GST/HST Ruling

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

Excise and GST/HST Rulings Directorate 320 Queen Street Ottawa ON K1A 0L5
XXXXX XXXXX XXXXX	Case Number: 94831
XXXXX XXXXX	June 27, 2007

Subject:

Penalty imposed under section 283 of the Excise Tax Act

Dear XXXXX:

Reference is made to our telephone conversation XXXXX. It is our understanding that you represent several clients XXXXX who are sole proprietors involved in the XXXXX industry. In particular, your clients who are registered for GST/HST are engaged in the commercial activity of XXXXX, a zero-rated supply under the legislation (the Excise Tax Act). As a result of their supplies being zero-rated, your clients are in a net tax refund position. It is our further understanding that your clients have either quarterly or annual filing frequencies. Your clients are often unable to file their returns on the required due date given the nature of their business where they are often absent for long periods of time.

Under section 283 of the Excise Tax Act, a $250 penalty is imposed on registrants who fail to respond to a demand issued by the Canada Revenue Agency (the CRA) requesting that the registrant file an outstanding return. You have expressed concerns that this penalty should not be applied to registrants such as your clients who are in a net tax refund position. This penalty is applicable in those situations where the registrant does not respond to the request within the specified time frame. Under the legislation, the penalty is exigible regardless of whether the registrant is in a net tax or net tax refund position. As we explained, the CRA is responsible for the administration of the Excise Tax Act as it is written, and all matters of tax policy or changes to the Excise Tax Act would need to be addressed to the Minister of Finance.

Several options, however, were discussed during our conversation as a means of addressing the concerns of your clients and facilitating compliance with the legislation.

One option to consider is that your clients who are quarterly filers can elect to file a GST return on an annual basis. This would result in your clients who are sole proprietors filing a GST return once a year on June 15 of the following year. No quarterly instalment payments would be required since your clients are in a net tax refund position. Input tax credits could only be claimed, however, when the return is filed.

Another option would be for your clients to file nil returns by the due dates and to claim input tax credits in a return within the four years allowed for the claiming of input tax credits in accordance with the legislation.

As discussed, if any of your clients receive a demand from the CRA to file returns, it is suggested that your client, or the person authorized by your client, communicate with the CRA at the telephone number indicated on the demand within the time frame specified on the demand. Through this process, the client or the person authorized by the client, would have the opportunity to provide reasons why the return is late and to discuss with the CRA, based on the particular situation, as to when a return could be filed, if it couldn't be filed within the time period specified in the demand.

In response to your request for a contact person within the CRA responsible for the issuance of the demands, you may wish to contact Ms. Lynn Livingston, Director, Trust Accounts Division, Tower C, Place Vanier, 25 McArthur Road, Ottawa, ON K1A 0L5. Ms. Livingston may be reached at (613) 954-1294.

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at (613) 952-0301.

Yours truly,

Owen Newell, CGA
Manager
General Operations Unit
General Operations & Border Issues Division
Excise and GST/HST Rulings Directorate

2007/07/13 — RITS 95253 — Application of the GST/HST to Cemetery Products and Services - Supply of Interment Rights

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

Excise and GST/HST Rulings Directorate Place de Ville, Tower A, 15th floor 320 Queen Street Ottawa ON K1A 0L5
XXXXX XXXXX XXXXX XXXXX	Case Number: 88917
XXXXX XXXXX	July 18, 2007

Subject:

GST/HST INTERPRETATION Tax Status of Midwifery Services

Dear XXXXX:

This is in reply to your telephone call XXXXX concerning the proposed amendment announced by the Department of Finance on December 28, 2006 to exempt the services of midwives from the Goods and Services Tax (GST)/Harmonized Sales Tax (HST).

All legislative references are to the Excise Tax Act (the "ETA") and the regulations thereunder, unless otherwise specified.

Interpretation Requested

You are asking for information about the anticipated time frame for the proposed amendment to become law and when the exemption will come into force. In addition, you would also like to know how this proposed amendment will impact the ability of midwives in XXXXX to recover the GST/HST they incur on expenses related to supplies of midwifery services.

Interpretation Given

The proposed amendment to the ETA to include an exempting provision for the services of midwives is included in the Budget Implementation Act, 2007, S.C. 2007, C-52, which received Royal Assent on June 22, 2007. The ETA was amended to include midwifery services in the list of exempt supplies in section 7 of Part II of Schedule V as well as a corresponding amendment to the definition of "practitioner" in section 1 of this Part to add a person who practises the profession of midwifery for purposes of section 7.

The exemption for midwifery services applies to supplies made after December 28, 2006, which corresponds to the date of the announcement by the Department of Finance. As the amendment is now law, practitioners of midwifery services are no longer involved in commercial activities. As a consequence, they are no longer registrants for GST/HST purposes nor are they entitled to claim input tax credits relating to expenses incurred after December 28, 2006.

The definition of "practitioner" in respect of a supply of midwifery services in section 1 of Part II of Schedule V now includes a person who practises the profession of midwifery and who is licensed or otherwise certified to practise that profession in the province in which the person supplies the service. If no licence or certification is required in the province where the service is supplied, then the supplier must have the qualifications equivalent to those necessary to be licensed or certified in another province. Section 7 of Part II of Schedule V exempts from GST/HST supplies of midwifery services rendered to an individual when a "practitioner" of the service makes the supply.

Please note that the application of section 7 of Part II of Schedule V is not dependent on who pays for the supply, as this section does not require that the supply be "made to" a particular recipient. Accordingly, when a practitioner of midwifery services renders a midwifery service to an individual, this supply made by the practitioner remains exempt even in circumstances where the practitioner bills a person other than the individual (a third party) for payment of the consideration for this supply.

Prior to the amendment to the ETA, the tax status of midwifery services varied across Canada. In most provinces and territories, including XXXXX, midwifery services were taxable supplies. Further, we understand that there are situations in XXXXX where practitioners of midwifery services may supply midwifery services to the provincial government or these practitioners may receive government grants. Please note that the GST/HST is not charged on supplies made to the Government of XXXXX or on amounts received as government grants.

Because midwifery services were taxable prior to December 29, 2006, practitioners of midwifery services were involved in a commercial activity for purposes of the GST/HST. As such, they were required to be registered for the GST/HST ^[viii]1 and were entitled to claim input tax credits when they filed their GST/HST returns to recover the GST/HST that they incurred on their expenses used to make these taxable supplies.

However, because midwifery services supplied in the circumstances described above are exempt effective December 29, 2006, practitioners of midwifery services must now deregister for GST/HST purposes. In addition, practitioners of midwifery services who were registrants should take the following information into account for the time period between December 29, 2006 and June 22, 2007:

1. Because of the announcement to exempt midwifery services, registrants may have decided on their own not to collect and remit the GST/HST on their supplies of midwifery services made after December 28, 2006. Since this proposed amendment is now law, registrants that did not collect and remit GST/HST on supplies of midwifery services may continue accordingly.

2. If the registrant collected and remitted the GST/HST on supplies made after December 28, 2006, the amounts collected as GST/HST can be refunded to the recipients of the supplies in accordance with section 232. Alternatively, the recipients could apply for a rebate under section 261.

3. As noted above, input tax credits are not available for expenses incurred in providing exempt midwifery services after December 28, 2006. Registrants will be required to make adjustments for input tax credits they may have previously claimed for business expenses related to exempt supplies. Also note that there are special change-in-use rules for input tax credits claimed on capital property that may involve adjustments.

Finally, we also note that section 7 of Part II of Schedule V does not exempt all supplies made by practitioners of midwifery services; i.e., if the service is not a midwifery service rendered to an individual, the supply of that other service will continue to be a taxable supply.

The foregoing comments represent our general views with respect to the subject matter of your request. These comments are not rulings and, in accordance with the guidelines set out in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service, do not bind the Canada Revenue Agency with respect to a particular situation. Future changes to the ETA, regulations, or our interpretative policy could affect this interpretation.

To ensure that the issues concerning the exemption for midwifery services are fully addressed, including how to make input tax credit adjustments relating to the GST/HST paid or payable on capital property as well as on expenses incurred after December 28, 2006, we encourage you to contact GST/HST Rulings, XXXXX, telephone 1-800-959-8287 (service in English) or 1-800-959-8296 (service in French).

