Please note that the following document, although correct at the time of issue, may not represent the current position of the Canada Revenue Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence du revenu du Canada.
[Addressee]
Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 15th floor
320 Queen Street
Ottawa ON K1A 0L5
Case Number: 131301
March 29, 2011
Dear [Client]:
Subject:
GST/HST INTERPRETATION
ITC Eligibility in respect of Goods Imported for Commercial Service
Thank you for your letters of December 20, 2010, and January 6, 2011, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to tangible personal property that is temporarily imported for processing.
All legislative references are to the Excise Tax Act (ETA) unless otherwise specified.
Statement of Facts
Our understanding of the facts is based on the information provided in your letter and in subsequent telephone conversations, as follows:
1. Your client ("CanCo") is a resident registered for GST/HST purposes. CanCo provides taxable supplies in Canada of commercial services in respect of tangible personal property owned by its customers.
2. CanCo will enter into an agreement with a customer ("NRCo") for the supply in Canada of a processing service in respect of NRCo's goods before the goods are exported to a refinery in Europe for further processing. NRCo is an unregistered non-resident for purposes of the ETA.
3. NRCo will enter into a separate agreement with a supplier ("SupplyCo") before the goods are imported for the purchase of the goods in respect of which CanCo will perform the services. SupplyCo is also an unregistered non-resident for purposes of the ETA. Pursuant to the agreement, delivery of the goods supplied by SupplyCo to NRCo will occur at CanCo's premises in Ontario, although in some cases, depending on the goods, some may be delivered in Canada before they arrive at CanCo's premises (e.g., at a port).
4. Because NRCo has no presence in Canada, nor a Canadian business number, CanCo will be the importer of record and will pay the tax in respect of the importation of the goods.
Ruling Requested
You would like to know whether CanCo could claim an input tax credit (ITC), through the flow-through mechanism under section 180 of the ETA, to recover the tax it paid on the imported goods.
Interpretation Given
As outlined in GST/HST Memoranda Series 1.4, Excise and GST/HST Rulings and Interpretations Service, we are unable to provide you with a GST/HST ruling as requested because your inquiry relates to a generic fact situation. However, we are pleased to provide you with the following GST/HST interpretation of the applicable provisions of the ETA to assist you with the application of the tax to the described fact scenario.
Based on the information provided, CanCo would be entitled to claim an ITC in respect of the tax paid on the imported goods pursuant to subsection 169(2) of the ETA instead of through the flow-through mechanism under section 180 of the ETA.
In your letter, you referred to a response that was provided by the Canada Revenue Agency with respect to a particular situation in which section 180 of the ETA applied. We would like to confirm that the facts in that situation are different from the facts in this case. Section 180 would not apply in this case because neither the non-resident, NRCo, nor any other person on NRCo's behalf, would be considered to have imported the goods.
Instead, it is CanCo in this case who imported the goods for the purpose of making a taxable supply to NRCo of a commercial service in respect of NRCo's goods. It is therefore subsection 169(2) of the ETA that would apply in this case. Under subsection 169(2), where a registrant imports goods of a non-resident person, who is not registered for GST/HST purposes, for the purpose of making a taxable supply to the non-resident of a commercial service in respect of the goods and, during a reporting period of the registrant, tax in respect of the importation becomes payable by the registrant or is paid by the registrant without being payable, the ITC of the registrant in respect of the goods for the reporting period is an amount equal to that tax. As a result, CanCo would be entitled, pursuant to subsection 169(2), to claim an ITC in respect of the tax payable by CanCo, or that was paid by CanCo without becoming payable, in respect of the importation of the goods.
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 613-954-4291. 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,
Geoff Macmillan
Border Issues Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate
UNCLASSIFIED
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