Schedule VI

Table of Contents

Part I

Section 2

Cases

Hedges v. Canada, 2016 FCA 19

authorizations to possess marihuana were not sale exemptions

The appellant (“Hedges”) sold illegally produced dried marihuana to an intermediary (“BCCS”) which, in turn, sold it to individual members suffering from ailments. Although it was accepted by the Crown that the product was a “drug,” it was not zero-rated under Sched. VI-I-2(d) if it could “be obtained without a prescription or Ministerial exemption” (para. 4). Although Hedges and BCCS in fact had not been issued authorizations to possess marihuana (ATPs) by Health Canada, Hedges argued inter alia that the ATPs constituted “exemptions” permitting the sale of marihuana - so that marihuana did not come within this carve-out for drugs which could be sold without an exemption.

After first concluding (at para. 20) that “the zero-rated supply was intended to apply to certain drugs that could be legally sold to a consumer,” and noting (at para. 24) that “it would be illogical to tax a drug that may be lawfully sold to a consumer, (i.e., all the drugs captured by the carve out) but to exempt from taxation a drug that is not lawfully sold,” Rennie JA went on to reject the above argument, stating (at paras. 25, 29):

An ATP is an authorization…[and] is not an exemption.

… While holding an ATP may exempt one from the application of the criminal law, it is not an “exemption” as contemplated by fiscal legislation… .

Words and Phrases
exemption
Locations of other summaries Wordcount
Tax Topics - General Concepts - Illegality illogical to infer a tax benefit from illegal sales 145
Tax Topics - Statutory Interpretation - Headings heading did not contemplate illegal drugs 94

See Also

Hedges v. The Queen, 2014 TCC 270, aff'd 2016 FCA 19

marihuana is a drug but "Authorization to Possess" it is not a purchase "exemption"

Hedges was assessed for his failure to charge GST on his sales of illegally produced dried marihuana to an intermediary ("BCCCS"), which in turn sold it to individual members suffering from ailments. After a detailed review of the regulatory regime, including the Marihuana Medical Access Regulations permitting sales by licensed producers to patients who, following certification by a medical practitioner, had received an "Authorization to Possess" (ATP) from Health Canada, C Miller J found that zero-rating of the product under Sched. VI, Part I, s. 2(d) turned on whether, as a general mater, dried marihuana was a "drug" which "may [not], under the MMARs, be sold to a consumer without a prescription or exemption" (para. 74).

He found that it was a "drug" as broadly defined in the Food and Drugs Act (noting at para. 67 that "dried marihuana sold for use recreationally is not a drug as defined under the FDA, while dried marihuana sold for use therapeutically is") and rejected Crown submissions that the term should be restricted to drugs approved under the FDA and accessible by prescription.

However, he found (at para. 84) that "the medical declaration required to be completed by a practitioner pursuant to the MMARs is not an order nor is it given to a pharmacist [and] is clearly not a prescription" and further found (at paras. 94-6) that an ATP is not as exemption. The appeal was dismissed.

Administrative Policy

Excise and GST/HST News - No. 97 17 November 2015

Importations of donor eggs

[S]upplies of human sperm and oocytes are not drugs that are included in section 2 of Part I of Schedule VI and therefore are not zero-rated under this section. In addition, section 5 of Part I of Schedule VI zero-rates supplies of human sperm. However, there is no corresponding provision in the Act that zero-rates supplies of human oocytes.

GST Memoranda Series 4.1 "Prescription Drugs and Biologicals" ETA - Schedule VI Part II

GST M 300-4-2 "Health Care Services"

Paragraph 2(a)

Administrative Policy

8 March 2018 CBA Commodity Taxes Roundtable, Q.3

Le Gardeur decision on zero-rating based on a component being zero-rated has not been accepted

Although CRA’s position was that supplies of in vitro diagnostic test kits designed for laboratory use are taxable, the Centre Hospitalier Le Gardeur decision (2007 TCC 425) found that certain in vitro diagnostic test kits are zero-rated pursuant to Sched. VI, Pt. I, s. 2(a). In Notice 248, Application of the GST/HST to Supplies of in Vitro Diagnostic Test Kits (December 2009), CRA stated:

The CRA is currently reviewing the impact of the TCC decision, which is dated July 20, 2007. In the interim, the CRA has adopted an administrative position which is in keeping with the TCC decision. This position applies from the date of the TCC decision until such time as the CRA review in this matter is completed.

Has this review been completed? CRA indicated that it was awaiting the Patterson Dental decision for clarification of this issue.

Paragraph 2(b)

Administrative Policy

Excise and GST/HST News - No. 101 March 2017

Hormonal, but not copper, intrauterine devices are zero-rated

Hormonal IUDs have a reservoir which slowly releases hormones used for contraception. … Copper IUDs have a plastic frame that is wound around with copper wire or has copper sleeves. …

[H]ormonal IUDs available in Canada contain the drug levonorgestrel which is on the list established under subsection 29.1(1) of the Food and Drugs Act and require a prescription from a physician to be purchased. … Therefore, the supply of hormonal IUDs is zero-rated pursuant to paragraph 2(b) of Part I of Schedule VI….

[S]ales of copper IUDs are subject to GST/HST....

The Prescription Drug List

list of phrmaceutical drugs pusuant to FDA s. 29.1(1)

Paragraph 2(e)

See Also

Patterson Dental Canada Inc. v. The Queen, 2018 TCC 112

zero-rating for epinephrine did not include a drug containing epinephrine

The taxpayer sold anesthetic solutions containing epinephrine to dentists, and (notwithstanding an adverse Technical Interpretation letter received by its consultant) did not charge GST on the basis of the zero-rating in Sched. VI, Pt. I, s. 2(e) of any of the listed drugs including “epinephrine and its salts.” The epinephrine had no anesthetic effect and instead acted as a vasopressor (constriction of blood vessels) to prolong the duration of the local anesthetic.

In confirming that the supplies were not zero-rated, Favreau J first stated (at paras 45-47):

As stated in the Finances Technical Notes (April 2017 and April 2012), paragraph 2(e) of Part I of Schedule VI of the ETA enumerates a list of non‑prescription drugs used to treat life-threatening conditions that are zero-rated at all levels of production and distribution. …

There is no doubt in my mind that the epinephrine and its salts and the anesthetic solutions containing epinephrine supplied by the appellant come within the definition of the term “drug” as defined under the Canadian Food and Drugs Act

However, drugs which have epinephrine as their sole active ingredient are different from those that have epinephrine combined with another active ingredient, such as the anesthetics in issue.

He concluded (at paras 56 -58):

The anesthetics in issue supplied by the appellant are not designed to serve as an emergency relief for patients suffering from major death threatening conditions as required for being listed in paragraph (2)(e) of Part I of Schedule VI of the ETA.

The Legislator did not use on purpose in paragraph 2(e) the terms “mixture of drugs” as he did in paragraphs 2(b) and 2(d) of Part I of Schedule VI of the ETA.

In my view, by allowing epinephrine or any other drug listed in paragraph 2(e) to be mixed with other substances and to characterize this type of mixture with a zero-rating, would be contrary to the policy established by the Department of Finance.

