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.
GST/HST Rulings Directorate
5th floor, Tower A, Place de Ville
320 Queen Street
Ottawa ON K1A 0L5
[Addressee]
Case Number: 246815
Dear [Client]:
Subject: GST/HST RULING
[…][Services to non-resident in the business of transporting property by conveyance to or from Canada and between places outside Canada]
Thank you for your correspondence of [mm/dd/yyyy], concerning the application of the goods and services tax/harmonized sales tax (GST/HST) to […] services provided to […][the Operator, a business engaged in international shipping].
The HST applies in the participating provinces at the following rates: 13% in Ontario; and 15% in New Brunswick, Newfoundland and Labrador, Nova Scotia, and Prince Edward Island. The GST applies in the rest of Canada at the rate of 5%.
All legislative references are to the Excise Tax Act (ETA) unless otherwise specified.
STATEMENT OF FACTS
Based on your letter, attached documentation, subsequent emails and a telephone conversation on [mm/dd/yyyy], our understanding of the facts is as follows:
1. […] ([…][the Operator) is a […] company based and registered […][outside Canada] that operates and manages […](the Conveyance).
2. The Operator was incorporated […][outside Canada] and has not been continued in Canada. You have […][provided the Operator’s incorporation documents].
3. The Operator is engaged in an international shipping business outside Canada and does not carry on any business activities in Canada nor does it have any fixed place of business in Canada.
4. The Operator is not registered for the GST/HST under Subdivision d of Division V of Part IX of the ETA.
5. The Conveyance, […] owned by […] (the owner), is registered […][outside Canada] and is not, nor has ever been, registered in Canada. You have […][provided documents] as evidence the […][Conveyance] is a foreign-registered […][conveyance].
6. The Operator has international shipping as its principal business and all or substantially all of its gross annual revenues are generated from international shipping.
7. The Operator is responsible for the operation and management of the Conveyance for and on behalf of the owner.
8. The Operator is in the business of transporting property […] to or from Canada and between places outside Canada on international voyages. As such, it uses the Conveyance to transport cargo to or from Canada or between places outside Canada.
9. The Conveyance [entered Canadian waters] on [mm/dd/yyyy] […] in order to load […][property to be transported outside Canada].
10. On [mm/dd/yyyy], […][before leaving Canadian waters, the Conveyance required the services of a resident GST/HST registrant corporation, CanCo].
11. […]
12. The Operator, for and on behalf of the owner, entered into an agreement with […][CanCo]. […][You have provided a] copy of this agreement […].
13. On [mm/dd/yyyy], the Operator […] engaged [CanCo’s] services. […]
14. […]
15. […][On mm/dd/yyyy] the Conveyance […][departed Canadian waters] to deliver its cargo to a place outside Canada.
16. […][CanCo] issued invoices to the Operator for its […] services, which included charges for the GST/HST. A sample invoice is attached […] to your submission.
17. […]
RULING REQUESTED
You would like to know whether:
1) the supply of […] services made by [CanCo] to the Operator is zero-rated pursuant to paragraph 2(a) of Part V of Schedule VI; and,
2) the tax already paid on consideration for that supply may be recovered by the Operator.
RULING GIVEN
Based on the facts set out above, we rule that:
1) The supply of […] services made by [CanCo] to the Operator is zero-rated under paragraph 2(a) of Part V of Schedule VI; and,
2) The tax paid on consideration for the zero-rated supply of […] services may be recovered by the Operator in the manner described below.
EXPLANATION
Ruling 1: Zero-rated supply
A supply of a service may be zero-rated under paragraph 2(a) of Part V of Schedule VI to the ETA where it is made to a person:
- who is not resident in Canada and is not registered under subdivision d of Division V of Part IX of the ETA at the time of the supply;
- who carries on a business of transporting passengers or property by ship, aircraft or railway to or from Canada or between places outside Canada; and,
- who acquires the service for consumption, use or supply in the course of so transporting passengers or property.