Yours truly,

Susan Eastman
Municipalities and Health Care Services Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate

2007/07/25 — RITS 90193 — Section 156(1) Election: Change of Legal Name

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

Excise and GST/HST Rulings Directorate Place de Ville, Tower A, 15th floor 320 Queen Street Ottawa ON K1A 0L5
XXXXX XXXXX XXXXX	Case Number: 65377
XXXXX XXXXX	July 5, 2007

Subject:

GST/HST RULING Application of the GST/HST to the affairs of the XXXXX

Dear XXXXX:

Thank you for your letter XXXXX concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the affairs of the XXXXX (the Corporation)

Statement of Facts

We understand that:

1. The Corporation was incorporated without share capital XXXXX.

2. The Corporation is not registered for purposes of the GST/HST.

3. XXXXX,

XXXXX.

4. XXXXX,

XXXXX.

5. XXXXX,

XXXXX.

XXXXX.

6. XXXXX,

XXXXX.

7. XXXXX,

XXXXX.

8. XXXXX,

XXXXX.

XXXXX.

XXXXX.

XXXXX.

Ruling Requested

You would like to know if the Corporation would be considered to be a non-profit organization as defined in subsection 123(1) of the ETA.

Ruling Given

Based on the facts set out above, we rule that the Corporation is considered to be a person organized solely for a purpose other than profit, with no part of its income payable to or otherwise available for the personal benefit of any member, and if it in fact operates for a purpose other than profit it would qualify as an NPO under subsection 123(1) of the ETA.

This ruling is subject to the qualifications in GST/HST Memorandum 1.4, Goods and Services Tax Rulings. We are bound by this ruling provided that none of the above issues is 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

A "non-profit organization" is defined in subsection 123(1) of the ETA to be a "person (other than an individual, an estate, a trust, a charity, a public institution, a municipality or a government) that was organized and is operated solely for a purpose other than profit, no part of the income of which is payable to, or otherwise available for the personal benefit of, any proprietor, member or shareholder thereof unless the proprietor, member or shareholder is a club, a society or an association the primary purpose and function of which is the promotion of amateur athletics in Canada."

As indicated in GST/HST Policy Statement P-215, Determination of Whether an Entity is a "Non-Profit Organization" for Purpose of the Excise Tax Act ("ETA"), we look at the governing documents to determine whether an entity was organized solely for a purpose other than profit. Entities organized solely for a non-commercial public purpose will be considered organized for non-profit purposes. The governing documents of the Corporation indicate that it was established solely for a purpose other than profit.

The determination of whether an entity is operated solely for non-profit purposes is a question of fact at any given time. Therefore any determination of whether an entity is a non-profit organization for purposes of the ETA is specific to the time the determination is made.

The governing documents state that upon dissolution of the Corporation and after payment of all its debts and liabilities, all remaining property shall be distributed or disposed of to organizations in the Province, the undertaking of which is charitable or beneficial to the community.

It is our view that the Corporation currently meets the three criteria listed in P-215 and therefore would qualify as a non-profit organization for purposes of the ETA.

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at (613) 952-0329.

Yours truly,

Trent MacDonald
Charities, Non-Profit Organizations and Educational Services Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate

2007/07/10 — RITS 79146 — Application of GST to Lease and Sub-Lease Agreements

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

Excise and GST/HST Rulings Directorate Place de Ville, Tower A, 15th floor 320 Queen Street Ottawa ON K1A 0L5
XXXXX XXXXX XXXXX	Case Number: 63048
XXXXX XXXXX XXXXX	July 26, 2007

Subject:

GST/HST RULING Application of GST/HST to fully-serviced mortgages

Dear XXXXX:

Thank you for your letters concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the sale and servicing of mortgages by a XXXXX (the "Seller") to your client, XXXXX (the "Investor"). We apologize for the delay in responding to your request.

All legislative references are to the Excise Tax Act (ETA) and the regulations thereunder, unless otherwise specified.

Statement of Facts

The following facts are taken from your letter XXXXX and the draft Agreement XXXXX between the Investor XXXXX and the Seller. The Investor was incorporated under the laws of XXXXX. The Investor does not carry on business in Canada, is not resident in Canada and has no permanent establishment in Canada for purposes of the ETA. The Investor is a resident of XXXXX and is not registered for GST/HST purposes. The Seller is a XXXXX, a resident of Canada and is registered for GST/HST purposes.

XXXXX.

Fully funded Mortgage Loans are mortgages that have already been funded. These mortgages appear on an XXXXX Schedule given to the Investor. XXXXX the Agreement requires the Seller to provide the Investor with an XXXXX Schedule of fully funded Mortgage Loans setting out the details of the mortgages that it proposes to sell to the Investor. It reads:

XXXXX

The Investor is required to provide an Acquisition notice pursuant to XXXXX of the Agreement, in respect of full funded Mortgage Loans. This section reads as follows:

XXXXX

XXXXX the Agreement requires the Investor to deposit the purchase price of any fully funded Mortgage Loan that it acquires from the Seller. The Investor must also reimburse the Seller for any mortgage insurance premiums and titles insurance premiums paid by the Seller with respect to any such Mortgage Loan.

A Committed Mortgage is defined to mean a Mortgage that appears on the XXXXX Committed Mortgages Report. This report sets out Committed Mortgages made by the Seller and which the Seller allocates to the Investor. These mortgages are new mortgages where the Seller has issued a Commitment Letter but have not yet been funded. A Commitment Letter is a letter issued to a borrower by the Seller in respect of a Mortgage Loan.

XXXXX requires the Seller to provide a XXXXX Committed Mortgages Report to the Investor and the Investor is deemed to have agreed to purchase these mortgages as set out in the report provided the mortgages meet the specified criteria.

XXXXX the Agreement deal with Committed Mortgages acquired by the Investor prior to their being funded. The Investor is required to deposit funds estimated by the Seller in the Funding XXXXX Report, into a trust account set up by the Seller. The funds must be sufficient to make all advances and meet all other payments required in connection with the Committed Mortgages. The Seller is authorized to withdraw funds from the Trust Account to fund the Acquired Loans.

With respect to both types of mortgages, XXXXX the Agreement provides:

XXXXX

The Seller is required to perform or, in the case of existing Mortgage Loans, is expected to have already performed, certain specified duties in processing each Mortgage Loan. The duties include acquiring, assembling and processing information and reports; arranging for solicitors or notaries; and obtaining insurance. The Seller is required to generally perform such other acts as a prudent Seller performs in processing Mortgage Loans in accordance with normal prudent industry standards.

The servicing component of the Agreement is set out in XXXXX and requires the Seller to perform such of the following duties as are applicable to such Mortgage Loans, including:

Deliver to the Investor a Daily Mortgages Funded Report in a specified form;

Keep a separate loan account for each Mortgage Loan;

XXXXX;

Give necessary notice in respect of amounts due or overdue;

XXXXX;

XXXXX;

Settle with the mortgagor and the expropriating authority the amount and disposition of any compensation payable upon expropriation of any minor part of or interest in the Mortgaged Premises;

XXXXX;

Maintain proper records and accounts showing all receipts, payments and disbursement in respect of the Mortgage Loan and the Mortgage;

Notify the Investor of any alteration or modification in the terms of the Mortgage or Mortgage Loan under certain conditions. The Investor has the right to require the Seller to purchase back a Mortgage Loan as a result of an unsatisfactory change, within seven days and by giving written notice;

Take necessary or expedient action, from time to time, to enforce performance of the obligations of the mortgagor under the Mortgage or in respect of the Mortgage Loan and to realize upon the Mortgage and other security, at the cost and expense of the Investor, subject to XXXXX;

XXXXX;

XXXXX; and

XXXXX.

XXXXX states that all Mortgages shall be registered in the name of the Seller and all related security documents and policies shall be drawn in the name of the Seller. The Investor and such other persons as may be designated by the Investor from time to time shall be named in all Mortgage Loan insurance policies, title insurance policies and fire insurance policies. Notwithstanding the foregoing, the Seller shall execute registrable assignments of the Mortgages and all related security documents and deliver those to the Custodian as part of a bulk assignment from time to time and not less frequently than once every calendar month. Notwithstanding such registration and for so long as the Seller continues to administer a Mortgage Loan the Seller shall be named on all insurance policies relating thereto along with the Investor and the Custodian.

