Telephone No.: (613) 957-8224
Fax No.: (613) 990-3602
File No.: 11640-3(cav)
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Subject:
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GST Interpretation
Accounts Payable Service
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I refer to a letter dated October 13, 1994, written by XXXXX concerning an interpretation on the application of GST to an accounts payable service supplied to an unregistered non-resident (Company A) by a Canadian registrant (Company B). This letter has been reviewed and the following comments are provided.
Fact Situation
1. A non-GST-registered non-resident person located in XXXXX XXXXX (Company A) wishes to engage a GST-registered firm located in XXXXX to process its account payable transactions (i.e. Company A wishes to purchase an accounts payable service from Company B).
2. Company B will receive invoices from Company A's suppliers and will
- verify that the supplier's invoices correctly belong to Company A;
- keypunch required data from those invoices;
- provide a computerized tape and associated reports which will be sent to Company A; and
- file these invoices in Canada temporarily (Note: once a year Company A's invoices will be sent to XXXXX).
3. Company B will issue cheques to Company A's suppliers. Cheques with Company A's name, address and bank account information will be imported by Company B who will print on these cheques the appropriate information to pay Company A's suppliers who have provided goods and services to Company A. These cheques will be processed through Company A's bank located in XXXXX[.] Although these cheques are in the physical possession of Company B, Company B never takes title to these cheques.
4. Company A has no commercial activity in Canada.
5. Company B will invoice Company A fee for this accounts payable service.
Interpretation Requested
XXXXX has asked for a number of interpretations relating to the above scenario. I however, wish to comment only on the response to following statement:
(3) the accounts payable service described above does not fall under the category of being consumed, used or enjoyed in Canada.
XXXXX Tax Services Office
Response
XXXXX states that if an accounts payable service is performed in Canada, initial consumption would occur in Canada. Therefore, the exclusion in paragraph (a), section 7, Part V of Schedule VI to the Act would apply to make the supply taxable at 7%.
Our Comments
I would like to point out that in order for the supply of a service to be zero-rated under Schedule VI, Part V, section 7, the service must be performed in whole or in part in Canada (the supply must be made or deemed to be made in Canada under the provisions of paragraph 142(1)(g) of the Act). Therefore, even though a service is performed in whole or in part in Canada, the service may still be regarded as primarily for consumption, use or enjoyment outside Canada. Please refer to Policy Statements P-004 and P-108 and GST Memorandum 300-3-5.
With respect to the accounts payable service, it is my opinion that this supply is zero-rated under section 7 of Part V of Schedule VI as the service, which relates to outstanding liabilities incurred in XXXXX is primarily for the non-resident's use. The determination of initial consumption and enjoyment of the service is irrelevant in this case.
Please arrange to have XXXXX inform XXXXX that the accounts payable service is zero-rated under section 7 of Part V of Schedule VI to the Act.
Should you require further clarification, please do not hesitate to contact Carol Ann Villeneuve at (613) 837-2096 or Randy Nanner at (613) 952-8810.
H.L. Jones
Director
General Applications Division
GST Rulings and Interpretations
Policy and Legislation Branch
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