Please note that the following document, although correct at the time of issue, may not represent the current position of the Canada Revenue Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence du revenu du Canada.
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[Addressee]
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Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 15th floor
320 Queen Street
Ottawa ON K1A 0L5
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Business Number: […]
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March 12, 2013
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Dear [Client]:
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Subject:
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GST/HST RULING
Public Service Body Rebate of the Provincial Part of the HST-[Whether resident in a Province]
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Thank you for your submissions of […], concerning […] ([…] [the Charity])'s entitlement to claim a public service body rebate of the provincial part of the Harmonized Sales Tax (HST). […].
The HST applies in the participating provinces at the following rates: 13% in Ontario, New Brunswick and Newfoundland and Labrador, 15% in Nova Scotia, and 12% in British Columbia. The GST applies in the rest of Canada at the rate of 5%.
Effective April 1, 2013, the 12% HST in British Columbia will be replaced by the 5% GST and a provincial sales tax. It is also proposed that, effective April 1, 2013, the provincial sales tax and the 5% GST currently in effect in Prince Edward Island will be replaced by a 14% HST.
All legislative references are to the Excise Tax Act (ETA) unless otherwise specified.
Statement of Facts
We understand
1. [The Charity] was incorporated under [an act in] […] [Participating Province X] […].
2. [The Charity] is a registered charity for income tax purposes, effective [mm/dd/yyyy]. [The Charity] is also a charity for ETA purposes.
3. [The Charity] is registered for GST/HST purposes, with GST/HST account number […].
4. [The Charity]'s home office is located in […], [Participating Province X].
5. […] [Locations of the Charity's activities]: […]
6. […]
7. [The Charity] has paid HST in […] [Participating Province Y].
8. [The Charity] has held […] fundraisers in [Participating Province Y] […].
9. [The Charity] has entered into […] [Agreement A] with […] [the consultant], located in […], [Participating Province Y]. […]
10. [Agreement A] [outlines] the expectations between [the Charity] and [the consultant]. […]
* "This work is temporary and being done on a consulting basis."
* […] [Details of Agreement A]
11. Pursuant to [Agreement A] […].
12. Pursuant to [Agreement A] […]
13. Pursuant to [Agreement A] […].
14. [The consultant] does not have any authority to contract on behalf of [the Charity].
15. [The Charity] entered into […] [Agreement B], dated [mm/dd/yyyy], with […] [Participating Province Y] […].
16. […].
17. […] [Details relevant to Agreement B]
18. […] [Details relevant to Agreement B]
19. [The Charity] does not own any land in [Participating Province Y].
20. [The Charity] is registered [extraprovincially] […] under [an act in] [Participating Province Y] […]. […].
21. […] [Describes tangible property of the Charity in Participating Province Y]
Ruling Requested
You would like to know
1. In which provinces is [the Charity] resident? In particular, is [the Charity] resident in [Participating Province Y]?
2. Can [the Charity] claim a public service body rebate of any of the provincial part of the HST paid or payable in [Participating Province Y]?
Ruling Given
Based on the facts set out above, we rule that
1. [The Charity] is resident in [Participating Province X], […] [Participating Province Z], […] . [The Charity] is not resident in [Participating Province Y].
2. [The Charity] can claim a partial rebate of the provincial non-creditable HST charged based on the extent it intended to consume, use or supply the property or service in the course of its activities in each participating province in which it is resident.
This ruling is subject to the qualifications in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service. We are bound by this ruling provided that none of the above issues are currently under audit, objection, or appeal, that no future changes to the ETA, regulations or our interpretative policy affect its validity, and all relevant facts and transactions have been fully disclosed.
Explanation
Resident in a province
The ETA contains deeming rules whereby a person is deemed to be resident in a province in certain circumstances. Pursuant to paragraph 132.1(1)(a), a person is deemed to be resident in a province if:
• the person is resident in Canada; and
• in the case of a corporation, the corporation is incorporated or continued under the laws of that province and not continued elsewhere.
Pursuant to paragraph 132(1)(a), a corporation incorporated or continued in Canada and not continued elsewhere is deemed to be resident in Canada. A corporation incorporated in Canada refers to a corporation that is formed in Canada (i.e. via the act of provincial or federal incorporation). [The Charity] is incorporated under [an act in] [Participating Province X] […]. Therefore, [the Charity] is deemed to be resident in Canada. [The Charity] is also deemed to be resident in [Participating Province X] under paragraph 132.1(1)(a).