Pursuant to subsection 132(5) of the ETA, the residency of an international shipping corporation is determined with reference to the Income Tax Act. That is, where a corporation is deemed under subsection 250(6) of the Income Tax Act to be resident in a country other than Canada throughout a taxation year of the corporation and not to be resident in Canada at any time in the year, the corporation shall, for the purposes of the GST/HST, be deemed to be resident in that other country throughout the year and not to be resident in Canada at any time in the year, unless it is deemed resident in Canada through its permanent establishment in Canada under subsection 132(2) of the ETA.
Subsection 250(6) of the Income Tax Act, R.S.C. 1985, c.1 (5th Supp.) provides:
250 (6) For the purposes of this Act, a corporation that was incorporated or otherwise formed under the laws of a country other than Canada or of a state, province or other political subdivision of such a country is deemed to be resident in that country throughout a taxation year and not to be resident in Canada at any time in the year, if
(a) the corporation
(i) has international shipping as its principal business in the year, or
(…)
(b) all or substantially all the corporation’s gross revenue for the year consists of any one or more of
(i) gross revenue from international shipping,
(…)
(c) the corporation was not granted articles of continuance in Canada before the end of the year.
The Operator is a corporation that has international shipping as its principal business, with all or substantially all of its gross annual revenues generated from international shipping. Further, the corporation was incorporated outside Canada and not continued in Canada and it has no fixed place of business or permanent establishment in Canada. Accordingly, the Operator is deemed not to be resident in Canada in the taxation year for purposes of the GST/HST by virtue of subsection 250(6) of the Income Tax Act and, by extension, subsection 132(5) of the ETA.
The Operator was not registered for the GST/HST under subdivision d of Division V of Part IX of the ETA at the time of the supply.
The Operator carries on a business of transporting property by […][conveyance] to or from Canada or between places outside Canada.
The Operator consumed and/or used the […] services rendered by […][CanCo] while, or in the course of, transporting property on the Conveyance from Canada to a place outside Canada. That is, the […] services were connected with and arose from the service of transporting property by […][conveyance] from a place in Canada to a place outside Canada.
In these circumstances, the supply of […] services made by [CanCo] to the Operator is zero-rated under paragraph 2(a) of Part V of Schedule VI.
Ruling 2: Rebate claim
Pursuant to section 225, a supplier who collects an amount as or on account of GST/HST in error is required to include that amount in their net tax for the reporting period in which it was collected and to remit any net tax amount owing for the reporting period.
Where a supplier has charged or collected an excess amount as or on account of tax in error on a supply that qualifies for zero-rating, the supplier may refund or credit the excess amount to the recipient in accordance with the requirements set out in section 232. If the supplier refunds or credits the amount collected as GST/HST in error, the supplier must do so within two years after the day the amount was charged or collected and provide the recipient with a credit note (unless the recipient issues a debit note) containing prescribed information. Generally, the supplier may deduct the amount to the extent that it has been included in determining their net tax for the reporting period in which the credit note is issued or a preceding reporting period. For additional information, see GST/HST Memorandum 12-2 Refund, Adjustment, or Credit of the GST/HST under Section 232.
Alternatively, if the supplier does not refund or credit a person who has paid an amount as GST/HST on a supply that qualifies for zero-rating, the person who has paid this amount may apply to the Canada Revenue Agency (CRA) for a rebate of tax paid in error in accordance with the requirements set out in section 261 using Form GST189, General Application for GST/HST Rebates. The time limit to apply for this rebate is within two years after the day the amount was paid. An amount that has previously been refunded is not eligible for the rebate. For additional information, see the GST/HST Guide RC4033: General Application for GST/HST Rebates.
DISCLAIMER
In accordance with the qualifications and guidelines set out in GST/HST Memorandum 1-4, Excise and GST/HST Rulings and Interpretations Service, the CRA is bound by the ruling(s) given in this letter provided that: none of the issues discussed in the ruling(s) are currently under audit, objection, or appeal; no future changes to the ETA, regulations or the CRA’s interpretative policy affect its validity; and all relevant facts and transactions have been fully and accurately disclosed.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 343-553-3873.Should you have additional questions on the interpretation and application of the GST/HST, please contact a GST/HST Rulings officer at 1-800-959-8287 or by fax to 1-418-566-0319.
Sincerely,
Anna Messore
Manager, GST/HST Rulings
Border Issues 2 Unit
General Operations and Border Issues Division
GST/HST Rulings Directorate
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