Words and Phrases
drug

Section 6

Administrative Policy

GST/HST Notice 312 Proposed GST/HST Treatment of Supplies of Human Ova and In vitro Embryos May 2019

Effect of zero-rating on importations

The first proposed amendment to the Act would add, under section 6 of Part I of Schedule VI to the Act, the supply of an ovum, as defined in section 3 of the Assisted Human Reproduction Act, to the list of drugs and biologicals that are zero‑rated for GST/HST purposes. Consequently, the importation of an ovum would be considered a non‑taxable importation for GST/HST purposes under section 6 of Schedule VII to the Act and therefore no longer subject to tax. Similarly, an ovum brought into a participating province from a non-participating province, or from another participating province for which the rate of the provincial part of the HST is lower, would be considered non-taxable property for GST/HST purposes under section 15 of Part I of Schedule X to the Act and therefore no longer subject to self-assessment for the provincial component of the HST, or part thereof.

Meaning of “ovum”

As defined in section 3 of the Assisted Human Reproduction Act, ovum means a human ovum, whether mature or not.

Treatment of the subject supplies before amendments passed

[S]uppliers can stop charging GST/HST on supplies of human ova in accordance with the proposed amendment as of March 20, 2019. … [C]onsistent with its standard practice, the CRA is administering this measure on the basis of the proposed amendment [and similarly re embryos]

If the proposed amendment becomes law, you may then contact the supplier, who may choose to adjust the amount charged, or refund or credit the amount collected. If so, the supplier must provide you with a credit note for the amount. Alternatively, you can file a rebate claim with the CRA for the amount paid in error … . However, the CRA cannot pay a rebate for an amount paid in error as or on account of tax until the proposed amendment becomes law.

A supplier who has charged or collected GST/HST on human ova supplied after March 19, 2019, must include that amount in the calculation of their net tax on their GST/HST return, and remit that net tax if there is a balance owing, according to the regular rules.

Assimilated to single supply at fertility clinic of institutional health care service

Where a patient of a fertility clinic or other health care facility undergoes treatment or other service at the clinic which includes the implantation of a human donor ovum or the transfer of an in vitro embryo, the CRA considers that the supply of the human donor ovum or in vitro embryo made by the clinic to the patient in these circumstances would generally be part of an exempt supply of an institutional health care service.

Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Schedules - Schedule VII - Section 13 356
Tax Topics - General Concepts - Effective Date CRA allows immediate application of the new non-supply rules for human ova or embryos but won’t process rebate claims until passed 156
Tax Topics - Excise Tax Act - Schedules - Schedule V - Part II - Section 1 - Institutional Health Care Service assimilation of provision of ovum or embryo to single supply at fertility clinic of institutional health care service 76

Part II

Section 11.1

See Also

Dr. Brian Hurd Dentistry Professional Corporation v. The Queen, 2017 TCC 142 (Informal Procedure)

hypothetical separate supply of an orthodontic appliance by an orthodontist would have been zero-rated

Campbell J found that an incorporated orthodontic practice was making a single supply of exempt orthodontic health services rather than (as argued by it) two supplies comprised of a zero-rated supply of medical equipment (the orthodontic appliance) and of exempt orthodontic services (e.g., adjustment and maintenance services). She then rejected obiter the Crown's argument in the alternative that a separarate supply of the orthodontic appliances would not have been zero-rated but, instead, an exempt supply of a "medical...prosthesis" under Sched. V, Pt. II, s. 1 - "institutional health care service" para. (b), stating (at para 44):

…[I]f I had concluded that the Appellant provided multiple supplies, then … the supply of the orthodontic appliance would be zero-rated pursuant to section 11.1 of Schedule VI, Part II of the Act. … [T]he Act has set out the scheme for an orthodontic appliance entirely separate and apart from the provisions that apply to a prosthesis. … [T]he supply of an orthodontic appliance, being a medical device assembled by a licensed dental professional in a patient’s mouth, falls within the zero-rated scheme contained in Schedule VI. This interpretation is also consistent with the Department of Finance Technical Notes to section 11.1 of Schedule VI, Part II which unconditionally zero-rates an appliance.

Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Schedules - Schedule V - Part II - Section 5 single supply by incorporated orthodontist of health care services 246
Tax Topics - Excise Tax Act - Schedules - Schedule V - Part II - Section 1 - Institutional Health Care Service - Paragraph (h) single supply of orthodontic services by incorporated orthodontic practice qua health care facility 155
Tax Topics - Excise Tax Act - Section 123 - Subsection 123(1) - Supply single supply of orthodotic service 81
Tax Topics - Excise Tax Act - Schedules - Schedule V - Part II - Section 1 - Institutional Health Care Service - Paragraph (b) orthodontic appliance was not a "medical prosthesis" 152

24.1

See Also

Health Quest Inc v. The Queen, 2014 TCC 211 (Informal Procedure)

insufficient product design evidence

The appellant ("Health Quest") distributed footwear for the relief of various disabling conditions of the foot. The Minister reassessed the taxpayer on the basis that many of the shoes sold were not zero-rated supplies under s. 24.1 of Part II of Schedule VI of the ETA. Campbell J found that the Minister's pleading of this legal conclusion did not shift the burden of proof to the taxpayer (see summary under General Concepts - Onus).

The Minister was unable to prove that the shoes were not specially designed for use for a "crippled or deformed or similarly disabled foot," as the appeal officer's evidence was based on there not being sufficient information to conclude that they were. Campbell J suggested that "product literature, any scientific studies conducted and testimony of medical professionals" would have been beneficial in drawing any conclusions (para. 37) and indicated (at para. 41) that Masai Canada Ltd. v. Canada (Border Services Agency), 2012 FCA 260 "implied that to establish if a product, at least under the Customs Tariff, is 'specially designed' there should be evidence on the design and purposive intent behind the design of the product."

Locations of other summaries Wordcount
Tax Topics - General Concepts - Onus mixed assumptions of fact and law 173

32

See Also

Tremblay v. The Queen, [2001] GSTC 64 (TCC) (Informal Procedure)

An elevator shaft constructed by the builder of the appellant's home in order to permit the operation of a wheelchair lift provided by a separate supplier was found to be an "accessory" essential for the use of the lift, so that its supply was zero-rated under section 32.

Section 33

Administrative Policy

Excise and GST/HST News, No. 104, July 2018

qualifying service animals

The following are considered service animals for purposes of section 33:

  • seeing-eye horses (miniature ponies);
  • seeing-eye dogs;
  • hearing-ear dogs;
  • seizure alert or response dogs;
  • special service skills dogs that can assist pulling a wheelchair, carrying or picking up items or providing balance for an individual with mobility difficulties; and
  • other special skills service animals that offer assistance to young adults with autism or provide emotional support for individuals with mental health issues.

Additionally, section 33 also zero-rates the supply of a service of training an individual to use the service animal if the service is provided by an organization that is operated for the purpose of supplying such specially trained animals to individuals with a disability or impairment. Where an organization’s purpose is to train service animals and individuals to use service animals, rather than supplying the service animal, the supply of any training services provided to an individual to use the service animal is generally taxable.

34

See Also

Buccal Services Ltd. v. The Queen, [1994] GSTC 70 (TCC)

A healthcare facility through a dentist (as independent treatment provider) provided various laboratory and diagnostic services such as special x-ray studies, photographs and anesthesia facilities. The appellant had a paucity of evidence to support its submission that 40% to 50% of the supplies made by it were zero-rated supplies. Kempo T.C.J. went on to reject a submission that dental supplies made by the appellant fell within ss.23 (now, 11.1) 25, 26 and 34 of Part II of Schedule VI, stating that "where the service is clearly included in Schedule V, the exempt status of that service would govern and take precedence over the zero-rating provisions" (p. 70-3) and found that the services provided were institutional healthcare services instead.

