Please note that the following document, although correct at the time of issue, may not represent the current position of the Canada Revenue Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence du revenu du Canada.
GST/HST Rulings Directorate
5th floor, Tower A, Place de Ville
320 Queen Street
Ottawa ON K1A 0L5
[Addressee]
Case Number: 246201
Business Number: […]
Dear [Client]:
Subject: GST/HST INTERPRETATION
Supplies made through a distribution platform
Thank you for your correspondence of [mm/dd/yyyy], concerning the application of the goods and services tax/harmonized sales tax (GST/HST) to supplies made through a distribution platform. We apologize for the delay in this response.
The HST applies in the participating provinces at the following rates: 13% in Ontario; and 15% in New Brunswick, Newfoundland and Labrador, Nova Scotia, and Prince Edward Island. The GST applies in the rest of Canada at the rate of 5%.
All legislative references are to the Excise Tax Act (ETA) unless otherwise specified.
Based on the information provided in your letter of [mm/dd/yyyy] and […][Agreement #1] available on […][the Company’s Platform], we understand the following:
1. You are representing […][the Creator], and we are in receipt of a third party authorization on this matter.
2. [The Creator] is currently registered under the regular GST/HST registration provisions effective [mm/dd/yyyy].
3. [The Creator] earns income from […][the Company] […].
4. You indicated that the Creator uploads […] videos on [the Company’s Platform]. […], [the Company] pays fees to the Creator factoring in amongst others certain revenue [from sales of] elements such as […][X] and subscription received from its users and viewers in accordance with […][Agreement #2]. [The Company] determines the payout amount based on its records.
5. You stated that the users or viewers have the option to subscribe to the Creator and/or give tips ([X](Footnote 1) to the Creator.
6. […][The Company’s Platform offers a] video streaming service […] [and] allows users to chat, interact, generate their own content and create their own entertainment.
7. [The Company] is a non-resident of Canada and is registered under the simplified GST/HST registration regime(Footnote 2) as of [mm/dd/yyyy].
8. The following agreements govern the contractual relationship of the parties involved:
a. [Agreement #1](Footnote 3) governs the contractual relationship between [the Company] and [the Company’s Platform] users (includes creators, users and viewers) regarding the use of [the Company’s Platform] services. [Agreement #1 applies] to products or services offered on [the Company’s Platform] […], and its network of websites, software applications, and any other products or services offered by [the Company] (Footnote 4).
b. [Agreement #2](Footnote 5) governs the content creator’s participation in […][the Program] which is operated by [the Company](Footnote 6). The Program permits the Creator to monetize the broadcasting, streaming, distribution and exhibition of their content through the products, services or programs described below(Footnote 7).
9. [Agreement #1] for [the Company’s Platform]’s users includes, in part, the following:
a. Under section [#] […][Information about the Company’s grant of license, for access to and use of the Platform and related services, to users including the Creator](Footnote 8)
b. Under section [#] […][Description of the user content and grant of user content license to the Company].
c. Under [#] […][Creator’s representations and warranties with respect to user content]
d. Under section [#] [Information about the Company’s right to place advertisements on the Platform].
10. [Agreement #2] includes, in part, the following:
a. Under section [#] […][Outlines the conditions for the Creator to broadcast its live content](Footnote 9).
b. Section [#] […][Description of program fees paid by the Company to the Creator] :
* […][Information about the revenues share calculation based on the [X] awarded to the Creator](Footnote 10)
* […][Information about the Creator’s share of revenues associated with a program where the Company places a website link on the Creator’s page that directs Platform’s users to the purchase of a product](Footnote 11).
* […][Description of the subscription revenues share](Footnote 12).
* […][Description of the advertisement revenues share](Footnote 13)(Footnote 14)
* […][Information about certain other programs]
c. Pursuant to Section [#] […][Information about access to data related to the Program]
d. Section [#] […][Information about the responsibilities of the Company and the Creator with respect to taxes]
e. Section [#] […].
f. Section [#] […][Information about the relationship between the parties].
RULING REQUESTED
You would like to know how the GST/HST applies to the Creator’s revenues from [the Company] and whether the supplies made by the Creator qualify as zero-rating supplies.
