IPP that can only be used primarily in participating provinces - Participating province of greatest proportion of use cannot be determined
Disclaimer
We do not guarantee the accuracy of this copy of the CRA website.
Scraped Page Content
IPP that can only be used primarily in participating provinces - Participating province of greatest proportion of use cannot be determined
Generally, three place of supply rules apply where the Canadian rights for a supply of intangible personal property (IPP) can only be used primarily (more than 50%) in participating provinces, but it is not possible to determine the participating province in which the greatest proportion of those rights can be used. This will be the case where there are no limitations to the extent to which the rights can be used in any of those provinces.
These rules do not apply to a supply of IPP that relates to real property or goods or to a supply of IPP that relates to services that is deemed to be made in a province based on the specific place of supply rule for IPP that relates to services.
Rule 1
If the value of the amount for the supply of the IPP is $300 or less, the supply is made in a participating province if the supply is made through a permanent establishment of the supplier located in the province in the presence of an individual who is, or who acts on behalf of, the recipient, or through a vending machine situated in the province, and the IPP can be used in the participating province.
Example
A regional fitness club with facilities situated throughout the provinces of New Brunswick and Newfoundland and Labrador supplies fitness memberships to individuals for a single fee of less than $300 for a six-month membership to the club. The membership entitles members to: unlimited access to all club facilities; access to nutritional and fitness seminars; a towel service; and a one-time fitness evaluation.
A student from New Brunswick attending university in Newfoundland and Labrador acquires a six-month membership to the fitness club at the membership desk at the club's facility that is closest to the university. The student provides his permanent address in New Brunswick as his home address.
The Canadian rights for the membership can only be used primarily in the participating provinces. Also, the supply is made through a permanent establishment of the supplier in Newfoundland and Labrador in the presence of the recipient and the IPP can be used in Newfoundland and Labrador. The supply of the IPP is therefore made in Newfoundland and Labrador and the HST will apply at a rate of 15%.
Rule 2
If Rule 1 does not deem the supply to be made in a participating province (such as, where either the amount for the supply is more than $300 or the supply is not made through a permanent establishment or vending machine as described in the above rule), the supply may be deemed to be made in a participating province if the supplier obtains an address of the recipient in the province in the normal course of business. Specifically, the supply of the IPP is made in a participating province if:
- in the normal course of business the supplier obtains an address that is:
- a home or a business address in Canada of the recipient, or
- if more than one such address is obtained, the home or business address in Canada of the recipient that is most closely connected with the supply, or
- if the supplier does not obtain a home or business address in Canada of the recipient, any other address in Canada of the recipient that is most closely connected with the supply, and
- the address is in the province, and
- the IPP can be used in the province.
Example
A supplier in Ontario supplies software by way of licence to a company in Newfoundland and Labrador for use by its employees at its offices in Newfoundland and Labrador and New Brunswick. The software is downloaded electronically over the Internet. The licence provides that the software may only be used from the offices of the recipient in Newfoundland and Labrador and New Brunswick. In the normal course of business, the supplier obtains a business address of the recipient that is in Newfoundland and Labrador and that is also the billing address for the supply.
The Canadian rights for the software can only be used primarily in the participating provinces. Also, in the normal course of business, the supplier obtains a business address of the recipient that is in Newfoundland and Labrador. The supply is therefore made in Newfoundland and Labrador and the HST will apply at a rate of 15%.
Rule 3
If the supply is not considered to be made in a participating province under Rule 1 or Rule 2, the supply of the IPP is made in the participating province for which the tax rate is the highest among the participating provinces in which the IPP can be used. If two or more of the participating provinces in this case have the same rate for the provincial part, the HST will be required to be charged by the supplier using that particular rate.
Example
A company in Nova Scotia makes a supply of intellectual property rights to a Quebec company that can only be used in Nova Scotia and Ontario. The business address in Canada of the recipient obtained by the Nova Scotia company in the normal course of business is in Quebec.
The Canadian rights for the intellectual property rights can only be used primarily in participating provinces. Although the supplier obtains a business address of the recipient, that address is in Quebec, a province in which the intellectual property rights cannot be used. The supply of the IPP is therefore made in the participating province that has the highest rate for the provincial part of the HST among the participating provinces in which the IPP can be used, which in this case is Nova Scotia. The HST will apply at a rate of 15%.
Forms and publications
- Date modified:
- 2016-07-07