37

Administrative Policy

Excise and GST/HST News - No. 97 17 November 2015

Design features must assist in coping with incontinence

To be an incontinence product specially designed for use by an individual with a disability, the product must be designed to absorb leakages, reduce odours, control bacteria, maintain dryness, and protect the individual against skin irritation. As such, the product must be designed using high-absorbency materials and typically have a sealed edge to ensure leakage protection. The fact that a product is reusable or disposable, or can be used by an individual who does not have a disability is not sufficient to change the characteristics of a product so that it is no longer considered to be an incontinence product specially designed for use by an individual with a disability.

…Examples of products that are not zero-rated under this provision include waterproof chair pads, sheets and mattress covers.

Children’s diapers…are not zero-rated… .

Part III

Section 1

See Also

River Road Co-Op Ltd. v. The Queen, [1995] GSTC 34 (TCC)

A direct charge retail co-operative charged $3.50 per week to each member of the co-operative irrespective of the type or volume of goods purchased by the member. Lamarre TCJ. concluded that such service fees did not constitute partial payment for goods purchased by the members and, therefore, no portion of such fees qualified for zero-rating.

Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Section 153 - Subsection 153(2) 62

Administrative Policy

29 March 2017 Ruling 183173

dietary supplement is not zero-rated

In finding that a bottled product that was to be mixed with water did not qualify under Sched. VI, Pt II, s. 1, CRA stated:

[T]he CRA considers a product to be a food or beverage if an average consumer would recognize and purchase the product as such in the ordinary course of buying basic groceries. … Consumers usually consume food and beverages to sustain or maintain life, to allay hunger or thirst, or for enjoyment rather than for therapeutic or preventative effects … .

Products commonly referred to as dietary supplements are consumed for their therapeutic or preventative effects (e.g., to correct actual or perceived health problems), or to achieve specific beneficial effects related to performance or physique. This also includes products that are labelled or marketed as products to be consumed primarily to facilitate the intake of ingredients that place an emphasis on such claims. Products commonly referred to as dietary supplements are not considered to be basic groceries and are not within the scope of section 1 of Part III of Schedule VI. …

T]he Product on its own is not a beverage, but rather is taken with water to allow for the ingestion of the Product. The Product is to be consumed in accordance with recommended dilution instructions. The Product is not a food, beverage, or an ingredient. The Product is a dietary supplement and, as such, is not zero-rated as a basic grocery.

GST/HST Technical Information Bulletin B-110 Application of the GST/HST to the Practice of Acupuncture April 2017

Separate supplies of herbal goods by acupuncturist

Sales of products such as dried herbs and herbal goods for medicinal purposes are generally separate supplies made by the acupuncturist and do not form part of an acupuncture service. As such, most sales of these products are subject to the GST/HST. Such products also include botanical medicines, Chinese herbal medicines, and tinctures, ointments, and nutritional supplements, whether or not dispensed by an acupuncturist….

Paragraph 1(e)

See Also

Ike Enterprises Inc. v. The Queen, 2017 TCC 59

crystallized ginger sold as baking ingredient rather than candy

The appellant sold crystallized ginger; sticks (made of wheat, rice and spelt); and granola in special packaging in bulk to retailers for sale in their bulk bins. Before turning to these individual items, Smith J stated (at paras 47-48):

[T]he Act…ensure[s] that basic groceries are not subject to GST. …

[T]he exclusions listed in section 1 of Part III…should be narrowly construed. To take a broad interpretation of such exclusions would defeat the policy objective noted above.

Smith J found that the crystallized ginger was zero-rated, finding (at paras 53, 54, 55, 57 and 58):

The first ingredient was … ginger.

The Appellant …had never sold this product as a candy or confectionery nor seen it sold as such by its customers in their bulk bins.

Taking a textual approach to the interpretation of section 1(e) of the Act, I find that the opening words “candies, confectionery that may be classed as candy, or any goods sold as candies”, clearly suggest that it is primarily intended to exclude food that is commonly viewed and sold as candy where the first ingredient is in fact sugar or some other natural or artificial sweetener. …

[M[ost consumers would be surprised to learn that products sold in the baking section of a typical grocery store, could be subject to GST

[T]he crystallized ginger …was sold as a baking ingredient similar to a dried fruit.

Words and Phrases
confectionary
Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Schedules - Schedule VI - Part III - Section 1 - Paragraph 1(f) fried sticks were sold as snack and were not baked 215
Tax Topics - Excise Tax Act - Schedules - Schedule VI - Part III - Section 1 - Paragraph 1(h) granola in cereal aisle intended primarily as breakfast cereal 176

Paragraph 1(f)

See Also

Ike Enterprises Inc. v. The Queen, 2017 TCC 59

fried sticks were sold as snack and were not baked

The appellant sold crystallized ginger; sticks (made of wheat, rice and spelt); and granola in special packaging in bulk to retailers for sale in their bulk bins. Before turning to these individual items, Smith J stated (at paras 47-48):

[T]he Act…ensure[s] that basic groceries are not subject to GST. …

[T]he exclusions listed in section 1 of Part III…should be narrowly construed. To take a broad interpretation of such exclusions would defeat the policy objective noted above.

In finding that the sticks came within the exclusion from zero-rating in para. 1(f), Smith J stated (at paras 59, 62, and 63):

…[T]he sticks … were manufactured by a company called “Old School Snacks” and the evidence clearly established that they were sold as snacks and eaten as‑is without further preparation.

…[T]he … sticks were not sold as crackers or “bread sticks” or even as a bread product. … [B]read products including crackers are in fact oven‑baked and not fried.

…I find that nothing turns on the fact that the sticks were marketed as a healthy organic snack. On balance, I find that the sticks are a convenience food captured by the use of the words “other similar snack foods” and more specifically the use of the word “sticks” in section 1(f) of the Act.

Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Schedules - Schedule VI - Part III - Section 1 - Paragraph 1(e) crystallized ginger sold as baking ingredient rather than candy 229
Tax Topics - Excise Tax Act - Schedules - Schedule VI - Part III - Section 1 - Paragraph 1(h) granola in cereal aisle intended primarily as breakfast cereal 176

Paragraph 1(h)

See Also

Ike Enterprises Inc. v. The Queen, 2017 TCC 59

granola in cereal aisle intended primarily as breakfast cereal

The appellant sold crystallized ginger; sticks (made of wheat, rice and spelt); and granola in special packaging in bulk to retailers for sale in their bulk bins. Before turning to these individual items, Smith J stated (at paras 47-48):

[T]he Act…ensure[s] that basic groceries are not subject to GST. …

[T]he exclusions listed in section 1 of Part III…should be narrowly construed. To take a broad interpretation of such exclusions would defeat the policy objective noted above.

In finding that the granola was not excluded from zero-rating under para. 1(h), Smith J found (at paras 68, 70):

… [M]any types of breakfast cereals can be snacked “right out of the box” and the suggestion on the packaging that you can do so, does not change a breakfast cereal into a snack item or convenience food. ...

While I agree that packaging and labelling will generally carry the day, I find that product placement within the grocery store is equally determinative. … [I]ts customers sold the product in question in the cereal aisle of the grocery store… .

Words and Phrases
breakfast cereal
Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Schedules - Schedule VI - Part III - Section 1 - Paragraph 1(e) crystallized ginger sold as baking ingredient rather than candy 229
Tax Topics - Excise Tax Act - Schedules - Schedule VI - Part III - Section 1 - Paragraph 1(f) fried sticks were sold as snack and were not baked 215

Paragraph 1(k)

See Also

Hubka v. The Queen, [1995] GSTC 58 (TCC)

Supplies of ice cream made in the form of boxes of 12, 24 or 36 single serving packages were excluded from zero-rating by s. 1(k). Bonner TCJ. stated (at p. 58-3):

"I cannot discover any basis either in the language of para. (k) or in the statutory context for arriving at a conclusion that the packaging which contains the single serving packages of ice cream is in any way relevant. The plain language looks to the packaging of the ice cream and not to the packaging of the packages."

Part V

Section 1

See Also

Muller v. Baldwin, L.R. 9 Q.B. 457

In the absence of anything in the governing legislation to the contrary, "exported from the port" was to be construed in its ordinary meaning of "carried out of the port" and, therefore, included coals taken out of the port on a steamer to be consumed on board during a distant voyage.

Words and Phrases
exported

Administrative Policy

8 March 2018 CBA Commodity Tax Roundtable, Q.9

no zero-rating of sale to Cdn purchaser who provided physical delivery of goods in Canada to NR ultimate purchaser

Company B, a registered resident, agreed to sell tangible personal property (the “Property”) to Company C, an unregistered non-resident, using the Incoterms® 2010 DAP Port of Liverpool, U.K. so that delivery and title transfer was to occur at the U.K. destination – although the parties agreed that Company C was to indemnify Company B if the Property were lost or damaged in transit. The Property is then loaded onto Company C’s vessel at the Port of Halifax and was immediately exported.

CRA indicated that it appeared that, because Company C acquired physical possession of the Property in Canada pursuant to the terms of the agreement, s. 142(2)(a) did not apply to deem the supply to be outside Canada. Similarly, CRA indicated that as the delivery of the Property by Company B to Company C appeared to be in Canada, zero-rating under Sched. VI, Pt. V, s. 1 also would not be available for the preceding supply of the Property by a Canadian registered vendor (Company A) to Company B.

Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Section 142 - Subsection 142(2) - Paragraph 142(2)(a) Incoterms did not govern the place of delivery of goods 154

GST/HST Memorandum 4.5.2 "Exports – Tangible Personal Property" August 2014

Overview of requirements

3. A supply of tangible personal property (other than an excisable good) made by a person to a recipient (other than a consumer) who intends to export the property is zero-rated if all of the following conditions are met:

  • a. in the case of property that is a continuous transmission commodity that the recipient intends to export by means of a wire, pipeline, or other conduit, the recipient is not registered for GST/HST;

    b. the recipient exports the property as soon after the property is delivered by the person to the recipient as is reasonable having regard to the circumstances surrounding the exportation, and where applicable, to the normal business practice of the recipient;

    c. the recipient has not acquired the property for consumption, use, or supply in Canada before exportation;

    d. after the supply is made and before the recipient exports the property, the property is not further processed, transformed, or altered in Canada, except to the extent reasonably necessary or incidental to its transportation; and

    e. the person maintains evidence satisfactory to the Minister of National Revenue of exportation of the property by the recipient.

Intent to export vs actual export of the property

7. Tangible personal property will generally be regarded as exported where the property is carried or sent out of Canada for trade, consumption, use, or supply by the recipient outside Canada, and the property is not consumed, used, or supplied en route before delivery to a place outside Canada. The recipient must have the intention of exporting the property when the supply is made in order for it to be zero-rated. However, ...[t]he recipient must export the property in fact.

As soon after the property is delivered by the person to the recipient as is reasonable

9. Whether tangible personal property is exported "as soon after the property is delivered by the person to the recipient as is reasonable" will depend on the facts of each situation, including the type of property involved and the general business practices of the recipient. The CRA will consider the following factors where the supplier can provide documentary evidence why the property was not exported either immediately after the supply was made, or in the time frame originally anticipated:

  • a late shipment from a subcontractor delays the shipment of the whole consignment;
  • transportation obstacles have been encountered;
  • some tangible personal property is held in inventory while awaiting delivery of other property before exporting all of the property at once;
  • the delay is attributable to the recipient's normal business practice; or
  • other situations have resulted in unexpected delays.
Satisfactory evidence of exportation

16. The acceptability of the evidence of exportation will depend on whether the entire shipment of the tangible personal property can be traced from its origin in Canada to the point where it leaves Canada on its way to a foreign destination. [E]vidence…will vary depending on the mode of transportation…and the nature of the property. Satisfactory evidence may include…:

  • sales invoice or purchase contract that identifies the property and the recipient, matched with the respective shipping or delivery instructions on the purchase order;
  • transportation document…such as a bill of lading…which is evidence of a contract of carriage as well as proof of delivery of the property on board a vessel (additional information… is available in GST/HST Memorandum 28.2, Freight Transportation Services);
  • customs brokers' or freight forwarders' invoice that relates to the exported property;
  • import documentation required by the country to which the property is exported;
  • in the case of motor vehicles, boats, ships, and aircraft, registration from the foreign regulatory authority where the property has been licensed;
  • or any other evidence (…not generated internally by the recipient)…that the property has been exported.

CBAO National Commodity Tax, Customs and Trade Section – 2013 GST/HST Questions for Revenue Canada, Q. 1

prosecution or civil remedy
available with membership password at http://www.cba.org/CBA/sections_NSCTS/main/GST_HST.aspx

Where the taxpayer has failed to provide information pursuant to a requirement under s. 289.1, "CRA's general policy is to proceed with a compliance order under section 289.1 (civil court remedy) prior to seeking the prosecution provision under section 326.)

94 CPTJ - Q. 1

RC will be amending its administrative policy to allow certificates to be issued by purchasers containing prescribed information as evidence of exportation. However, the exporter may be required to make available to the Department the shipper's balance sheet statements and any other evidence necessary to verify the zero-rated export purchases.

2

Administrative Policy

GST/HST Memorandum 4.5.2 "Exports – Tangible Personal Property" August 2014

Example 3

An unregistered non-resident airline is supplied with meals for consumption on board, and parts used to operate the aircraft while the aircraft is transporting passengers or property to a destination outside Canada. The supplies of meals and parts are zero-rated.

Example 4

A cruise ship stops at a Canadian port while transporting passengers between places outside Canada. During the cruise ship's stay in port, the unregistered non-resident operator of the cruise ship rents bicycles for use by some of its passengers. The supplies of rented bicycles to the operator are not zero-rated because they are not acquired for consumption, use or supply by the operator in the course of transporting passengers.

5

Administrative Policy

16 March 2018 Ruling 158124

zero-rating of marketing assistance provided by Canco to U.S. affiliate

As a small part of its business, a U.S. resident who is not registered for GST/HST purposes (“USco”) supplies information services to Canadian businesses and individuals, who subscribe by credit card through a website hosted on a U.S. web server and with the information services being delivered electronically to them from that server. USco will now receive expanded assistance respecting marketing to its Canadian customers from its Canadian resident affiliate ("Canco"). The "New Services" include much of the marketing work including strategy development, weekly “prospecting” of accounts, assistance in the preparation of term sheets and proposals for delivery to prospective clients and in the negotiation of contract terms and drafting contracts, use of the Canco website as a portal in communicating with current and prospective purchasers and attending key trade events to promote the USco information services.

The Services Agreement between Canco and USco stipulates that Canco is not acting as agent of USco; and Canco does not have contact with the customers.

Ruling that the supplies of New Services by Canco to USco are zero-rated pursuant to Sched. VI, Pt. V, s. 5.

Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Section 240 - Subsection 240(1) USco’s use of a Canadian affiliate for substantial marketing support for web-delivered services did not constitute carrying on business in Canada 356
Tax Topics - Income Tax Act - Section 2 - Subsection 2(3) - Paragraph 2(3)(b) USco not carrying on business in Canada by virtue of extensive marketing assistance (without client contact) work provided by Canadian affiliate 228

CBAO National Commodity Tax, Customs and Trade Section – 2013 GST/HST Questions for Revenue Canada, Q. 17. ("Supplier Reliance on Purchaser Certificates")

available with membership password at http://www.cba.org/CBA/sections_NSCTS/main/GST_HST.aspx

Respecting a certificate of a non-resident that it is not carrying on business in Canada:

CRA has not indicated in GST/HST Memorandum 4.5.1, nor in any other publication, that such a document would be accepted by the CRA as proof that a non-resident is not carrying on business in Canada for purposes of zero-rating a supply under Part V of Schedule VI to the ETA. A supplier may not rely on such documentation as acceptable proof that a non-resident person is not carrying on business in Canada for purposes of zero-rating a supply under Part V of Schedule VI to the ETA.

Section 6.1

Administrative Policy

8 March 2018 CBA Commodity Tax Roundtable. Q. 17

unscheduled repairs not necessarily emergency services

In the railway industry, maintenance orders generally are tracked as either scheduled maintenance - or as “bad orders,” being for repair services of railway rolling stock other than regularly scheduled maintenance, many of which arise where required repairs to rolling stock cannot be timely completed at U.S. facilities. Would all “bad orders” qualify as an emergency repair service? CRA responded:

As described in … 4-5-3 … an “emergency” is an unforeseen event or combination of events that calls for immediate action. The repairs must be of an urgent nature, such that if not immediately undertaken, the existing conditions could seriously affect the safety of the conveyance, the property or passengers being transported, or the people working on or about the conveyance. Whether a particular repair service referred to as a “bad order” would qualify as an emergency repair service for purposes of section 6.1 of Part V of Schedule VI … would depend on the facts of each situation.

Words and Phrases
emergency

GST/HST Memorandum 4.5.2 "Exports – Tangible Personal Property" August 2014

Emergency

38. The term "emergency" is not defined in the Act but generally refers to an unforeseen event or combination of events that calls for immediate action. The repairs must be of an urgent nature that if not immediately undertaken, could seriously affect the safety of the conveyance, the property, or passengers being transported, and the people working on or about the conveyance. The application of sections 6, 6.1 and 6.2 of Part V of Schedule VI depends on the facts associated with each situation.

  • Example 6 While transporting an empty tank car from Montréal to Québec City, the domestic carrier notices that one of the wheels of the tank car is damaged. The carrier delivers the empty tank car to a repair facility operated by a firm specializing in repairing railway rolling stock. The repair firm contacts the unregistered non-resident lessor of the tank car and obtains authorization to repair the tank car. Following the repairs, the tank car is returned to the carrier for transportation to Québec City. The parts supplied to the unregistered non-resident, along with the emergency repair service, are zero-rated.

Section 7

Administrative Policy

"GST/HST In Electronic Commerce", CCRA Discussion Paper, November 2001.

Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Section 143 - Subsection 143(1) 0

23 October 2000 Interpretation 11640-1

The Canadian operator of an internet auction site would be considered, with respect to non-resident vendors, to be arranging for, procuring or soliciting orders for supplies made by them. The payment of an annual fee by vendors for the right to list items on the auction site would be considered to be consideration for a supply to them of a right and would not be eligible for zero-rating and would be deemed by s. 142(1)(c)(i) to be a supply made in Canada.

6 May 1998 HQ Letter

administrative services provided to an RRSP with a non-resident beneficiary and a resident trustee will be zero-rated if paid for by the annuitant and taxable if funded out of the trust.

Paragraph 7(d)

Administrative Policy

GST/HST Memorandum 4.5.3 “Exports – Services and Intellectual Property” June 1998

Examples of Canadian real property exclusion

48. The following are examples of services that are considered to be in respect of real property for purposes of Part V of Schedule VI:

  1. services physically performed on the real property (e.g., construction and maintenance);
  2. services that enhance the value of the real property, affect the nature of the real property, relate to preparing the real property for development or redevelopment, affect the management of the real property, or affect the environment within the limits of the real property (e.g., engineering, architectural services, surveying and subdividing, management services, security services);
  3. services related to;
    1. the transfer or conveyance of the real property or the proposed transfer or conveyance of the real property (e.g., real estate services in relation to the actual or proposed acquisition, lease or rental of the real property, legal services rendered to the owner or beneficiary or potential owner or beneficiary of real property as a result of a will or testament);
    2. a mortgage interest or other security interest in the real property; or
    3. the determination of the title to the real property.

Paragraph 7(f)

Administrative Policy

28 February 2019 CBA Roundtable, Q.8

soliciting orders for Canadian customer of NR did not oust zero-rating

A registered non-resident (NR) does not itself have any presence in Canada but uses a resident (sub)contractor (RC) to provide marketing and soliciting services (in the credit card processing line of business) to a resident Canadian company in consideration for commissions. There is no formal agency agreement in place between NR and RC. CRA stated:

Section 7 of Part V of Schedule VI to the ETA zero-rates the supply of a service made in Canada to a non-resident person unless the service is specifically excluded by paragraphs 7(a) through 7(h) of that section. Based on the limited information provided, it appears that the supplies of services made by RC to NR would be zero-rated pursuant to section 7.

Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Section 142 - Subsection 142(1) - Paragraph 142(1)(g) registered non-resident marketer using services of a Canadian subcontractor was thereby making supplies in Canada 140

Section 10

See Also

Canada v. Dawn’s Place Ltd., [2006] GSTC 137, 2006 FCA 349

use of copyright in downloading images was only incidental

International subscribers to the registrant's internet website were granted a "non-exclusive, limited and revocable licence to download and view the content of the website" on their computer. In finding that the subscription fees were not zero-rated consideration, Sharlow J.A. quoted with approval a statement of the OECD Model Tax Convention on Income and Capital that:

"Thus, in a transaction that in essence is an acquisition of data or images transmitted electronically, any incidental copying is merely the means by which the data is captured and stored. The essential consideration for the payment in that case is the data, not the use of the copyright, even though copyright is incidentally used."

Locations of other summaries Wordcount
Tax Topics - Treaties - Income Tax Conventions - Article 12 111

Administrative Policy

B-090 "GST/HST and Electronic Commerce" July 2002

Software zero-rating (Example 1 under Supplies Made to Non-Residents)

[T]he supply of software is a supply of intellectual property.

GST/HST Memorandum 4.5.3 “Exports – Services and Intellectual Property” June 1998

Example -zero-rating of global database (para. 51)

Canadian company sells the international rights to operate a global database to a foreign company who pays the royalties to the Canadian company. As the recipient of the supply is a non-resident that is not registered for the GST/HST, the supply of such rights is zero-rated.

29 October 1997 Ruling HQR0000558

IP includes know-how

Respecting the provision of CD-ROM discs containing databases and software permitting the retrieval of the data, protected by copyright, CRA stated:

Intellectual property includes patents, trade marks, trade names, industrial designs and know-how.

Articles

James Swanson, David Ross, "Taxing Intangibles - GST and the Supply of Digital Images", GST & Commodity Tax, Vol. XVII, No. 4, May 2003, p. 25.

Section 10.1

Administrative Policy

8 April 2016 Ruling 158060

zero-rating of law society membership

A non-resident lawyer who does not practise law in Canada is a “not in Province” member of a specified Class of a provincial law society, and is provided with access to educational programs as a member. The lawyer is not present in Canada each time a supply of a membership is made to him or her, and is not registered.

Ruling

That as none of the exclusions in s. 10.1 applies, the supply of membership by the society to the lawyer is zero-rated.

