5 December 2007 GST/HST Interpretation 93795 - Bus charters and tour packages

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.

Dear XXXXX:

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

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 Canada Revenue Agency (CRA) Web site at www.craarc.gc.ca/E/pub/gi/notice226/README.html.

We understand that XXXXX is a receptive operator that conducts business with tour operators around the world.

Interpretation Requested

You have provided examples for which you would like the GST/HST treatment clarified under the Foreign Convention and Tour Incentive Program (FCTIP) as follows:

1. XXXXX supplies hotel accommodation to a foreign tour operator and charges GST/HST. The foreign tour operator subsequently packages the accommodation with a car rental and air transportation. Is the foreign tour operator eligible for a rebate of the GST/HST paid?

2. XXXXX supplies hotel accommodation and a fly/drive documentation kit to a foreign tour operator and charges GST/HST. The fly/drive documentation kit has a value of $XXXXX in relation to the $XXXXX total value of what is supplied; however, a single price is charged for both. A fly/drive kit is not sold separately from accommodation. The foreign tour operator subsequently packages the accommodation and fly/drive kit with a car rental and air transportation. Is the fly/drive documentation kit part of the supply of the accommodation, a separate supply from the accommodation, or part of a supply of a tour package that includes the accommodation and kit? Is the foreign tour operator eligible for a rebate of the GST/HST paid?

3. XXXXX supplies hotel accommodation and a ferry transfer within Canada to a foreign tour operator. XXXXX is not acting as an agent of the ferry operator, but rather purchases the ferry transfer and supplies it to the foreign tour operator as a principal supplier. The ferry transfer is valued at $XXXXX in relation to the $XXXXX total value of what is supplied; however, a single price is charged for both. The ferry transfer is prebooked by XXXXX according to the itinerary and a voucher is printed in the name of the travellers with details of the transfer such as the date and time. The foreign tour operator subsequently packages the accommodation and ferry transfer with a car rental and air transportation. Is XXXXX supplying a tour package?

Interpretation Given

The FCTIP, a new rebate program that replaces the 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 nonresident 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.

As you are aware, 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.

Accommodation rebate (Question 1)

A non-resident non-registered tour operator will be eligible for a rebate under the FCTIP of the full amount of GST/HST paid on the purchase of hotel accommodation that is resold as part of an eligible tour package provided that all of the eligibility requirements for the rebate are met. For a list of these requirements, please refer to the answer to Question 9.2 of the Notice.

An eligible tour package for the purposes of the FCTIP must include short-term and/or camping accommodation in Canada and at least one service, and it must be sold for an all-inclusive price. A package comprised of hotel accommodation in Canada, a car rental and air transportation that is sold for an all-inclusive price is an eligible tour package for the purposes of the FCTIP; therefore, a non-resident non-registered tour operator purchasing hotel accommodation for this package is eligible for a rebate as described above.

Hotel accommodation and fly/drive documentation kit (Question 2)

It is our view that the hotel accommodation and fly/drive documentation kit are a single supply of hotel accommodation.

Consequently, a non-resident non-registered tour operator will be able to apply for the accommodation rebate under the FCTIP provided that all the conditions and eligibility requirements are met as described in our response to Question 1 above.

Hotel accommodation and ferry transfer (Question 3)

XXXXX supplies hotel accommodation and a ferry transfer within Canada to a foreign tour operator and charges a single price for both. XXXXX is not acting as an agent of the ferry operator in respect of the supply of the ferry transfer. XXXXX supply of hotel accommodation in Canada and a ferry transfer for an all-inclusive price is a supply of an eligible tour package for the purposes of the FCTIP.

A registrant can pay or credit a non-resident non-registered tour operator the amount of the tour package rebate under the FCTIP that the tour operator would have been entitled to receive from the CRA had the tour operator paid the GST/HST, applied to the CRA and met all the requirements for the rebate. Additional information on paying or crediting the rebate is outlined in Questions 7.1 through 7.12 of the Notice.

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 XXXXX.

Yours truly,

XXXXX
Services and Intangibles Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate

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