With respect to consideration, XXXXX provides that the Investor agrees to purchase the Mortgages on a fully-serviced basis. The purchase price for the Mortgages and the related origination, underwriting, processing and servicing of the Mortgages shall be calculated and payable as follows:

XXXXX
XXXXX

Ruling Requested

Is the acquisition of Mortgage Loans and servicing by the Investor from the Seller under the Agreement a single supply of a financial service?

If the servicing is a separate supply from the supply of Mortgage Loans, is the servicing incidental to the supply of Mortgage Loans under the Agreement, pursuant to section 138 of the ETA?

Finally, if the servicing is a separate supply, is the servicing part of the supply of Mortgage Loans pursuant to section 139 of the ETA?

Ruling Given

Based on the facts set out above, we rule that the fees described in XXXXX the Agreement, payable by the Investor to the Seller, are consideration for a supply of a financial service.

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.

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-952-9577.

Yours truly,

Kirk Moore
Financial Institutions Unit
Financial Institutions & Real Property Division
Excise and GST/HST Rulings Directorate

2007/08/03 — RITS 64981 — Redemption of Points at Retailer

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

Excise and GST/HST Rulings Directorate Place de Ville, Tower A, 15th floor 320 Queen Street Ottawa ON K1A 0L5	Case Number: 86167
XXXXX XXXXX XXXXX	Code: 11755-7
	August 9, 2007

Subject:

GST/HST INTERPRETATION GST paid on XXXXX ticket

Dear XXXXX:

Thank you for your letter XXXXX and our subsequent telephone conversation concerning the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) content of an airline ticket purchased by you with loyalty program points XXXXX, for purposes of claiming an input tax credit.

Statement of Facts

1) XXXXX you redeemed 3,800 XXXXX (accumulated under the XXXXX) for an XXXXX airline ticket. You paid an additional $XXXXX for the ticket. The ticket was for air travel from Vancouver to New York on XXXXX, and New York to Vancouver XXXXX. The itinerary issued by XXXXX shows that the $XXXXX consists of a loyalty administration fee of $XXXXX, a Canada Air Security Charge of $XXXXX, a Nav Canada , Fuel and Security surcharge of $XXXXX, as well as various other U.S. taxes and fees. XXXXX has stated to you that there is no GST in the amount of $XXXXX.

2) XXXXX you changed the date of your return flights XXXXX and you were charged a $XXXXX change fee and $XXXXX GST, according to XXXXX fare summary XXXXX. The fare summary also shows an amount of XXXXX Combined Taxes line, and another amount of $XXXXX Canada GST.

3) You are a GST registrant and the above travel is made in the course of your commercial activities.

Interpretation Requested

You would like to know how much GST you are eligible to claim as input tax credit (ITC).

Interpretation Given

Based on the information provided, you are eligible to claim as ITC the amount of $XXXXX GST paid in respect of the air ticket in question.

Explanation

As XXXXX explained to you, it did not charge you GST when you redeemed your points for an airline ticket. The breakdown of the amount of $XXXXX is provided by XXXXX at the bottom of page 3 of the Itinerary XXXXX. It includes various taxes, service fees and an administration fee, but no GST.

On the amounts listed on XXXXX Fare Summary of XXXXX has informed us that you paid a total of $XXXXX, including $XXXXX GST. The amount of $XXXXX GST appears to be a matter between XXXXX and XXXXX, and it is not an amount of GST paid or payable by you. You may wish to contact XXXXX if you wish to receive further details on that amount.

The foregoing comments represent our general views with respect to the subject matter of your request. These comments are not rulings and, in accordance with the guidelines set out in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service, do not bind the Canada Revenue Agency with respect to a particular situation. Future changes to the ETA, regulations, or our interpretative policy could affect this interpretation.

For your convenience, find enclosed a copy of GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service.

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at (613) 954-1433.

Yours truly,

Bao Tran
Specialty Tax Unit
Financial Institutions and Real Property Division
Excise and GST/HST Rulings Directorate

2007/06/25 — RITS 87690 — Application of the GST/HST to the Activities of a XXXXX Receiver]

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

Excise and GST/HST Rulings Directorate Place de Ville, Tower A, 15th floor 320 Queen Street Ottawa ON K1A 0L5	XXXXX XXXXX XXXXX
	Case Number: 94920
XXXXX XXXXX XXXXX	October 1, 2007

Subject:

GST/HST RULING XXXXX XXXXX6 x XXXXX mL - XXXXX

Dear XXXXX:

Thank you for your fax of XXXXX concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to XXXXX XXXXX(the Product).

All legislative references are to the Excise Tax Act (ETA) and the regulations thereunder, unless otherwise specified.

Statement of Facts

Our understanding of the facts is as follows:

1. The Product is sold in multiples of 6 x XXXXXmL containers pre-packaged by the manufacturer.

2. The front Product label makes the following statements XXXXX.

3. The back Product label states XXXXX

4. The Product ingredients include modified milk ingredients and artificial flavours.

5. The Web site for XXXXX the maker of the Product, suggests the Product provides nutrition for persons who: XXXXX.

6. The Web site for XXXXX also describes the Product XXXXX as XXXXX XXXXX.

7. The Product is not a meal replacement or nutritional supplement as set out in the Food and Drug Act and its Regulations.

Ruling Requested

You would like to know how the GST/HST applies to supplies of the Product (vanilla flavour).

Ruling Given

Based on the facts set out above, we rule that supplies of the Product (vanilla flavour) are zero-rated under section 1 of Part III of Schedule VI.

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

Generally, every recipient of a taxable supply made in Canada shall pay tax calculated at the rate of 6% on the value of the consideration for the supply (or 14% in the participating provinces of Nova Scotia, New Brunswick, and Newfoundland and Labrador) unless the supply is zero-rated. Zero-rated supplies are included in Schedule VI. The tax rate in respect of a zero-rated supply is 0%.

Under Part III of Schedule VI, certain supplies of basic groceries are zero-rated. Section 1 of Part III of Schedule VI zero-rates supplies of food or beverages for human consumption, including sweetening agents, seasonings and other ingredients mixed with or used in the preparation of such food or beverages, other than supplies included in paragraphs (a) to (r) of that section.

Paragraph 2 of the GST/HST Memoranda Series 4.3, Basic Groceries, provides guidelines on what the Canada Revenue Agency (CRA) considers to be a "food" or "beverage" that consumers usually consume to allay hunger or thirst or for enjoyment rather than for therapeutic or preventative effects. Further, paragraph 148 of this publication provides information regarding products that are considered dietary supplements that are consumed for their therapeutic or preventative effects and are not considered basic groceries.

Meal replacements and nutritional supplements that, as discussed in paragraph 160 of this publication, meet the criteria set out in the Food and Drug Act and its Regulations, are not considered dietary supplements and such products are generally zero-rated under section 1 of Part III of Schedule VI.

Food products that are not meal replacements or nutritional supplements as set out in the Food and Drug Act and its Regulations, are not dietary supplements and are a specialized form of normal food designed for people with particular intolerances or allergies, are treated as normal food for GST/HST purposes. As such, these food products may be zero-rated under section 1 of Part III of Schedule VI, unless one of the exceptions in paragraphs (a) to (r) of that section applies.

In determining the tax status of a particular product, it is the composition of each particular product in a product line that must be considered to determine if each particular product is a meal replacement, nutritional supplement, dietary supplement or normal food.

The Product in this case is not a meal replacement, nutritional supplement or dietary supplement. It is a beverage and as such, any exceptions applicable to beverages in paragraphs 1(a) to (r) of Part III of Schedule VI must be considered.

In particular, paragraph 1(n) of Part III of Schedule VI provides that beverages are excluded from zero-rating except when prepared and prepackaged specially for consumption by babies; when sold in multiples, prepackaged by the manufacturer or producer, of single servings; or when cans, bottles or other primary containers in which the beverages or products are sold contain a quantity exceeding a single serving.

The Product is prepackaged by the manufacturer in 6 x XXXXX mL containers. Supplies of the Product (vanilla flavour) are zero-rated under section 1 of Part III of Schedule VI.

XXXXX in other flavours

The Web site XXXXX states that XXXXX is also available in chocolate and strawberry flavours. Supplies of chocolate flavoured XXXXX when prepackaged by the manufacturer in 6 x XXXXX mL containers are zero-rated under section 1 of Part III of Schedule VI.