CBAO National Commodity Tax, Customs and Trade Section – 2013 GST/HST Questions for Revenue Canada, Q. 33. ("Application of S. 10.1, Sch. VI, P. V – Service Related to Intangible Personal Property")

available with membership password at http://www.cba.org/CBA/sections_NSCTS/main/GST_HST.aspx

A Canadian GST-registered supplier sells custom software that it has been using to perform a service electronically, with such supplies being made in Canada. The purchaser is a non-resident who does not carry on any business in Canada, and will use the software to supply the same service to Canadian customers, with such supplies being deemed to be made outside Canada pursuant to s. 143.

After stating that the supply would be zero-rated under s. 10 (rather than 10.1) assuming the non-resident was not registered, CRA stated:

[I]f the intangible personal property supplied to the non-resident in the scenario were the type of intangible personal property that can be zero-rated under [s. 10.1]…and again assuming that the non-resident was not registered, the supply would not be excluded from zero-rating under that provision on the basis of the exclusion in subparagraph 10.1(b)(iii).

2 November 2012 Ruling Case No. 140160

Operator, a registered resident of province 1, has developed a program that consists of a secure network and various business, communications and software systems. The clients of the Operator are businesses that supply taxable goods and services and independent contract agents ("ICAs") who are contracted by the businesses to provide services. The ICAs are provided access to, and the use of, the program to provide their services. There are no restrictions with respect to where the program may be accessed and used by the businesses and the ICAs. Rulings that the supply made by the Operator to non-resident non-registered businesseses or ICAs of the right of access to, and use of, the program is a zero-rated supply of intangible personal property under section 10.1 of Part V of Schedule VI.

14 February 2012 Ruling Case No. 99181 [non-exclusive information use rights]

non-exclusive information use rights

A Canadian company which is a registrant (the "Resident Supplier") enters into an agreement with a non-registered non-resident company to supply it "with the non-exclusive use rights to information belonging to the Resident Supplier for an up front payment of CD$[…] and contingent payments of CD$[…] in each of the succeeding […] years." Ruling that there is a zero-rated supply of intangible personal property by the Resident Supplier under s. 10.1.

4 February 2012 Ruling Case No. 99181 [information licence]

information licence

A resident supplier agrees to supply an unregistered non-resident recipient with the non-exclusive use rights to information belonging to the supplier for an up front payment as well as and contingent payments for a number of the succeeding years.

As the Agreement contains no terms or conditions with respect to the location of the use of the rights, the supply is deemed by s. 142(1)(c) to be made in Canada. However, it is zero-rated under Sched. VI, Pt. V, s. 10.1.

GST/HST Info Sheet GI-034 "Exports of Intangible Personal Property" April 2007

Examples of supplies of IPP that will now be eligible for zero-rating under the proposed provision include:

  • subscriptions to Web sites that provide subscribers with a right to access and use digitized content on the site, such as information in a database or images, and that may also include a right to download a copy of the digitized content;
  • subscriptions to interactive Web sites that provide subscribers with a right to access and use digitized content, such as games, music and videos, on the sites while they are online;
  • digitized information, such as news items or stock market data, that is delivered electronically on a periodic basis to subscribers based on their personal preferences;
  • digitized products, such as music, images, and books, that are downloaded from Web sites and paid for individually. ...

The CRA will generally accept an online self-declaration by customers that they are not residents of Canada along with their complete home address as proof of residency, provided it is supported by another satisfactory verification method of residency such as:

  • if customers pay for the supplies of IPP by credit card or debit card, either a comparison of the customer's declared home address with the billing address, or
  • a comparison of the customer's declared home address with the location of the financial institution that issued the card; or the use of geo-location software.

B-090 "GST/HST and Electronic Commerce" July 2002

Factors that generally indicate that a supply made by electronic means is one of intangible personal property are:

  • a right in a product or a right to use a product for personal or commercial purposes is provided, such as:

    - intellectual property or a right to use intellectual property (e.g., a copyright); or

    - rights of a temporary nature (e.g., a right to view, access or use a product while on-line);

  • a product is provided that has already been created or developed, or is already in existence;
  • a product is created or developed for a specific customer, but the supplier retains ownership of the product; and
  • a right to make a copy of a digitized product is provided

Section 12

Administrative Policy

GST/HST Memorandum 4.5.2 "Exports – Tangible Personal Property" August 2014

Common carrier

19. A "common carrier" is not defined in the Act but generally refers to a person engaged in the business of transporting property from place to place, and who offers services to the public for compensation.

  • Example 1
  • A Canadian resident purchases a vehicle from an automobile dealer located in Toronto. The resident asks the dealer to arrange for a common carrier to pick up the automobile from the dealer's lot and deliver it to the resident's son who is currently living in Portugal. The dealer hires a carrier on behalf of the resident to ship the vehicle to Portugal. The supply of the vehicle by the dealer to the Canadian resident is zero-rated provided the dealer maintains the appropriate documentary evidence of exportation.

Paragraph 12(a)

Cases

Montecristo Jewellers Inc. v. The Queen, 2019 TCC 31

items were not “shipped” to China under a “contract of carriage” when they were handed directly to the customer on boarding the aircraft

Customers would purchase watches or jewellery at Vancouver stores of the appellant in order to take them as gifts on their regular trips to China. The appellant’s staff would personally take the items to the airport (shortly before the flight departure) where they were inspected by a CBSA officer who would stamp a completed E15 form (a Canadian customs form evidencing exportation of the listed items) and then essentially ensure or monitor that the items were not handed over to the customer until shortly before boarding.

In finding that zero-rating was not available under s. 12(a), Lyons J stated (at paras 71, 78):

…[P]aragraph 12(a) … denotes an intention that a third party carrier would need to be engaged where the supplier “ships” the property to a destination outside Canada. This construction aligns with Parliament’s intent that exported goods are available for use (by the recipient or its designate) only outside Canada.

… As no third party carrier was engaged under a contract for carriage, I find that the appellant did not ship the Jewellery within the meaning of paragraph 12(a).

Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Section 142 - Subsection 142(1) - Paragraph 142(1)(a) delivery in Canada as full voluntary transfer of possession there 318

Section 14

Administrative Policy

GST/HST Memorandum 4.5.2 "Exports – Tangible Personal Property" August 2014

Example 8

A manufacturer in Canada charges its customers for moulds required in manufacturing a specific product. The moulds remain in Canada but the goods produced with the use of the moulds are sold to both Canadian and American customers. The supplies of the moulds to the non-resident customers are zero-rated provided the moulds are for use directly in the manufacture or production of goods for the non-resident.

15.1

Administrative Policy

May 2016 Alberta CPA Roundtable, GST Q.1

docs must evidence like-kind exchange, delivery places, and BN/name of registrant

What documentation satisfies Sch. VI, Pt. V, s. 15.1? CRA responded:

In order for the "first seller" to zero-rate the supply of the continuous transmission commodity to the "first buyer" referenced in Section 15.1 of Part V of Schedule VI, the "first buyer", in addition to the other requirements as set out in this provision, must supply evidence satisfactory to the Minister to the "first seller" that the continuous transmission commodity (CTC) has been supplied to a registrant and all or part of the consideration is property of the same class or kind delivered to the first buyer outside Canada.

The CRA would accept invoices and/or written agreements of the CTC exchanged between the first buyer and the registrant. The documentation should contain such information as would be required to determine the following:

  • The CTC exchanged is of the same class or kind purchased.
  • The place of delivery of the CTC to the registrant inside Canada.
  • The place of delivery of the exchanged CTC to the first buyer outside Canada.
  • Identity of the registrant including their BN.