As noted in GST/HST Memorandum 1-4, Excise and GST/HST Rulings and Interpretations Service, a ruling provides the Canada Revenue Agency’s (CRA) position on specific provisions of the legislation as these relate to a clearly defined fact situation of a particular person, and where all of the relevant facts and supporting documentation have been presented in writing. As we are not in possession of all of the pertinent facts, we are unable to provide a ruling. However, we are pleased to provide an interpretation of the relevant ETA provisions for your assistance.
INTERPRETATION GIVEN
In general, supplies of property or services made in Canada are taxable supplies and are subject to the GST/HST, unless they are specifically identified as exempt. Schedule V of the ETA lists exempt supplies, which are not subject to the GST/HST. Schedule VI of the ETA lists zero-rated supplies, which are considered to be taxable supplies, but are subject to the GST/HST at the rate of 0%.
Several zero-rating provisions for the export of services or intangible personal property apply to non-resident recipients that are or are not registered under Subdivision D of Division V. Non-resident persons may be registered under Subdivision D of Division V (referred to as the regular GST/HST registration provisions) or under Subdivision E of Division II (referred to as the simplified GST/HST registration provisions). Registration under the simplified GST/HST registration provisions is generally for non-resident digital economy businesses which are not otherwise registered or required to be registered under the regular GST/HST registration provisions. A person can only be registered for GST/HST purposes under one of these subdivisions, not both at the same time.
For further information regarding simplified GST/HST registration provisions for digital economy businesses that are non-residents of Canada, go to “GST/HST for digital economy business” at https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/gst-hst-businesses/digital-economy-gsthst/register-gst-hst.html. To confirm if a person is registered under the simplified GST/HST registration provisions, go to “Confirming a simplified GST/HST account number - Canada.ca” at https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/gst-hst-businesses/digital-economy-gsthst/confirming-simplified-gst-hst-account-number.html to search the registry.
Supply of Intangible Personal Property
The supply of a right to use content, where the supplier retains ownership of the content, is characterized as a supply of intangible personal property (IPP).
For further information on supplies of a right to use the content, please refer to Example 19 of the GST/HST Technical Information Bulletin B-090, GST/HST and Electronic Commerce.
The Creator’s supply of a license or right to use its content would generally be considered as a supply of IPP. The Creator provides the right to [the Company] to offer the videos uploaded or streamed [on the Platform] by the Creator to users and viewers on a subscription, pay-per view, or other payment basis. As a consideration for the supply, [the Company] will generally pay the Creator in the form of a fixed amount (USD $[…]) calculated on the [X] awarded to the Creator […] and a share of net subscription revenues […].
Pursuant to paragraph 142(1)(c), a supply of IPP is deemed to be made in Canada if the property may be used in whole or in part in Canada. In other words, a supply of IPP could be considered to be made in Canada even if it is not actually used in Canada. The fact that the supply may be made to a recipient who is outside Canada at the time the supply is made will not impact the determination of whether the supply of IPP is made in Canada.
In determining whether IPP may be used in Canada, reference may be made to any written agreement for the supply that contains terms governing the place of use of the IPP. Where there are no restrictions governing where the IPP may be used, the supply of IPP will be considered to be made in Canada.
Given that there is no indication in the information provided that the place of use of the content supplied by the Creator is restricted in any manner, it is assumed for purposes of this interpretation that there are no such restrictions. As such, the content supplied to [the Company] could be considered to be made in Canada as the content may be used in Canada.
A taxable supply of IPP made in Canada is subject to GST at the rate of 5% (or HST at a rate of 13% or 15% when made in a participating province: Ontario, New Brunswick, Newfoundland and Labrador, Nova Scotia or Prince Edward Island) unless the supply is zero-rated (taxed at 0%).
Pursuant to section 10.1 of Part V of Schedule VI of the ETA, a supply of IPP that is made in Canada may be zero-rated in certain circumstances if it is made to a non-resident person who is not registered under the regular GST/HST registration provisions.
For more information regarding the zero-rating of exported intangible personal property under section 10.1 of Part V of Schedule VI, please refer to GST/HST Info Sheet GI-034, Exports of Intangible Personal Property. For information on the criteria for determining the registration status, residency of persons to whom supplies are made and physical location, you may wish to review GST/HST Memorandum 4.5.3, Exports – Services and Intangible Personal Property.
Additionally if a taxable supply is determined to be made in Canada and is not zero-rated, a further analysis with respect to the province in which the supply is made or deemed to be made is necessary to determine the appropriate rate of tax.
Whether a supply made in Canada is made in a participating province or non-participating province is determined by section 144.1 and Schedule IX, and where applicable, the New Harmonized Value-added Tax System Regulations (the Regulations). Section 144.1 provides that a supply is deemed to be made in a province if it is made in Canada and is, under the rules set out in Schedule IX, made in the province. Further, under section 144.1, a supply made in Canada that is not made in any participating province is deemed to be made in a non-participating province.
Section 3 of Part IX of Schedule IX provides that, notwithstanding any other part of Schedule IX, a supply of property or a service is made in a province if the supply is prescribed to be made in the province under the Regulations.
Generally, for supplies of IPP with respect to which there are no restrictions regarding where the property may be used, paragraph 8(b) of Division 2 of Part 1 of the Regulations provides that the supply of IPP is made in a particular province if
* in the ordinary course of business of the supplier, the supplier obtains a particular address that is
* if the supplier obtains only one address that is a home or business address in Canada of the recipient, the home or a business address in Canada obtained by the supplier,
* if more than one such address is obtained by the supplier, the home or business address in Canada of the recipient that is most closely connected with the supply, or
* in any other case, the address in Canada of the recipient that is most closely connected with the supply, and
* the particular address is in the province, and
* the intangible personal property can be used in the province.
Where the above rule does not determine the supply of the IPP to be made in a province, paragraph 8(c) of the Regulations provides that the supply is made in the participating province for which the tax rate is the highest among the tax rates for the provinces in which the property can be used.
The place of supply rules that determine the province in which a supply, including a supply of IPP, is made are further explained in draft GST/HST Technical Information Bulletin B-103, Harmonized Sales Tax – Place of supply rules for determining whether a supply is made in a province.
Supply of Advertising Services
The term “advertising” is not defined in the ETA; however, as described in GST/HST Memorandum 4-5-3, Exports - Services and Intangible Personal Property, a service of advertising generally includes a service of creating a message and a service directly related to the communication of such a message. In addition, in order for the service to be that of advertising, the message must be oriented towards soliciting business, attracting donations, or calling public attention in the form of an information notice, a political announcement, or other similar communication.
Generally, where the Creator allows an online advertisement to be placed on […][the Creator’s page on the Company’s Platform], the Creator is making a supply of a service, and more specifically a service of advertising. In return, [the Company] will generally pay the Creator a share of revenue obtained from advertisements […] as a consideration for the supply. Also, by allowing [the Company] to post a link [on the] Creator’s […] page, which would direct [the Company's Platform] users to the purchase of a product, the Creator is communicating a message intended to solicit business for [the Company]. This could also be considered a supply of an advertising service. Where the Creator receives a payment such as a fee […] for providing a website link on its […] page which would direct the users to the purchase of a product […], the payment received could be consideration for a supply of a service of advertising.
For further information on supply of advertising services, please refer to examples 11 and 12 of the GST/HST Technical Information Bulletin B-090, GST/HST and Electronic Commerce.
Pursuant to paragraph 142(1)(g), a supply of a service is deemed to be made in Canada if the service is, or is to be, performed in whole or in part in Canada. Conversely, paragraph 142(2)(g) of the ETA deems a supply of a service to be made outside Canada if the service is, or is to be, performed wholly outside Canada.
The Creator’s supply of an advertising service would be deemed to be made in Canada under paragraph 142(1)(g) if the services are wholly performed in Canada.
Nevertheless, under certain conditions, supplies made in Canada to non-resident persons may be zero-rated under Part V of Schedule VI of the ETA. Specifically, section 8 of Part V of Schedule VI zero-rates a supply of an advertising service that is made to a non-resident person who is not registered under the regular GST/HST registration provisions at the time the service is performed.
