27 June 2005 GST/HST Interpretation 59654 - Section 256 New Housing Rebate

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 fax XXXXX concerning whether a non-resident is considered a person resident in Canada for Goods and Services Tax (GST)/Harmonized Sales Tax (HST) purposes in respect of their activities carried on through a permanent establishment in Canada.

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

The non-resident owns real property (an office building) in Canada through which the non-resident makes supplies of real property (leases).

The non-resident has no representatives in Canada and the place of management is in the United States.

Interpretation Requested

You would like to know if the real property of the non-resident constitutes a permanent establishment pursuant to section 123 of the ETA for purposes of subsection 240(6) of the ETA.

Interpretation Given

Part (a) of the definition of permanent establishment in section 123 of the ETA states that a "permanent establishment", in respect of a particular person, means

(a) a fixed place of business of the particular person, including

(i) a place of management, a branch, an office, a factory or a workshop, and

(ii) a mine, an oil or gas well, a quarry, timberland or any other place of extraction of natural resources,

through which the particular person makes supplies.

A commercial office building in Canada belonging to a non-resident person is a prima facie example of a fixed place of business of the person. Where the non-resident owner of the building leases the building to another person it is considered to be making supplies through that fixed place of business and has therefore satisfied all the requirements of the definition of permanent establishment in section 123 of the ETA.

We have enclosed a copy of GST/HST Policy Statement P-208R - Meaning of 'permanent establishment' in subsection 123(1) of the ETA for your information. This policy provides guidelines to determine whether a fixed place of business exists in cases that do not involve the examples listed in the definition of "permanent establishment". It also sets out various indicators that may be used to determine whether supplies are made through a fixed place of business.

It should be noted that the non-resident owner in these circumstances would be considered to be carrying on business in Canada for GST/HST purposes as set out in example #6 of the enclosed policy statement P-051R2 - Carrying on business in Canada.

Subsection 240(6) of the Act requires that every non-resident registrant without a permanent establishment in Canada must provide and maintain security in an amount and form satisfactory to the Minister. A non-resident registrant such as the non-resident building owner in this case who makes supplies through its own fixed place of business (i.e. their permanent establishment) in Canada is exempted from the requirement to post security.

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, Goods and Services Tax Rulings, 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) 957-8220.

Yours truly,

Kevin W. Smith
Border Issues Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate

2005/06/03 — RITS 60367 — Books Sold With CD-ROMs