Supplies of strawberry flavoured XXXXX

Supplies of XXXXX that are fruit flavoured are also subject to the exception in paragraph 1(d) of Part III of Schedule VI. This paragraph excludes from zero-rating, the supply of non-carbonated fruit juice or fruit-flavoured beverages, other than milk-based beverages, that contain less than 25% by volume of

(i) a natural fruit juice or combination of natural fruit juices, or

(ii) a natural fruit juice or combination of natural fruit juices that have been reconstituted into the original state,

or goods that, when added to water, produce a beverage, noted above.

As discussed in paragraph 20 of GST/HST Memoranda Series 4.3, a product will qualify as a milk-based beverage if it has milk as a main ingredient. The term milk refers to whole, skimmed and partly skimmed milk. Where XXXXX contains modified milk ingredients, these are not considered "milk" for ETA purposes and as such, XXXXX is not a milk-based beverage.

Therefore, where XXXXX is a fruit flavoured beverage with less than 25% natural fruit juice, it will be excluded from zero-rating under paragraph 1(d) of Part III of Schedule VI and will be taxable at 6% GST or 14% HST as applicable.

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 306-975-6214.

Yours truly,

Cheryl McKenzie
Goods Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate

2007/07/31 — RITS 95599 — [Application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) and January 26, 2007 Proposed Amendments Relating to Qualified Institutions]

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

Excise and GST/HST Rulings Directorate Place de Ville, Tower A, 15th floor 320 Queen Street, Ottawa K1A 0L5	XXXXX XXXXX XXXXX XXXXX
	Case Number: 88383
XXXXX XXXXX	September 20, 2007

Subject:

GST/HST INTERPRETATION XXXXX

Dear XXXXX:

XXXXX

Thank you for your XXXXX concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the XXXXX Pension Plans.

All legislative references are to the Excise Tax Act (ETA) and the regulations thereunder, unless otherwise specified.

We understand that you are doing the accounting for the XXXXX pension plan. Your plan is a single employer company pension plan with both defined benefit and defined contribution components.

Interpretation Requested

You would like some guidance on the claiming of Input Tax Credits (ITCs) in relation to the XXXXX pension plan.

Interpretation Given

As discussed with you in our telephone conversation XXXXX, without all the facts and documentation outlining the XXXXX pension plan arrangement we are unable to give any specific guidance to you. However, we can give you the following general information that may be of assistance to you in determining the eligibility for ITCs of the persons involved in the pension plan.

Although a pension plan is subject to the requirements of federal or provincial pension legislation, a pension plan is not a legal entity and it is not a person for GST/HST purposes. However, pursuant to the definition of "person" in subsection 123(1) of the ETA, a trust is a person. Therefore, for GST/HST purposes where a pension plan trust is established under a pension plan, the trust is a separate person and is subject to the obligations and entitlements of the ETA as a person.

Claiming ITCs for pension plans expenses

The ETA sets out the methods for determining the amount that is claimable as an ITC and the circumstances and conditions that must exist before an ITC can be claimed. A person may be able to claim an ITC with respect to property or a service if all the following criteria are met:

•   the property or service must be acquired, imported or brought into a participating province by a person for consumption, use or supply in the course of the person's commercial activities;

•   the person must be a registrant during the reporting period in which the GST/HST on the property or service becomes payable by the person or is paid without having become payable;

•   the person must have obtained sufficient documentary evidence to substantiate the ITC prior to making the claim in a GST/HST return;

•   tax must be payable by the person in respect of the supply, importation or bringing in, or be properly paid by the person prior to its becoming payable; and

•   the ITC must be claimed in a return filed within the time limit for claiming the ITC.

Generally, where a supply is made in respect of property or a service and the supplier issues the invoice to a pension plan trust the property or service is acquired for consumption, use or supply by the pension plan trust established in respect of the plan.

Pension plan trusts are generally engaged in the making of supplies of financial services as defined in the definition of "financial service" in subsection 123(1) of the ETA (e.g. the investment of funds, the payments of benefits to plan members, etc.). By virtue of Part VII of Schedule V to the ETA, a supply of a financial service is exempt unless the supply falls within Part IX of Schedule VI, in which case it would be a zero-rated supply.

If a pension plan trust is engaged in commercial activities (for example, as lessor of real property) it will be entitled to claim input tax credits to the extent property or services are acquired by the pension plan trust for consumption, use or supply in the course of commercial activities of the trust and all the requirements under section 169 of the ETA are met in order to claim input tax credits. Otherwise, the trust may not claim any input tax credits in respect of property or services acquired.

Generally, a particular property or service is acquired for consumption, use or supply in the course of an employer's activities where the employer is the person liable to pay the consideration for the supply under the agreement for the supply.

Where the employer invoices the trust in respect of property or services supplied in relation to the pension plan, and the trust pays the invoice from the trust assets, generally, the amount is consideration for a taxable supply made by the employer to the trust. The employer is supplying or re-supplying property or services to the trust.

The exception to this situation is where the employer has acquired property or services from a third party in a fiduciary capacity, for example, as administrator of, and for the benefit of, the pension plan trust. Where the employer acquires a particular property or a service from a third party on behalf of the trust and the trust pays for the supply directly, or indirectly by reimbursing the employer for the property or service, it is considered to have been acquired by the pension plan trust, and therefore for consumption, use or supply by the trust. The employer is not considered to have acquired the property or service for consumption use or supply in the course of its commercial activities and is not entitled to an input tax credit in respect of the tax paid on the consideration for the supply.

For example, if an employer contracts with an investment manager for its services and under the pension plan arrangement the trust pays for the investment advice regarding the plan trust assets the employer will not be entitled to claim an ITC for the GST/HST paid on the supply of the investment management services. If the employer pays the invoice, the result will be the same. Pursuant to paragraph 169(1)(c), the employer would be eligible for ITCs only with respect to supplies that it acquires for "consumption, use or supply in the course of commercial activities of the person." Since the services normally relate to the assets owned by the pension plan trust and are acquired for consumption or use by the pension plan trust to invest pension plan assets, the requirement under section 169 of the ETA would not be met.

Where an employer acquires property or services for the benefit of the pension plan trust, pays for the supply and is reimbursed by the trust, the reimbursement is generally not consideration for a supply and is not subject to GST/HST.

Accounting for GST/HST in relation to pension plan expenses - Technical Interpretation Bulletin B-032R Registered Pension Plans

The Canada Revenue Agency currently has an administrative policy outlined in Technical Interpretation Bulletin B-032R entitled "Registered Pension Plans". A registrant may apply the provisions of the administrative policy in accounting for GST/HST in relation to pension plan expenses provided the registrant does so on a consistent basis otherwise the above legislative interpretation of the ETA must be applied. The bulletin has been enclosed for your convenience. You should be aware that the Canada Revenue Agency is currently reviewing its policy on the application of the GST/HST to the operation of pension plans.

The foregoing comments represent our general views with respect to the subject matter of your request. These comments are not rulings and, in accordance with the guidelines set out in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service, do not bind the Canada Revenue Agency with respect to a particular situation. Future changes to the ETA, regulations, or our interpretative policy could affect this interpretation.

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613 952 9220.

Yours truly,

Larry Springstead
Specialty Tax Unit
Financial Institutions and Real Property Division
Excise and GST/HST Rulings Directorate

2007/09/28 — RITS 92521 — B-032R Registered Pension Plans

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

Excise and GST/HST Rulings Directorate Place de Ville, Tower A, 15th floor 320 Queen Street Ottawa ON K1A 0L5	XXXXX XXXXX XXXXX XXXXX
XXXXX: XXXXX XXXXX	Case Number: 92317
	October 19, 2007

Subject:

GST/HST INTERPRETATION FCTIP Rebate for Accommodation

Dear XXXXX:

Thank you for your XXXXX, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to supplies of accommodation in Canada purchased by XXXXX (the Company).

All legislative references are to the Excise Tax Act (ETA) and the regulations thereunder, unless otherwise specified.

Statement of Facts

We understand that the Company is a XXXXX-based tour receptive company that purchases accommodation in various cities and locations in Canada. These accommodations are either offered for sale as part of a package assembled by the Company or are offered for sale by the Company's parent company XXXXX (the Parent Company).

