange Canada program.

This ruling is subject to the general limitations and qualifications outlined in section 1.4 of Chapter 1 of the GST/HST Memoranda Series. We are bound by this ruling provided that none of the above issues is currently under audit, objection, or appeal; that there are no relevant changes in the future to the Excise Tax Act, or to our interpretative policy; and that you have fully described all necessary facts and transactions for which you requested a ruling.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 952-4157.

Yours truly,

Trent MacDonald
Government Sectors Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate