9 March 2000 GST/HST Interpretation HQR0030315 - Restriction Under Paragraph 252.2(g) of the Excise Tax Act

XXXXX

This is in reply to your request of March 8, 1998, regarding the application of the restriction under paragraph 252.2(g) of the Excise Tax Act (ETA).

The scenario you have described involves a resident registered person who supplies tour packages including short-term accommodation to a group of non-resident individuals. The registrant credits the non-resident rebate to the non-resident individuals under subsection 252.1(8) of the ETA.

You have requested whether paragraph 252.2(g) of the ETA applies to restrict the amount of the net tax deduction that may be claimed by the registrant in respect of the amount of the rebate credited to the non-resident individuals.

Our response is as follows:

Paragraph 252.2(g) of the ETA provides that a rebate shall not be paid under subsection 252.1(2) unless the total of all rebates for which the application is made in respect of tour packages including short-term accommodation and determined in accordance with the formula set out in paragraph 252.1(5)(a), does not exceed $75, if the person is a consumer of the tour packages and, in any other case, does not exceed $75 for each individual to whom the accommodation is made available.

Subsection 252.1(2) of the ETA provides in part for a rebate to a non-resident individual of tax paid in respect of a tour package that includes short-term accommodation. If the individual elects to do so in the application, the amount of the tax paid is deemed under paragraph 252.1(5)(a) to be equal to $5 per eligible night of short-term accommodation included in the tour package. In any other case, paragraph 252.1(5)(b) of the ETA generally deems the amount of tax paid to be equal to 50% of the total tax paid by the individual in respect of the tour package.

Under subparagraph 252.1(8)(c)(i), the amount that may be paid or credited by the registrant on account of the rebate in the case of a tour package such as the one described in your scenario is equal to the amount that would be determined under paragraph 252.1(5)(b). Provided all other conditions have been met, the registrant may claim a net tax deduction under subsection 234(2) in respect of the amount paid or credited.

Therefore, paragraph 252.2(g) of the ETA only applies if the rebate is determined in accordance with the streamlined method under paragraph 252.1(5)(a) of $5 per night in an application made. This method only applies if the individual elects to use it in the application. The restriction under paragraph 252.2(g) does not apply where the rebate is paid or credited under subection 252.1(8) and to the corresponding net tax deduction because the rebate in that case must be calculated using the formula set out in paragraph 252.1(5)(b) (i.e. 50% of the total tax paid on the tour package) as opposed to the streamlined method under 252.1(5)(a).

On a more general basis, the restriction under paragraph 252.2(g) of the ETA can only apply if the non-resident individual actually files a rebate application (as opposed to being paid or credited the rebate by the registrant) and then, only if the individual chooses in that application to use the streamlined method of $5 per night.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 957-8223.

Carolle Mercier
Services and Intangibles Unit
General Operations and Border Issues Division
GST/HST Rulings and Interpretations Directorate