GST/HST Memorandum 4.5.2 "Exports – Tangible Personal Property" August 2014

62. Continuous transmission commodities situated in Canada are frequently exchanged for similar commodities situated outside Canada. For example, natural gas acquired in Canada on a zero-rated basis by an unregistered non-resident who intends to export the gas may instead be sold and delivered in Canada, without having been exported, to a registrant in exchange for the registrant's gas of the same class and kind already situated outside Canada. Persons may enter into such exchange agreements to minimize transportation costs and reduce shipping time without changing the zero-rated status of the transaction.

63. Generally, section 15.1 ensures that specified cross border exchanges of continuous transmission commodities transported by means of wire, pipeline, or other conduit qualify for zero-rating on a transaction basis rather than on the basis of physical flows.

64. Where the registrant who acquires the continuous transmission commodity from the first buyer is not acquiring the commodity for consumption, use, or supply exclusively in the course of commercial activities of the registrant, the supply is an imported taxable supply and the registrant is liable for tax under sections 218 and 218.1, calculated on the value of the consideration for the supply of the commodity.

15.2

Administrative Policy

GST/HST Memorandum 4.5.2 "Exports – Tangible Personal Property" August 2014

69. If the recipient subsequently neither exports the commodity as described in paragraph 15.2(a), nor supplies it as described in paragraph 15.2(b), the supply is still zero-rated if the supplier did not know or could not reasonably be expected to have known, at or before the latest time at which GST/HST in respect of the supply would have been payable if the supply were not zero-rated, that the recipient would not supply or export the commodity as required.

70. Where the commodity is not exported or supplied as declared in writing by the registered recipient, the supply to the recipient is an imported taxable supply. The recipient is liable for tax under sections 218 and 218.1, and an amount calculated under section 236.1, unless the commodity is acquired for consumption, use, or supply exclusively in the course of the recipient's commercial activities.

5 February 2013 Ruling Case No. 141852

Company A (a Canadian-resident registrant) sells crude oil for its market value to Company B (its U.S.-resident affiliate and also a registrant), with title and delivery occurring when it is injected into the pipeline, and with Company B being the importer of record into the U.S. Where Company B does not require the crude oil which it purchased, it will sell the crude back to Company A at the current market price, with payment generally made on a set-off basis. CRA stated:

If the recipient [i.e., Company B] does not know at the time of purchase whether the continuous transmission commodity, including a portion thereof, purchased from a particular supplier will be exported, then the recipient cannot and should not provide a written declaration stating that the commodity is intended to be exported in the circumstances described in paragraphs 1(b) to (d) of Part V of Schedule VI.

GST Memorandum (New Series) 3.7 (Draft), February 2012 para. 1040105: General Discussion. 2 August 2001 TI RITS 32561

"Where a registrant receives a zero-rated supply of natural gas intended for export and a taxable supply of natural gas that is not zero-rated because it is intended for sale in Canada, the fact that the gas purchased for export may be mixed with the gas purchased for supply in Canada does not affect the entitlement to purchase natural gas using an export declaration, provided that evidence is maintained that the quantity purchased for export is the same as the quantity exported."

23

Administrative Policy

31 August 2004 Headquarter Letter - RITS 50657

In indicating that legal services provided to a non-resident manufacturer to defend it against product liability claims would be zero-rated, the Directorate stated that:

"Legal services supplied to a manufacturer to defend against a product liability claim are not generally considered to be directly connected to the product, but rather directly connected to the manufacturer's objective of defending itself against the claim to minimize its potential legal liability."

24 July 2003 Ruling Case No. 41660

Preparation of written appraisals of specific real properties located in Canada were "in respect of" such properties and, accordingly, were not zero-rated.

9 April 2001 T.I. 33818

Professional services provided to a non-resident insurer with regard to the liability of the non-resident insurer under an insurance contract relating to the insurance of real or tangible personal property situated in Canada were zero-rated. "Although the professional services relate to a liability of the insurer in relation to an insurance contract in respect of real or tangible personal property situated in Canada, the real or tangible personal property does not appear to be the direct object of the professional service."

P-169R

"Meaning of 'in respect of real property situated in Canada' and 'in respect of tangible personal property that is situated in Canada at the time the service is performed', for purposes of Schedule VI, Part V, Section 7 and 23 to the Excise Tax Act," 25 May 1999.

15 June 2000 Headquarters Letter RITS 31364

A legal account rendered to a non-resident insurer was not zero-rated because the services were in respect of the defence of an individual involved in a motor accident in Canada.

1 September 1999 Headquarters Letter RITS HQR0001873

Ruling that a contingency fee charged to a non-resident could be pro-rated based on the litigation services provided by the law firm before and after the commencement of the litigation.

Memorandum (New Series) 4-5-3 "Export - Services and Intellectual Property" June 1998

48. The following are examples of services that are considered to be in respect of real property for purposes of Part V of Schedule VI:

  • (a) services physically performed on the real property (e.g., construction and maintenance);
  • (b) services that enhance the value of the real property, affect the nature of the real property, relate to preparing the real property for development or redevelopment, affect the management of the real property, or affect the environment within the limits of the real property (e.g., engineering, architectural services, surveying and subdividing, management services, security services);
  • (c) services related to;
  • (i) the transfer or conveyance of the real property or the proposed transfer or conveyance of the real property (e.g., real estate services in relation to the actual or proposed acquisition, lease or rental of the real property, legal services rendered to the owner or beneficiary or potential owner or beneficiary of real property as a result of a will or testament);
  • (ii) a mortgage interest or other security interest in the real property; or
  • (iii) the determination of the title to the real property.

Part VII

Section 1

Subsection 1(1)

Administrative Policy

GST/HST Info Sheet GI-170 "Charter Flights Supplied to Third-Party Charterers" May 2015

"Continuous journey" of an individual or group of individuals means the set of all passenger transportation services provided to the individual or group of individuals:

  • and for which a single ticket or voucher in respect of all the services is issued; or
  • where two or more tickets or vouchers are issued in respect of two or more legs of a single journey of the individual or group on which there is no stopover between any of the legs of the journey for which separate tickets or vouchers are issued, and all the tickets or vouchers are issued by the same supplier or by two or more suppliers through one agent acting on behalf of all the suppliers where:
    • all such tickets are supplied at the same time and evidence satisfactory to the Minister is maintained by the supplier or agent that there is no stopover between any of the legs of the journey for which separate tickets or vouchers are issued, or
    • the tickets or vouchers are issued at different times and evidence satisfactory to the Minister is submitted by the supplier or agent that there is no stopover between any of the legs of the journey for which separate tickets or vouchers are issued.

In order for passenger transportation services to be part of a continuous journey, the carrier or its agent must issue either a single ticket or voucher or multiple tickets or vouchers in respect of those passenger transportation services provided to the individual or group of individuals. If not, those passenger transportation services will not form part of a continuous journey for zero-rating and place of supply purposes as explained later in this info sheet.

…If a carrier does not issue tickets, but does issue a document that contains all the information commonly found on a ticket (such as detailed flight information, airports and specific locations where passengers will embark and disembark the aircraft, departure date(s) and time(s), and the passengers' information), then this document (hereafter, "travel document") is considered to be a ticket or voucher for the purposes of the definition of continuous journey.