[The Charity] is registered [extraprovincially] […] under [an act in] [Participating Province Y] […]. […] [A person] […] [that is registered extraprovincially] is not incorporated in [Participating Province Y], nor is it continued under the laws of [Participating Province Y]. Therefore, [the Charity] is not deemed to be resident in [Participating Province Y] pursuant to paragraph 132.1(1)(a) as a result of being registered [extraprovincially] […] under [an act in] [Participating Province Y] […].
In addition, paragraph 132.1(1)(d) deems a person to be resident in a province if the person is resident in Canada and the person has a permanent establishment in that province. Pursuant to subsection 132.1(3) and the New Harmonized Value-added Tax System Regulations, No. 2, a charity will be deemed to have a permanent establishment in a province if a place in that province would be a permanent establishment for income tax purposes under the following circumstances:
• the charity were a corporation; and
• the charity's activities were a business for income tax purposes.
"Permanent establishment" is defined in subsection 400(2) of Part IV of the Income Tax Regulations. Generally, a permanent establishment of a charity is a fixed place of activities. A fixed place of activities includes a determined or ascertained space in which there is some presence or routine over which the charity has some degree of control and in which some undertaking or operations of the charity occur. In most cases, this includes an office, branch, factory, workshop, warehouse, plant, mine, oil well, farm, timberland or natural resource used in the day-to-day activities of the charity. It does not mean that the place of activities must exist for a long time or be located in a durable building; for instance, a temporary field office on a construction site could be a fixed place of activities.
[The Charity]'s existing […] [locations] are each a fixed place of activities. Each [location] is a determined location that can be identified with [the Charity]; [the Charity] exercises control over the [locations]; and [the Charity] carries out its on-going charitable activities at the [locations] on a regular and reoccurring basis.
Since "permanent establishment" in respect of a charity means a fixed place of activities, [the Charity] has a permanent establishment in the following provinces:
• [Participating Province X] […];
• [Participating Province Z] […];
• […]
Therefore, [the Charity] is deemed to be resident in [Participating Province X], [Participating Province Z], […] pursuant to paragraph 132.1(1)(d).
[The Charity] does not currently have a fixed place of activities in [Participating Province Y]. [The Charity] does not […] carry out any day-to-day activities in [Participating Province Y] […].
However, there are other circumstances set out in subsection 400(2) of the Income Tax Regulations where a charity may have or be deemed to have a "permanent establishment" in a province.
A charity is deemed to have a permanent establishment in a particular place if it carries on activities through an employee or agent established in that place with a general authority to contract on behalf of the charity. [The consultant] does not have any authority to contract on behalf of [the Charity]; therefore, this provision does not apply. Based on the information provided, [the Charity] does not have any other employees or agents established in [Participating Province Y].
If a charity otherwise has a permanent establishment in Canada and owns land in a province, such land is deemed to be a permanent establishment. As discussed above, [the Charity] […] [has] permanent establishments in Canada; therefore, if [the Charity] owns land in a province, such land is deemed to be a permanent establishment. […]. Therefore, [the Charity] does not own land in [Participating Province Y].
If a charity uses substantial machinery or equipment in a particular place in a province, it will be deemed to have a permanent establishment in that province. Generally, where a charity uses (rented or owned) substantial machinery or equipment in a province either for 30 continuous days or for 90 cumulative days in a 12-month period, the charity would meet this requirement. Based on the information provided, [the Charity] does not use substantial machinery or equipment in [Participating Province Y]. […]
Since none of the circumstances set out in subsection 400(2) of the Income Tax Regulations apply, [the Charity] does not have a permanent establishment in [Participating Province Y]. As such, [the Charity] is not resident in [Participating Province Y].
For further information, see GST/HST Info Sheet GI-121, Determining Whether a Public Service Body is Resident in a Province for Purposes of the Public Service Bodies' Rebate.
Public Service Body Rebate for HST paid or payable in [Participating Province Y]
[The Charity] can claim a partial rebate of the provincial non-creditable HST charged based on the extent it intended to consume, use or supply the property or service in the course of its activities in each participating province in which it is resident. Thus, if [the Charity] pays HST on property or services purchased in [Participating Province Y], it can claim a rebate of the provincial non-creditable HST charged to the extent it intended to consume, use, or supply the property or service in the course of its activities in [the participating provinces in which it is resident]. The amount of the rebate is calculated using the relevant provincial rebate percentages of the participating provinces in which [the Charity] is resident.