The Company is a separate entity from the Parent Company, and it sells both accommodation and assembled packages to the Parent Company. Neither the Company nor the Parent Company are registered for GST/HST.

For the XXXXX, the Company facilitates all aspects of the tour in Canada, including hotels and guide services. The Company offers city tours through this business line. The Company sells the city tours to the Parent Company, which the Parent Company sells to non-resident individuals.

For the XXXXX, the Company sells the elements of a package to the Parent Company, which in turn offers them to individual clients in XXXXX. The clients create their own packages by choosing their preferred hotel and services as part of the Parent Company's XXXXX. For example, clients can select their choice of accommodation, transfers and tours at the time of reservation. The client pays the Parent Company in XXXXX for the entire package, and the Company receives payment from the Parent Company for any accommodation and services that have been booked through the Company. The Company invoices the Parent Company for the supplies that the Company makes to the Parent Company.

The Company has to retain original invoices with their proof of payment for XXXXX purposes.

The Company has also purchased accommodation that falls under the grandfathering clause for the Visitor Rebate Program (VRP), with contracts signed prior to September 25, 2006, and the eligible accommodation being made available prior to April 2009.

Interpretation Requested

You would like to know if the Company qualifies for a rebate under the new Foreign Convention and Tour Incentive Program (FCTIP) for the GST/HST paid on accommodation if the Company booked the accommodation, but non-resident clients put together their own package with services through the Parent Company.

You have also requested clarification about the timing and documentary requirements for supporting a rebate claim under FCTIP, and direction on handling invoices that relate to accommodation supplied under the VRP but received for the period starting after April 1, 2007, where a hotel has not deducted the amount of the rebate from its invoice.

Interpretation Given

Based on the information provided, where non-resident clients put together their own package through the Parent Company, the GST/HST paid on accommodation purchased by the Company and sold to the Parent Company would not qualify for a rebate under the FCTIP.

On September 25, 2006, the Government of Canada announced the cancellation of the VRP effective April 1, 2007. Budget 2007 confirmed the cancellation of the VRP and introduced the new FCTIP as its replacement. The legislative amendments received Royal Assent on June 22, 2007. Among other provisions, the FCTIP provides a GST/HST rebate to non-GST/HST-registered non-resident tour operators that purchase tour packages that include short-term and/or camping accommodation, or that purchase short-term and/or camping accommodation in Canada for resale to non-residents as part of a tour package, under certain conditions.

A non-GST/HST-registered non-resident tour operator that bought short-term and/or camping accommodation in Canada will be entitled to a rebate of the GST/HST paid on the accommodation if:

•   the tour operator bought the short-term and/or camping accommodation in Canada in the ordinary course of its business and resold it as part of an eligible tour package;

•   the tour operator sold the eligible tour package to another non-resident and payment for the sale of that tour package was made at a place outside Canada where the tour operator or its agent was conducting business; and

•   the short-term and/or camping accommodation included in the eligible tour package was made available to a non-resident individual.

Under the FCTIP, an eligible tour package must include short-term and/or camping accommodation and at least one service, and it must be sold for an all-inclusive price.

The Company is a non-GST/HST-registered non-resident tour operator and the accommodation that the Company purchases from hotels in Canada is short-term accommodation under the ETA. However, the Company would not qualify for a rebate with respect to accommodation that it sells to the Parent Company separately, as the requirement that the accommodation is resold in an eligible tour package by the Company would not be met.

Therefore, where non-resident clients put together their own tour package through the Parent Company, the accommodation purchased by the Company and sold to the Parent Company will not qualify for the rebate.

The Company is eligible for a rebate with respect to accommodation that the Company resells as part of an eligible tour package provided it meets all the other eligibility requirements. However, under the FCTIP, a registrant supplier cannot pay or credit the rebate amount with respect to supplies of accommodation.

A non-GST/HST-registered non-resident tour operator must file a rebate application for the rebate within one year after the last day any tax to which the rebate relates became payable using Form GST115, GST/HST Rebate Application for Tour Packages (copy enclosed, also available from the CRA Web site at http://www.cra-arc.gc.ca/E/pbg/gf/gst115/README.html). At the time the application is made, the person must be a non-resident to qualify for the rebate, and the total of the taxable (at 6%/14%) consideration for supplies of accommodation included in the rebate application must be at least $200. The Company may include one or more supplies of accommodation in a rebate claim, as long as the total consideration for taxable (at 6%/14%) supplies of accommodation totals $200 or more. These conditions apply to both the FCTIP and the old VRP.

As indicated on Form GST115, when a non-resident tour operator provides invoices or receipts as part of the proof that the tour operator is eligible for a rebate, those invoices or receipts must be the original invoices or receipts. However, the receipts will be returned to the tour operator once the rebate has been processed.

A non-resident tour operator is required to maintain additional documentation to support its eligibility for the rebate (e.g., a list of names and addresses of the clients who purchased tour packages from the tour operator). The supporting documentation must be kept in Canada, unless the non-resident gets permission to keep the records at a place outside Canada. Non-resident tour operators must write to a Canada Revenue Agency (CRA) Tax Services Office to get permission to keep their supporting documents at a place outside Canada.

Generally, the new FCTIP applies to purchases of short-term and/or camping accommodation resold as part of an eligible tour package made by non-resident non-GST/HST-registered tour operators when the first night of short-term or camping accommodation in Canada is after March 2007. However, the rules under the former VRP with respect to the rebate of the GST/HST continue to apply if the short-term and/or camping accommodation was purchased under an agreement in writing entered into before September 25, 2006, and the first night of short-term or camping accommodation in Canada is made available before April 2009. The VRP also continues to apply to accommodation made available after March 2007 if it is part of a continuous accommodation at the same facility that started before April 1, 2007.

Under the VRP, a rebate was available for the tax paid on accommodation purchased by a non-GST/HST-registered non-resident. Where the non-resident acquired the accommodation for supply in the ordinary course of a business of the non-resident of making such supplies, the non-resident would be eligible for a rebate if a supply of the accommodation was made to another non-resident person and payment of the consideration for that supply was made at a place outside Canada at which the supplier, or an agent of the supplier, conducted business, and the accommodation was made available to a non-resident individual.

Under the transitional rules for the VRP, the Company may be eligible for a rebate with respect to the accommodation that it resells to the Parent Company, if the accommodation was supplied to the Company under a written agreement entered into before September 25, 2006, and the accommodation is first made available before April 2009, or if the accommodation is part of a continuous accommodation at the same facility that started before April 1, 2007.

A registrant supplier can pay or credit the rebate amount to a non-resident tour operator in respect of supplies of accommodation under the VRP if the tour operator provides sufficient evidence to the supplier to prove that it would be entitled to the rebate if it had paid the tax and filed a claim with the CRA.

This evidence would include proof that the accommodation was acquired for supply in the ordinary course of a business of the tour operator of making such supplies, a supply of the accommodation was made to another non-resident person and payment of the consideration for that supply was made at a place outside Canada at which the tour operator, or an agent of the tour operator, conducted business, and that the accommodation was made available to a non-resident individual.

Where the supplier chooses not to pay or credit the rebate amount to the tour operator under the transitional rules, the tour operator may claim the rebate from the CRA by filing Form GST177, Refund Application for Non-Resident Travel Organizers (copy enclosed, also available from the CRA Web site at http://www.cra-arc.gc.ca/E/pbg/gf/gst177/README.html). The tour operator will have to provide documentation to support its claim, including the original receipts or invoices showing the tax paid and a copy of the written agreement or a CRA GST/HST ruling letter. These receipts will be returned.

We have also enclosed a copy of GST/HST Notice 221, Questions and Answers on the Cancellation of the Visitor Rebate Program and the Implementation of the New Foreign Convention and Tour Incentive Program, for your information.

The foregoing comments represent our general views with respect to the subject matter of your request. These comments are not rulings and, in accordance with the guidelines set out in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service, do not bind the CRA with respect to a particular situation. Future changes to the ETA, regulations, or our interpretative policy could affect this interpretation.

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at (613) 952-7909. 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,

Jacqueline Russell, CGA
Services and Intangibles Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate

2007/10/19 — RITS 93132 — Foreign Convention and Tour Incentive Program

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

Excise and GST/HST Rulings Directorate Place de Ville, Tower A, 16th floor 320 Queen Street Ottawa ON K1A 0L5	XXXXX XXXXX XXXXX XXXXX
XXXXX	Case Number: 97231
	November 29, 2007

XXXXX:

Subject:

GST/HST RULING – Tax status of XXXXX

Thank you for your letter XXXXX concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the supply of XXXXX (the Product).

