31 January 2008 GST/HST Interpretation 97989 - Wash Transactions Policy

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 letter XXXXX concerning the documentary requirements for claiming a rebate of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) under the Foreign Convention and Tour Incentive Program (FCTIP).

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 has been reduced from 6% to 5% and the rate of HST from 14% to 13%. The new rates 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 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, GST/HST Rate Reduction in 2008 on the CRA Web site at www.cra-arc.gc.ca/E/pub/gi/notice226/README.html.

We understand XXXXX (the Company) is a XXXXX tour operator. The Company is not a GST/HST registrant. The Company buys blocks of short-term accommodation in Canada, which it sells together with air transportation and ground transportation for an all-inclusive price. You have received an XXXXX indicating that accommodation providers in Canada can no longer pay or credit the rebate amount with respect to accommodation provided to non-resident non-registered tour operators.

The Company books XXXXX room nights in Canada per year, using XXXXX different accommodation suppliers. The Company uses an automated self-billing system to pay the accommodation suppliers.

Based on the contracts that the Company has with accommodation suppliers, rates and all other data are loaded onto the Company's computer system. The computer system also includes the information on the clients sent to each accommodation. The Company pays accommodation suppliers automatically using this system, and sends payment remittance advice and a detailed guest statement to the accommodation supplier. The payment is normally wired from the Company's XXXXX bank; in a few instances, the Company may mail a cheque.

Since the Company uses this self-billing system, it has requested that the accommodation suppliers not provide invoices for the accommodation provided. The accommodation supplier receives the payment remittance advice and the detailed guest statement, which provides the breakdown of the payment by the Company for the accommodation provided to its clients. You have provided an example of the payment remittance advice and the detailed guest statement for us to review.

The payment remittance advice is on the Company's letterhead and addressed to the Canadian accommodation supplier. It is dated XXXXX, states XXXXX, and is for an amount of $XXXXX. A copy of the cheque was not provided. The detailed guest statement lists the names of the clients, their arrival date and the duration of their stay, and a detailed breakdown of the room cost including discounts, housekeeping charges and provincial tax.

You also submitted a copy of sample invoice/itinerary that the Company provides to its customers, that it wishes to use as proof that the accommodation is sold as part of a tour package. The invoice is made out to XXXXX, with a XXXXX address, and is with respect to two named individuals included on the detailed guest statement already provided. (The detailed guest statement indicates that these two individuals arrived at XXXXX on XXXXX and stayed for XXXXX nights.) The invoice lists the basic price of the package, with reductions and supplements priced separately. The travel details indicate a round-trip flight between XXXXX and XXXXX, leaving XXXXX on XXXXX and returning from XXXXX on XXXXX. The accommodation is XXXXX for the dates XXXXX.

Interpretation Requested

You would like to know whether a copy of the payment remittance advice together with the detailed guest statement will be accepted in lieu of an accommodation supplier invoice as sufficient support for making a rebate claim if the Company adds a line to indicate the GST charged and paid. If these are not sufficient, what additional information will be required on the statements to make them acceptable as evidence for claiming the rebate?

Interpretation Given

Under the FCTIP, a rebate is available to a non-resident non-registered tour operator of the GST/HST paid on supplies of short-term and/or camping accommodation under certain conditions. Generally, a tour operator is a person who, in the ordinary course of a business of the person, packages or sells tours that are ultimately sold to, or are for the use of, either a group of travellers or an individual traveller.

To be eligible for the rebate pursuant to subsection 252.1(3), the tour operator must have resold the accommodation as part of an eligible tour package, and the accommodation in the tour package must be made available to a non-resident individual. The eligible tour package must have been sold to another non-resident and payment for that sale must have been made outside Canada at a place where the tour operator or its agent is conducting business.

An eligible tour package is a tour package that includes either short-term and/or camping accommodation in Canada and at least one service, and it must be sold for an all-inclusive price. Examples of services are transportation services such as air transportation, guide or interpreter services, sightseeing excursions and ski lessons. Packages that include a convention facility or related convention supplies are not eligible tour packages for purposes of the rebate.