Likewise, if [the Charity] pays HST on property or services purchased in other participating provinces, [the Charity] may claim a rebate of the provincial non-creditable HST charged to the extent it intended to consume, use, or supply the property or service in the course of its activities in [the participating provinces in which it is resident].
As [the Charity] is not resident in [Participating Province Y], [the Charity] would not be entitled to a rebate of the provincial part of the HST to the extent that the property or services are intended to be consumed, used or supplied in the course of its activities in [Participating Province Y]. However, [the Charity] would be entitled to a 50% rebate of the federal part of the HST paid in [Participating Province Y].
Interpretation Given
We are unable to provide a ruling on the question of how [the Charity] must calculate its public service body rebate of the provincial part of the HST, because [the Charity]'s rebate calculation depends on the specific transactions occurring during a claim period. However, we are pleased to provide the following interpretation.
Public service body rebate of the provincial part of the HST
Certain public service bodies can claim a partial rebate of the GST/HST paid or payable on eligible purchases and expenses. As a charity, [the Charity] is entitled to a 50% rebate of the GST and the federal part of the HST. A rebate can be claimed for GST/HST paid or payable only in respect of eligible purchases and expenses. For further information, see Guide RC4034, GST/HST Public Service Bodies' Rebate.
A charity that is not a selected public service body(Footnote 1) and is resident in one or more participating provinces is also eligible for a partial rebate of the provincial part of the HST. "Participating province" means the province of British Columbia, New Brunswick, Newfoundland and Labrador, Nova Scotia, or Ontario. Please note, British Columbia will no longer be a participating province after March 31, 2013. Prince Edward Island will become a participating province on April 1, 2013. Per the above ruling, [the Charity] is resident in two participating provinces, [Participating Province X] and [Participating Province Z].
1 "Selected public service body" means a school authority, a university, or a public college that is established and operated other than for profit; a hospital authority; a municipality; a facility operator; or an external supplier.
A charity that is not a selected public service body and that is resident in two or more provinces, at least one of which is a participating province, must calculate its rebate of the provincial part of the HST based on the extent it intended to consume, use or supply the property or service in the course of its activities in each participating province in which it is resident.
Therefore, [the Charity] must calculate its rebate of the provincial part of the HST in the following manner:
provincial rebate percentage
X [times]
provincial non-creditable HST charged
X [times]
the extent [the Charity] intended to consume, use or supply the property or service in the participating province
[The Charity] must complete this calculation for each participating province in which it is resident (i.e. [Participating Province X] and [Participating Province Z]).
Provincial rebate percentage
The provincial rebate percentage is […]% for a charity resident in [Participating Province X] […] and […]% for a charity resident in [Participating Province Z].
Provincial non-creditable HST charged
The provincial non-creditable HST charged for a claim period of a person is equal to the provincial part of the HST paid or payable on property or a service (other than a prescribed property or service), minus the following amounts:
• any amount that is included in determining an input tax credit of the person;
• any other rebate, refund, or remission of that HST that it is reasonable to expect the person received or is entitled to receive; and
• any amount of that HST that is refunded, credited, or adjusted in the person's favour and for which the person has either received a credit note from the supplier or has issued a debit note to the supplier.
To determine the provincial part of the HST, multiply the HST paid or payable by:
• 7/12 for those purchases taxed at 12%;
• 8/13 for those purchases taxed at 13%;
• 9/14 for those purchases taxed at 14%;
• 8/14 for those purchases taxed at 14% before the 2008 rate change; or
• 10/15 for those purchases taxed at 15% after the 2010 Nova Scotia rate change.
Extent of consumption, use or supply in the participating province
[The Charity] must determine the extent (expressed as a percentage) to which it intended to consume, use or supply the property or service in the course of its activities in the participating province. This determination is made at the "relevant time", which is defined in section 5.1 of the Public Service Body rebate (GST/HST) Regulations. Generally, the "relevant time" will be the time the supply was made to, or the property was imported or brought into a participating province by, [the Charity].
[The Charity] is not entitled to claim a rebate of the provincial part of the HST paid on property or services to the extent it intends to consume, use, or supply the property or services in a non-participating province, or in a participating province in which [The Charity] is not resident.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-952-9592. Should you have additional questions on the interpretation and application of GST/HST, please contact a GST/HST Rulings officer at 1-800-959-8287.
Yours truly,
Heather Reardon
Charities, Non-Profit Organizations and Educational Services Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate
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