All legislative references are to the Excise Tax Act (ETA) and the regulations thereunder, unless otherwise specified.

Effective January 1, 2008, the rate of the GST will be reduced from 6% to 5% and the rate of the HST from 14% to 13%. The new rates will apply to supplies for which the GST/HST is paid on or after January 1, 2008, without having become payable before that date. Specific transitional rules will apply to certain supplies, for example, real property. For more information on the transitional rules for the reduction of the GST/HST rate, please refer to GST/HST Notice 226, Proposed GST/HST Rate Reduction in 2008 on the CRA Web site at www.cra-arc.gc.ca/E/pub/gi/notice226/README.html.

Statement of Facts

We understand the facts to be as follows:

1. The Product is sold in XXXXX.

2. The net weight of the Product indicated on the package is XXXXX g.

3. The ingredients of the Product are XXXXX.

4. The Product is labelled as XXXXX.

5. Most of the labelling on the packaging is XXXXX.

6. No directions for eating the Product were evident on the packaging, however the picture on the label shows XXXXX.

7. The Product is ready for immediate consumption, however it could be heated.

8. The Product is advertised XXXXXXXXX as a dessert. The Product was advertised in XXXXX as a dessert.

9. The Product is very sweet and generally too chunky to be consumed as a drink.

Ruling Requested

You would like to know how the GST/HST applies to supplies of the Product.

Ruling Given

Based on the facts set out above, we rule that the supplies of the Product are zero-rated (taxable at the rate of 0%) pursuant to Section 1 of Part III of Schedule VI.

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

Section 1 of Part III of Schedule VI zero-rates supplies of food or beverages for human consumption ("basic groceries") and sweetening agents, seasonings and other ingredients mixed with or used in the preparation of such foods or beverages, unless one of the exceptions set out in paragraphs 1(a) through 1(r) applies.

Paragraph 1(n) of Part III of Schedule VI excludes from zero-rating the supply of beverages (other than unflavoured milk) or pudding, including flavoured gelatine, mousse, flavoured whipped dessert product or any other products similar to pudding, unless one of the exceptions set out in subparagraphs 1(n)(i) through 1(n)(iii) applies.

The terms "food" and "beverage" are not defined in the ETA. However, the CRA considers a product to be a food or beverage if an average consumer would recognize and purchase the product as such in the ordinary course of buying basic groceries. Consumers usually consume food and beverages to sustain or maintain life, to allay hunger or thirst, or for enjoyment rather than for therapeutic or preventative effects (e.g., to correct actual or perceived health problems) or to achieve specific beneficial benefits related to performance or physique.

The CRA's approach is based on the views of an "average consumer". As a result, individual preferences for, or dislikes of, certain products would not alter the general perception that a product was, or was not, a food or beverage. In this case, we do not consider the Product to be classified as a beverage as the Product has been advertised by the manufacturer and by the merchandiser as a dessert. While the word XXXXX is included in the labelling of the Product, the Product is intended to be eaten with a spoon, XXXXX.

As the Product has been advertised and would be viewed by the average consumer as a dessert, consideration was given to the Product being included in "other products similar to pudding". The definition of pudding is a dessert of a soft, spongy, or thick creamy consistency. While the product is considered to be a dessert, the consistency of the Product is more of a wet, watery fluid than a soft, spongy, thick creamy substance. The Product would therefore not be considered to be included in "other products similar to pudding".

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-952-9218. 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,

Michelle McCrae
Goods Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate

2007/11/29 — RITS 97232 — Tax Status of [Dessert Products Not "Similar to Pudding"]

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

Excise and GST/HST Rulings Directorate Place de Ville, Tower A, 15th floor 320 Queen Street Ottawa ON K1A 0L5	XXXXX XXXXX XXXXX XXXXX XXXXX
XXXXX XXXXX XXXXX	Case Number: 95667
	October 31, 2007

XXXXX:

Subject:

GST/HST INTERPRETATION Tour Packages

Thank you for your XXXXX concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to tour packages. We apologize for the delay in responding to your enquiry.

Please note that all publications and forms referenced in this letter are available on our Web site at www.cra-arc.gc.ca.

We understand the following:

•   XXXXX (the Company) is a non-resident tour operator that is not registered for GST/HST purposes.

•   The Company has an office (i.e., a permanent establishment) in XXXXX from which it conducts its travel business.

•   The Company sells tour packages to non-residents XXXXX at an all-inclusive price for a skiing vacation in Canada.

•   The Company's tour packages may include:

–   accommodation;

–   ski lift passes;

–   ski lessons;

–   ski guides;

–   transfers (i.e., Airport or mountain); and

–   international and domestic air travel.

•   The Company has XXXXX to pay its Canadian suppliers. XXXXX does not sell ski packages to Canadians nor does it have a permanent establishment in Canada.

Interpretation Requested

•   Are the Company's tour packages eligible for a GST/HST rebate (the Rebate) under the Foreign Convention and Tour Incentive Program (the FCTIP)? If yes, what is the mechanism for obtaining a Rebate?

•   Is the Company required to register for GST/HST? Can the Company register voluntarily for GST/HST? What is the registration process?

Interpretation Given

Rebates on eligible tour packages under the FCTIP:

Overview:

The FCTIP, a new rebate program that replaces the Visitor Rebate Program (VRP), came into effect April 1, 2007. The FCTIP continues to provide GST/HST relief to non-residents for:

•   all of the GST/HST paid on accommodation sold to non-resident tour operators that are not registered for the GST/HST and that include the accommodation in eligible tour packages for non-residents, and

•   generally 50% of the GST/HST paid on eligible tour packages that are sold to non-resident consumers and non-resident organizations or businesses that are not registered for the GST/HST, including tour operators.

It also continues to provide relief for certain properties and/or services used in the course of conventions held in Canada.

We have recently published GST/HST Notice No. 221, Questions and Answers on the Cancellation of the Visitor Rebate Program and the Implementation of the New Foreign Convention and Tour Incentive Program (the Notice), which is a comprehensive series of questions and answers on the elimination of the VRP and the introduction of the new FCTIP. Reference to the relevant questions and answers from the Notice will be made where applicable in this interpretation.

A tour operator, for GST/HST purposes, means a supplier of a tour package and may include persons such as outfitters and lodge owners. This definition does not include a travel agent acting on behalf of a tour operator. See the answer to Question 2.7 in the Notice for additional information.

Definition of Tour Package:

The definition of a tour package is the same under the new FCTIP as it was under the previous VRP.

A tour package for GST/HST purposes is:

"a combination of two or more services, or of property and services, that includes transportation services, accommodation, a right to use a campground or trailer park, or guide or interpreter services, where the property and services are supplied together for an all-inclusive price, but does not include a tour package that includes a convention facility or related convention supplies".

Because of this definition, a tour package cannot consist solely of property for GST/HST purposes. Therefore, a package that includes accommodation, which is property, and other property, is not a tour package for GST/HST purposes.

Furthermore, for a tour package to be eligible for a GST/HST rebate under the FCTIP it must include short-term and/or camping accommodation in Canada. Given that short-term and/or camping accommodation in Canada is property, the package must also include at least one service in order to be an eligible tour package under the FCTIP.

The definition of tour package and related terms as well as examples can be found in the Notice starting with Question 3.1.

Eligible Accommodation:

"Eligible" accommodation for the purposes of the FCTIP is short-term accommodation and camping accommodation.

Short-term accommodation means the rental of an accommodation unit in Canada as a place of lodging for an individual who will occupy it continuously for a period of less than one month and that costs more than $20 per night.

Specifically included in the definition for rebate purposes under the FCTIP is any type of overnight shelter that is part of a tour package that also includes food and the services of a guide. Specifically excluded is shelter on a train, trailer, boat or structure that is, or could be, self-propelled and the rental of an accommodation unit under a timeshare arrangement.

Camping accommodation means a campsite at a campground or recreational trailer park in Canada that is rented continuously as a place of lodging for periods of less than one month for the same individual. It includes water, electricity and waste disposal services if accessed by means of an outlet or hook-up at the campsite, and if supplied with the campsite.

