GST/HST Memorandum 3-3-5-1 “Place of Supply in a Province Specific Rules for Intangible Personal Property” January 2025

Meaning of transportation pass

12. Special rules apply for a supply of intangible personal property that is, or is similar to, a passenger transportation pass. Generally, a transportation pass entitles a person to receive either a fixed number of passenger transportation services to be provided at a later unspecified date, or to an unlimited number of passenger transportation services within a particular period. …

Application of general rules

14. If these rules do not determine the place of supply of the transportation pass (for example, where the passenger transportation services covered by the passenger transportation pass may not always begin in the same participating province), the place of supply is determined under the general place of supply rules for intangible personal property.

Example 7 ...

An individual purchases a rail pass at a rail station in Toronto, Ontario. The pass entitles the individual to a one‑way trip from Toronto to New York City, USA. When the individual wishes to travel, the individual will use the pass to obtain a rail ticket which specifies that the origin of that trip is Toronto.

When the supply of the rail pass is made, the supplier can determine that the passenger transportation service covered by the passenger transportation pass would terminate outside Canada.

The supply of the intangible personal property is therefore made in a non‑participating province and is subject to the GST at a rate of 5%. ...

Example 8

A business in Ontario purchases an air transportation pass for 10 one-way trips on any of a particular airline's routes in Canada and the USA, for use by its employees across Canada. The airline operates in all provinces in Canada and several states in the USA. When the business wishes to arrange travel, it uses the pass to obtain a plane ticket on one of the airline's routes.

When the supply of the transportation pass is made, the supplier cannot determine where each passenger transportation service will begin or whether the termination will be in or outside of Canada. Therefore, the special rules regarding intangible personal property that relates to passenger transportation services do not apply.

The place of supply is therefore determined under the general rules for the supply of intangible personal property.

Limited scope of s. 10 rules

15. The general place of supply rules for supplies of intangible personal property do not apply to supplies of intangible personal property that relates to tangible personal property such as an option to purchase tangible personal property. These types of supplies are subject to specific place of supply rules in section 10 of the Regulations.

16. Generally, a supply of intangible personal property is considered to relate to tangible personal property if the intangible personal property relates to specific tangible personal property. It excludes a supply of a right to use tangible personal property by way of lease, licence or similar arrangement, since such a supply is deemed by subsection 136(1) to be a supply of the tangible personal property that is subject to different place of supply rules,

Example 12

• Quebec company supplies an Ontario company with intangible personal property that relates to tangible personal property, which is ordinarily located as to 30% in Prince Edward Island, 10% in Ontario and 60% in the USA.
• Since the TPP that is ordinarily located in Canada to which the intangible personal property relates is ordinarily located primarily in the (two) participating provinces, and the greatest proportion is ordinarily located in PEI, the supply of the IPPis therefore made in PEI.

Example 14

• A registered non‑resident company supplies an Ontario company with intangible personal property that relates to tangible personal property, of which 5% is ordinarily located in Ontario and 95% in the USA.
• Since such TPP is ordinarily located primarily in the participating provinces and the greatest proportion is ordinarily located in Ontario, the IPP place of supply is in Ontario.

Determination of ordinary location by agreement

17. The place of supply rules for intangible personal property that relate to tangible personal property rely on the ordinary location of that tangible personal property.

18. For purposes of the place of supply rules, the ordinary location of property is deemed by section 4 of Part I of Schedule IX to be the location where the supplier and the recipient mutually agree that the ordinary location of the property is to be at a particular time.

19. In other words, the mutual agreement of the supplier and recipient is determinative even where the property is actually located at a different place at the relevant time from what had been agreed upon.

20. The mutual agreement of the parties may change from time to time. As a result, even if the original written agreement for a supply of property specified that the property would be located in a particular province, the parties may mutually agree subsequent to the signing of the contract that the property is to be moved at a particular time to a location in another province.

21. … The expression not ordinarily located primarily means ordinarily located 50% or less.

Category of IPP relating to real property is narrow

27. Based on this definition [in s. 123(1) of real property], except for property in Quebec, there are very few supplies of intangible personal property relating to real property that would not be deemed to be a supply of real property. As a result, the place of supply rules explained in this section would only apply in limited circumstances, such as a supply of a vacation club membership relating to a number of vacation resorts.

28. The place of supply rules for supplies of intangible personal property that relates to real property require a determination of the proportion of real property that is situated in a province. The determination of the relevant proportion of the real property that is situated in a province is based on the physical size of the entire real property (for example, based on square footage, square yards or acres) pursuant to its legal description. The value of the real property or the number of properties (unless they are of equal size) is not relevant to this determination.

Real property, and IPP relating thereto, can be supplied both inside and outside Canada

29. A supply of intangible personal property that relates to real property is deemed by subsection 142(1) to be made in Canada if the real property is situated in Canada and is deemed by subsection 142(2) to be made outside Canada if the real property is situated outside Canada. As a result, where the real property is both situated in Canada and outside Canada, the proportion of the supply of the intangible personal property that relates to the real property that is situated in Canada is considered to be made in Canada, while the proportion of the supply of the intangible personal property that relates to the real property that is situated outside Canada is considered to be made outside Canada.

30. It is therefore only the proportion of the supply of the intangible personal property that relates to real property that is situated in Canada that may be deemed to be made in a participating province and subject to the HST.

Real property can be supplied both inside and outside Canada

29. A supply of intangible personal property that relates to real property is deemed by subsection 142(1) to be made in Canada if the real property is situated in Canada and is deemed by subsection 142(2) to be made outside Canada if the real property is situated outside Canada. As a result, where the real property is both situated in Canada and outside Canada, the proportion of the supply of the intangible personal property that relates to the real property that is situated in Canada is considered to be made in Canada, while the proportion of the supply of the intangible personal property that relates to the real property that is situated outside Canada is considered to be made outside Canada.