Non-resident non-registered tour operators use form GST115, GST/HST Rebate Application for Tour Packages, to file a rebate claim with the CRA, and must provide sufficient documentary evidence to establish their entitlement to the rebate. As indicated on form GST115, tour operators purchasing short-term and/or camping accommodation are required to send in the following information with their rebate claims to prove that they have met the eligibility requirements:

•   original invoices or receipts that show the amount of GST/HST paid for the short-term and/or camping accommodation; and

•   itineraries for, or detailed descriptions of, the eligible tour packages (these can be on paper or CD).

This information confirms the amount of GST/HST charged to, and paid by, the non-resident tour operator for the accommodation, that the accommodation was sold as part of a tour package, that the tour package was an eligible tour package, and the number of nights of short-term and/or camping accommodation in Canada included in the tour package.

For purposes of a rebate under the FCTIP, the CRA will accept documentation prepared by the non-resident tour operator (i.e., reverse invoicing) provided that the documentation includes the information that would be included on the original invoices or receipts prepared by the supplier. This information must include:

•   details of the supplier (name, address, telephone number, GST/HST registration number);

•   details of the recipient (name, address, telephone number);

•   details of the supply (description of accommodation, number of nights, price);

•   the GST/HST charged; and

•   proof that the amount was paid (e.g., copy of cancelled cheque, wire payment confirmation number).

The sample payment remittance advice and detailed guest statement provided to us includes some, but not all, of these details. The Company would also need to include the GST/HST registration number of the supplier and the amount of GST charged on the detailed guest statement, and include a copy of the cancelled cheque or the wire payment confirmation number to indicate proof of payment in order for these documents to be accepted in support of a rebate claim.

In addition to this documentation, itineraries for, or detailed descriptions of, the eligible tour packages must be included with the rebate claim. These detailed itineraries or descriptions of each tour package must be sufficient to indicate that the tour operator sold the accommodation included in the rebate claim as part of an eligible tour package.

The Company provided a sample invoice/itinerary that does match the itinerary of the tour package to accommodation included in the detailed guest statement provided. We would accept these, along with the reverse invoicing documentation with the additional information noted above, as sufficient evidence to support the rebate claim.

Please note that these documents do not prove that a non-resident non-registered tour operator has met all of the requirements under the ETA to be eligible for the rebate. To be eligible for the rebate, the tour operator must have sold the eligible tour packages to non-residents for use by non-resident individuals, and payment for the sale of the tour packages must have been made at a place outside Canada. Non-resident tour operators who file rebate claims under FCTIP must keep supporting documents that will allow the CRA to determine the amount of the rebate that the non-resident is entitled to receive.

The form GST115 indicates that if asked by the CRA, a non-resident non-registered tour operator will also have to provide the following information from its books and records:

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

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

•   copies of invoices issued to non-residents who purchased the eligible tour packages; and

•   a list of the names and addresses of the non-resident individuals to whom the short-term and/or camping accommodation was made available.

The CRA may accept other types of documents if those other documents allow us to confirm that the eligibility requirements are met. The information demonstrating that the non-resident non-registered tour operator has met the eligibility requirements for the rebate does not have to be on separate documents. All the necessary information may be contained in only one or two documents. These could include electronic documents capable of being rendered into writing.

The supporting documents must be kept in Canada, unless the non-resident gets permission to keep the records at a place outside Canada. Non-residents must write to a CRA Tax Services Office (TSO) to get permission to keep their supporting documents at a place outside Canada.

Generally, permission to keep records outside Canada will be granted providing that the non-resident agrees to make them available to the CRA for examination and audit. The non-resident may ship the records to the applicable TSO and provide reasonable assistance necessary to complete the audit or, alternatively, reimburse the CRA for any costs incurred by the auditor and any other officers in travelling to where the books and records are kept to examine them.

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) 952-7909. 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

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