If the non-resident person is registered under the regular GST/HST registration provisions at the time the service is performed, the supply of the advertising service may still be zero-rated under the general zero-rating provision for the export of services found in section 7 of Part V of Schedule VI to the ETA. Section 7 of Part V of Schedule VI to the ETA zero-rates a supply of a service when made to a non-resident person provided none of the exclusions of the provision apply.
For more information regarding the zero-rating provisions under sections 7 and 8 of Part V of Schedule VI, please refer to GST/HST Memorandum 4.5.3, Exports – Services and Intangible Personal Property.
Similarly to what was explained in the previous section Supply of intangible personal property, a further analysis with respect to the province in which the supply is made or deemed to be made is necessary to determine the appropriate rate of tax where a taxable supply of a service is made in Canada and the zero-rating provisions described above do not apply. Whether a supply made in Canada is made in a participating province or non-participating province is determined by section 144.1 and Schedule IX, and where applicable, the New Harmonized Value-added Tax System Regulations (the Regulations).
Under the Regulations, different provincial place of supply rules exist with respect to general services, services in relation to real or tangible personal property and other specific types of services. Generally, we must first consider whether any specific place of supply rule applies in a particular situation. When the more specific place of supply rules for services do not apply, then it is the general place of supply rule for services in section 13 of Division 3 of Part 1 of the Regulations that applies.
Generally, for a service that is in the nature of advertising, section 13 of the Regulations described below would apply.
Where the supplier is able to obtain an address in Canada of the recipient, subsection 13(1) of the Regulations generally provides that, subject to sections 14 to 17 of the Regulations, a supply of a service is made in a province if, in the ordinary course of business of the supplier, the supplier obtains an address in the province that is
(a) if the supplier obtains only one address that is a home or a business address in Canada of the recipient, the home or business address in Canada obtained by the supplier;
(b) if the supplier obtains more than one address described in paragraph (a), the address described in that paragraph that is most closely connected with the supply; or
(c) in any other case, the address in Canada of the recipient that is most closely connected with the supply.
Where the supplier is not able to obtain an address in Canada of the recipient, subsection 13(2) of the Regulations provides that, subject to subsection (1) and sections 14 to 17, a supply of a service is made
(a) in a participating province if the Canadian element of the service is performed primarily in participating provinces and
(i) an equal or greater proportion of the Canadian element of the service is not performed in another participating province, or
(ii) if subparagraph (i) does not apply, the tax rate for the participating province is the highest among the participating provinces for which no greater proportion of the service is performed in another participating province; and
(b) in a non- participating province if the Canadian element of the service is not performed primarily in participating provinces.
For more information on determining the province of supply, please refer to draft GST/HST Technical Information Bulletin B-103, Harmonized Sales Tax – Place of supply rules for determining whether a supply is made in a province.
Note on […][certain other programs]
Based on the information provided, the Creator’s participation in [certain other programs](Footnote 15) will be subject to additional terms and conditions set out by [the Company that are] not covered under the [Agreement #1] or [Agreement #2]. As such, we do not have sufficient information to comment on this matter in this interpretation.
DISCLAIMER
In accordance with the qualifications and guidelines set out in GST/HST Memorandum 1-4, Excise and GST/HST Rulings and Interpretations Service, the interpretation(s) given in this letter, including any additional information, is not a ruling and does not bind the Canada Revenue Agency (CRA) with respect to a particular situation. Future changes to the ETA, regulations, or the CRA’s interpretative policy could affect the interpretation(s) or the additional information provided herein.
CONTACT
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 905-706-8742.
Should you have additional questions on the interpretation and application of the GST/HST, please contact a GST/HST Rulings officer at 1-800-959-8287 or by fax to 1-418-566-0319.
Sincerely,
Teresa Lau
Senior Rulings Officer
Digital Economy Unit
General Operations and Border Issues Division
GST/HST Rulings Directorate
FOOTNOTES
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2. According to subsection 211.12(12) ETA, the CRA must publicly disclose information about persons, including businesses that have registered for the simplified GST/HST, including their name and registration number. This information is available in the GST/HST registry database maintained by the CRA at canada.ca/en/revenue-agency/services/tax/businesses/topics/gst-hst-businesses/digital-economy-gsthst/confirming-simplified-gst-hst-account-number
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