Accommodation that does not meet the definition of either short-term accommodation or camping accommodation, such as accommodation outside of Canada, is not "eligible" accommodation for rebate purposes under the FCTIP. These definitions are also provided in the answers to Questions 3.3 and 3.4 in the Notice.

Characterization of Items as Property or Service:

A service means anything other than property, money, and anything that is provided to an employer by an employee in the course of employment. Some examples of services include:

•   guide (e.g., ski guide) or interpreter services;

•   transportation services (i.e., air travel);

•   sightseeing excursions; and

•   ski lessons.

See the answer to Question 3.5 in the Notice.

The following do not qualify as services as they are property:

•   short-term and camping accommodation;

•   meals;

•   a right to enter or attend an event, such as tickets to a show or a hockey game;

•   car rentals;

•   ski rentals;

•   ski lift passes; and

•   park passes.

Note that property means any type of property and includes goods and a right or interest of any kind but does not include money. See the answer to Question 3.6 in the Notice.

Generally, an all-inclusive price means a single price for all property and services sold together in a package. See the answer to Question 3.7 in the Notice for additional information.

Examples of tour packages are provided in the Notice starting at Question 3.8.

Eligibility for the Rebate:

The Company may be eligible for a Rebate if:

•   it purchased an eligible tour package (that includes short-term accommodation or camping accommodation) in Canada for sale in the ordinary course of its business of selling tour packages if eligible as detailed in the answer to Question 4.2 in the Notice; or

•   it purchased short-term accommodation (and/or camping accommodation) in Canada and sold it as part of an eligible tour package in the ordinary course of its business of selling tour packages that include the accommodation.

In addition to the above, the Company must meet the following conditions to qualify for the Rebate:

•   It sold the eligible tour packages to another non-resident person such as individuals or companies.

•   It made the short-term and/or camping accommodation (included in the tour package) available to a non-resident individual.

•   It received payments for its sales of tour packages at a place outside Canada at which it, or its agent, conducted business. Two factors that the Canada Revenue Agency (the CRA) would consider when determining if this criterion is met are where the payment is processed and where the payment is deposited.

•   It was invoiced a minimum totalling $200 for the cost of short-term and/or camping accommodation for which tax was charged.

•   It applied to the CRA for a Rebate within one year after the last day any tax to which the Rebate relates became payable. Generally, the day the tax became payable is the day the amount due was paid, or the date of the invoice, whichever comes first.

Note that these conditions are listed in the Notice starting at Question 5.1.

Calculating the Rebate Amount:

If the Company is eligible to claim a Rebate in respect of the tax paid on an eligible tour package it purchased and resold, it can claim a Rebate for part of the tax it paid on the tour package. However, if the Company received the amount of the Rebate directly from its Canadian supplier, it cannot apply to the CRA for a Rebate of that amount.

The Rebate for an eligible tour package is generally equal to 50% of the GST/HST paid on the package. The Rebate calculation is based on the number of nights of short-term and/or camping accommodation in Canada included in the package. However, the Rebate is reduced if there is ineligible accommodation provided in Canada included such as accommodation on a boat or train. For more details on calculating the Rebate amount, see Questions starting at 6.1 in the Notice.

If the Company is eligible to claim a Rebate for the tax paid on short-term accommodation it purchased and resold as part of an eligible tour package, it can claim a Rebate for the amount of GST/HST that it paid on the accommodation.

The Company may claim the Rebate on form GST 115, GST/HST Rebate Application for Tour Packages. The following documents must be sent with the Rebate claim:

•   original invoices showing the GST/HST the Company paid; and

•   itineraries or detailed descriptions for the eligible tour packages (group and individual).

The Company must also keep the following documents in its records and make them available if requested:

•   a list of names and addresses of the non-residents who purchased the tour packages;

•   the name(s) of the agent(s) through whom it sold the tour packages (if applicable);

•   copies of the original invoices issued to its clients; and

•   a list of the names and addresses of the non-resident individuals who stayed in the accommodation.

The CRA may accept other types of documents if those other documents allow us to confirm whether the eligibility requirements are met.

The information demonstrating that the eligibility requirements have been met could be on separate documents. Alternatively, all of the necessary information could be contained in only one or two documents. These could include electronic documents capable of being rendered into writing. For more information on books and records, see GST/HST Memorandum 15.1, General Requirements for Books and Records.

In addition, the Company must request permission from its tax services office to keep its records (relating to its rebate claims) outside Canada. For details about the request, see the section entitled "Books and Records" on page 12 of our GST/HST guide RC4027, Doing Business in Canada – GST/HST Information for Non-Residents.

Please note that the Company cannot apply to the CRA to have its GST/HST rebates deposited directly into its bank account.

Requirement to Register for GST/HST:

Every person who makes a taxable supply in Canada in the course of a commercial activity engaged in by the person in Canada must register for the GST/HST, except where:

•   the person is a small supplier (i.e., annual worldwide taxable sales, including those of the person's associates, do not exceed $30,000);

•   the only commercial activity of the person is the making of supplies of real property by way of sale otherwise than in the course of a business; or

•   the person is a non-resident person who does not carry on any business in Canada.

Whether a particular non-resident person is carrying on business in Canada is a question requiring consideration of all the relevant facts. The factors that will be considered in determining whether a non-resident person is carrying on business in Canada for GST/HST purposes in a particular situation include:

•   the place where agents or employees of the non-resident are located;

•   the place of delivery;

•   the place of payment;

•   the place where purchases are made or assets are acquired;

•   the place from which transactions are solicited;

•   the location of assets or an inventory of goods;

•   the place where the business contracts are made;

•   the location of a bank account;

•   the place where the non-resident's name and business are listed in a directory;

•   the location of a branch or office;

•   the place where the service is performed; and

•   the place of manufacture or production.

The importance or relevance of a given factor in a specific case depends upon the nature of the business activity under review and the facts and circumstances of each case. Generally, a non-resident person must have a significant presence in Canada to be considered to be carrying on business in Canada.

Based on the information provided, the Company does not appear to be carrying on business in Canada, and therefore the Company is not required to register for the GST/HST. There are no factors in this case to support a conclusion that the Company is carrying on business in Canada for GST/HST purposes. In particular, the Company does not sell ski packages to Canadians nor does it have a permanent establishment in Canada.

Even if a person does not have to register for GST/HST (i.e., because the person does not carry on business in Canada), the person may choose to register voluntarily if:

•   The person is engaged in a commercial activity in Canada. This would include small suppliers or a non-resident who, while not carrying on business in Canada, is engaged in an adventure or concern in the nature of trade in Canada.

•   The person is a non-resident person who in the ordinary course of carrying on a business outside Canada:

–   regularly solicits orders for the supply by the person of goods for export to or delivery in Canada even though those activities may not constitute the carrying on of business in Canada.

–   has entered into an agreement for the supply by the person of:

•   services to be performed in Canada, or

•   intangible personal property that is to be used in Canada, or that relates to:

•     real property situated in Canada,

•     tangible personal property ordinarily situated in Canada, or

•     services to be performed in Canada.

In our opinion, the Company is entitled to register voluntarily for GST/HST.

If the Company Chooses to Register for GST/HST:

Application of GST/HST on Tour Packages:

While the Company does not have to register, it may choose to register voluntarily. Generally, as a GST/HST registrant (i.e., a person that is registered or has to be registered for GST/HST), the Company would have to collect GST/HST on all its taxable (other than zero-rated) supplies of goods and services that it makes to its customers. For example, if the Company becomes a registrant and sells a tour package for a skiing vacation in Canada to a resident of XXXXX, this sale is treated as being made in Canada. Note that the Company has to stay registered for at least one year before it can ask the CRA to cancel its registration.

There are special rules for taxable supplies of tour packages. For details and for examples on how to account for tax on tour packages, see the section entitled "Tour Operators" starting on page 16 of our GST/HST guide RC4036, GST/HST Information for the Travel and Convention Industry.

Input Tax Credits:

Registered tour operators may recover the GST/HST that they pay or owe to their suppliers by claiming ITCs on their tax return. For further details on claiming ITCs, see the section entitled "Calculating GST/HST" on page 8 of the GST/HST guide RC4027.

Paying or Crediting a Rebate under the FCTIP:

For information on how a registrant supplier, such as a tour operator, may pay or credit an amount on account of the rebate to a qualifying non-resident, see Questions 7.1 to 7.12 in the Notice.

Business Number:

If the Company chooses to register for GST/HST, see the section entitled "Business Number" on page 8 of the GST/HST guide RC4027 for details on how to proceed with registration.

Security Deposit:

Since the Company does not have a permanent establishment in Canada, it must provide the CRA with security when it applies to be registered for GST/HST. See the section entitled "Security Deposit" on page 8 of the GST/HST guide RC4027.

Please note that if the XXXXX issues a bond on behalf of the Company, this is an acceptable form of security provided that all of the conditions under the bond requirements are met.

Books and Records:

Every person who is required to file a tax return for GST/HST purposes should keep records in English or French in Canada. Otherwise, the Company must request permission from its tax services office to keep its records (relating to its tax returns) outside Canada. For details about the request, see the section entitled "Books and Records" on page 12 of our GST/HST guide RC4027.

Filing your GST/HST returns:

When you register for GST/HST, the CRA gives you a reporting period for filing your GST/HST returns and remitting your payments. For details on how your Company's reporting period would be determined, see the section entitled "Filing Your GST/HST Returns – Reporting Periods" on page 11 of our GST/HST guide RC4027.

Direct Deposit:

If the Company obtains a Business Number and it expects to receive refunds or rebates when it files its GST/HST returns, it can complete and send in form GST 469, Direct Deposit Request, to ask the CRA to deposit the refunds or rebates directly to its bank account.

The foregoing comments represent our general views with respect to the subject matter of your request. These comments are not rulings and, in accordance with the guidelines set out in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service, do not bind the CRA with respect to a particular situation. Future changes to the Excise Tax Act, regulations, or our interpretative policy could affect this interpretation.

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-954-9700. Should you have additional questions on the interpretation and application of GST/HST, please contact the Vancouver tax services office at 1-604-691-4308.

Yours truly,

Michèle Routhier
GST/HST Rulings Officer
Services and Intangibles Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate

2007/11/06 — RITS 95869 — XXXXX – Employer Expenses Relating to Pension Plan Trusts and TIB-032R

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

Excise and GST/HST Rulings Directorate Place de Ville, Tower A, 16th floor 320 Queen Street Ottawa ON K1A 0L5	XXXXX.XXXXX XXXXX XXXXX
XXXXX	Case Number: 97230
	November 29, 2007

XXXXX:

Subject:

GST/HST RULING – Tax status of XXXXX

Thank you for your letter XXXXX concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the supply of XXXXX (the Product).

All legislative references are to the Excise Tax Act (ETA) and the regulations thereunder, unless otherwise specified.

Effective January 1, 2008, the rate of the GST will be reduced from 6% to 5% and the rate of the HST from 14% to 13%. The new rates will apply to supplies for which the GST/HST is paid on or after January 1, 2008, without having become payable before that date. Specific transitional rules will apply to certain supplies, for example, real property. For more information on the transitional rules for the reduction of the GST/HST rate, please refer to GST/HST Notice 226, Proposed GST/HST Rate Reduction in 2008 on the CRA Web site at www.cra-arc.gc.ca/E/pub/gi/notice226/README.html.

Statement of Facts

We understand the facts to be as follows:

1. The Product is sold in XXXXX.

2. The net weight of the Product indicated on the package is XXXXX g.

3. The ingredients of the Product are XXXXX.

4. The Product is labelled as XXXXX.

5. Most of the labelling on the packaging is XXXXX, XXXXX

6. No directions for eating the product were evident on the packaging, however the picture on the label shows XXXXX.

7. The Product is ready for immediate consumption, however it could be heated.

8. The Product is advertised XXXXX as a dessert. The Product was advertised in a XXXXX as a dessert.

9. The Product includes a significant amount of fluid and pieces of soft solids consisting of XXXXX and XXXXX.

10. The product is very sweet and generally too chunky to be consumed as a drink.

Ruling Requested

You would like to know how the GST/HST applies to supplies of the Product.

Ruling Given

Based on the facts set out above, we rule that the supplies of the Product are zero-rated (taxable at the rate of 0%) pursuant to Section 1 of Part III of Schedule VI.

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

Section 1 of Part III of Schedule VI zero-rates supplies of food or beverages for human consumption ("basic groceries") and sweetening agents, seasonings and other ingredients mixed with or used in the preparation of such foods or beverages, unless one of the exceptions set out in paragraphs 1(a) through 1(r) applies.

Paragraph 1(n) of Part III of Schedule VI excludes from zero-rating the supply of beverages (other than unflavoured milk) or pudding, including flavoured gelatine, mousse, flavoured whipped dessert product or any other products similar to pudding, unless one of the exceptions set out in subparagraphs 1(n)(i) through 1(n)(iii) applies.

The terms "food" and "beverage" are not defined in the ETA. However, the CRA considers a product to be a food or beverage if an average consumer would recognize and purchase the product as such in the ordinary course of buying basic groceries. Consumers usually consume food and beverages to sustain or maintain life, to allay hunger or thirst, or for enjoyment rather than for therapeutic or preventative effects (e.g., to correct actual or perceived health problems) or to achieve specific beneficial benefits related to performance or physique.

The CRA's approach is based on the views of an "average consumer". As a result, individual preferences for, or dislikes of, certain products would not alter the general perception that a product was, or was not, a food or beverage. In this case, we do not consider the Product to be classified as a beverage as the Product has been advertised by the manufacturer and by the merchandiser as a dessert. It is intended that the Product be eaten with a spoon, XXXXX.

As the Product has been advertised and would be viewed by the average consumer as a dessert, consideration was given to the Product being included in "other products similar to pudding". The definition of pudding is a dessert of a soft, spongy, or thick creamy consistency. While the product is considered to be a dessert, the consistency of the Product is more of a wet, watery fluid than a soft, spongy, thick creamy substance. The Product would therefore not be considered to be included in "other products similar to pudding".

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-952-9218. 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,

Michelle McCrae
Goods Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate

2007/11/29 — RITS 97231 — Tax Status of [Dessert Products Not "Similar to Pudding"]

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

Excise and GST/HST Rulings Directorate Place de Ville, Tower A, 15th floor 320 Queen Street Ottawa ON K1A 0L5	XXXXX XXXXX XXXXX
XXXXX	Case Number: 85659
XXXXX	November 16, 2007

Subject:

GST/HST INTERPRETATION Policy Statement P-248, Example 6

Thank you for your letter XXXXX concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the tax status of independent assessments performed by practitioners when these practitioners form themselves into a partnership.

All legislative references are to the Excise Tax Act (ETA) and the regulations thereunder, unless otherwise specified.

Interpretation Requested

Concerning P-248, The Application of the GST/HST to the Supply of an Independent Medical Examination ("IME") and to Other Independent Assessments, example 6, you would like to know would the results in example 6 be different if the practitioners in the example were psychologists and the "clinic" were a "partnership". In other words, if an individual, who is a "practitioner" as defined by section 1, Part II, Schedule V to the Act, is also a partner in a "partnership", do the provisions of subsection 272.1(1) permit the "partnership" to make supplies that are exempt under section 7 of Part II of Schedule V?

Interpretation Given

The qualifications for a "practitioner" as set out in section 1 of Part II of Schedule V to the Act are such that they can only be held by an individual. It is not possible for a partnership itself to meet the requirements of being a practitioner. Consequently, only individuals who are practitioners can make supplies that qualify for the exemption under section 7 of Part II of Schedule V to the Act. The deeming provision of subsection 272.1(1) to the effect that "anything done by a person as a member of a partnership is deemed to have been done by the partnership" does not override the requirement that for the supply to be exempt under section 7 of Part II of Schedule V, the supplier must be a practitioner as defined in section 1 of Part II of Schedule V to the Act.

The foregoing comments represent our general views with respect to the subject matter of your request. These comments are not rulings and, in accordance with the guidelines set out in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service, do not bind the Canada Revenue Agency with respect to a particular situation. Future changes to the ETA, regulations, or our interpretative policy could affect this interpretation.

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-954-4394.

Yours truly,

Doris McMullan
Corporate Reorganizations Unit
Financial Institutions and Real Property Division
Excise and GST/HST Rulings Directorate

2007/11/20 — RITS 90956 — GST/HST Treatment of Manufacturer's Rebates