Continuous Journey

Cases

Sunshine Coach Ltd v. The Queen, 2019 TCC 72 (Informal Procedure)

international flight tickets were not issued by agents for Canadian bus tour operator

In finding that the Canadian transportation services of a Calgary-based tour operator were not part of a “continuous journey” that included flights, so that s. 3 zero-rating was not available, Campbell J noted that the bus tickets issued by the Appellant did not include the airline tickets that international passengers used to travel into and out of Canada, nor did booking companies through which some passengers arranged travel act as agents of the bus operator.

Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Schedules - Schedule VI - Part VII - Section 2 Alberta bus tours were not part of continuous journey performed outside Canada 110
Tax Topics - Excise Tax Act - Schedules - Schedule VI - Part VII - Section 3 Alberta bus tours were not part of continuous journey entailing continuous flight 100

Administrative Policy

GST/HST Memorandum 28.3 Passenger Transportation Services July 2019

Continuous journey where 1 ticket agent issues 2 tickets with 3-hour stopover (para. 6)

Example 4

An individual travels by bus from Windsor, Ontario to Chicago, Illinois, USA, then by air from Chicago to Cancun, Mexico; the bus arrives at the airport in Chicago 3 hours before the flight leaves. The individual receives separate tickets for the bus and the flight from his travel agent when he books the travel.

These passenger transportation services form a continuous journey.

Freight transportation service

See Also

Andrews v. The Queen, 2017 TCC 23 (Informal Procedure)

driving a car is not transporting it

The appellant operated a proprietorship ("Canadian Auto") which provided a service of arranging, at the request of insurance companies, for the return of vehicles from the United States to Canada where the owner had suffered an incapacitating medical emergency, and subcontracted with drivers to return the vehicles. In finding that this service did not qualify as a “freight transportation service,” so that the appellant‘s supplies to the insurance companies were not zero-rated under Sched. VI, Pt. VII, s. 8, V.A. Miller J stated (at paras 25, 29-30):

… [T]he Appellant assumed liability for small dents or scrapes to the vehicles he was delivering. …[T]he Appellant did not and would not assume complete responsibility for the vehicles. The services offered by Canadian Auto are indistinguishable from “driving services” in this regard.

… I have concluded that a “freight transportation service” means a particular service of carrying personal property from one place to another. … [T]here must be [a] mode of carrying the personal property. … [T]he vehicle cannot be both the personal property and the means of carrying it at the same time. …

Canadian Auto [instead] provided a driving service to the insurance companies and the owners of the vehicles.

Words and Phrases
transporting
Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Schedules - Schedule VI - Part VII - Section 8 drving car not transporting it 113

Vuruna v. The Queen, 2010 TCC 365 (Informal Procedure)

Non-truck-owning driver not providing zero-rated freight transportation services

The registrant was a partnership comprised of a husband and wife who provided driving services to a trucking company. They appealed an assessment for late remittance of GST and late remittance penalties on the basis that they were providing outbound freight transportation services, and that supplies were zero-rated pursuant to Part VII of Schedule VI of the Act.

On finding that the registrant was not providing zero-rated freight transportation services, Bédard J. stated (at para. 23):

[T]he appellant did not use his own truck and did not assume liability for the supply of a freight transportation service. Consequently, he was not providing a freight transportation service to Whitelaw Trucking Inc. He was simply providing a driving service to Whitelaw Trucking Inc. and his services were a business input of that company.

Stopover

Administrative Policy

GST/HST Memorandum 28.3 Passenger Transportation Services July 2019

Interruption under 24 hours generally not a stopover

14. An interruption between 2 legs of a journey to transfer between conveyances is not considered a stopover when the interruption is 24 hours or less or ends with the next available scheduled transportation for the next leg of the journey. However, when the stop is longer than 24 hours and is for connection purposes only, the supplier or agent must provide supporting evidence that the interruption is not a stopover.

GST/HST Info Sheet GI-170 "Charter Flights Supplied to Third-Party Charterers" May 2015

"Stopover", in respect of a continuous journey of an individual or group of individuals, means any place at which the individual or group embarks or disembarks a conveyance used in the provision of a passenger transportation service included in the continuous journey, for any reason other than for transferring to another conveyance or to allow for servicing or refuelling of the conveyance.

A stop between two legs of a journey that is 24 hours or less is not considered to be a stopover. A stop of more than 24 hours between two legs of a journey will generally be considered to be a stopover where two or more tickets or vouchers are issued for the legs of the journey.

Section 5

Administrative Policy

GST/HST Memorandum 28.3 Passenger Transportation Services July 2019

Zero-rating of charge for extending ticket (para. 55)

55. Where the supplier of a passenger transportation service provides a service (listed in paragraph 56 of this memorandum) and the original passenger transportation service would have been zero-rated under section 2 or 3 of Part VII of Schedule VI to the Act, the listed service is zero-rated even if it is supplied at a different time or at a different location.

Example 13

A registered supplier in Canada provides an individual with a return ticket for a zero-rated flight from Toronto, Ontario to Barcelona, Spain. While in Barcelona, the individual decides to stay another week and contacts the supplier to have the ticket for the flight home amended. The supply of a service of amending the ticket to extend the stay in Barcelona is also zero-rated.

Section 2

Cases

Sunshine Coach Ltd v. The Queen, 2019 TCC 72 (Informal Procedure)

Alberta bus tours were not part of continuous journey performed outside Canada

The appellant was an Alberta-incorporated tour operator based out of Calgary that operated tour bus trips between a resort in Banff (“Sunshine Village”) and Alberta locations (usually Calgary or Canmore), although some of its charter services were for trips outside of Canada. In determining that zero-rating under Sched. VI., Pt. VII, s. 2 was not available, Campbell J found that, as there was no evidence that any of the disputed transportation services were provided outside of Canada, accordingly, the services are not zero-rated under s. 2 because neither the origin nor termination of any of those trips or any stopovers in respect to the services provided by the Appellant were outside Canada.

Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Schedules - Schedule VI - Part VII - Section 3 Alberta bus tours were not part of continuous journey entailing continuous flight 100
Tax Topics - Excise Tax Act - Schedules - Schedule VI - Part VII - Section 1 - Subsection 1(1) - Continuous Journey international flight tickets were not issued by agents for Canadian bus tour operator 74

Administrative Policy

GST/HST Memorandum 28.3 Passenger Transportation Services July 2019

Exclusion if day trip returning to Canada

40. Specifically excluded from this zero-rating provision is a passenger transportation service that is part of a continuous journey if both the origin and termination of the journey are in Canada and, at the time the journey begins, the individual or group is not scheduled to be outside Canada for an uninterrupted period of at least 24 hours during the journey. Such continuous journeys (trans-border day trips) are subject to the GST/HST.

Example 7

A tour boat ride along the St. Lawrence River is not zero-rated if it starts and ends in Canada on the same day, even if the boat docks on the American side for lunch or sightseeing purposes.

Section 3

Cases

Sunshine Coach Ltd v. The Queen, 2019 TCC 72 (Informal Procedure)

Alberta bus tours were not part of continuous journey entailing continuous flight

The appellant was an Alberta-incorporated tour bus operator based out of Calgary that operated tour bus trips between a resort in Banff (“Sunshine Village”) and Alberta locations (usually Calgary or Canmore), although some of its charter services were for trips outside of Canada. In finding that zero-rating under Sched. VI.pt. VII, s. 3 was not available, Campbell J noted that the bus tickets issued by the Appellant did not include the airline tickets that international passengers used to travel into and out of Canada, nor did booking companies through which some passengers arranged travel act as agents of the taxpayer.

Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Schedules - Schedule VI - Part VII - Section 2 Alberta bus tours were not part of continuous journey performed outside Canada 110
Tax Topics - Excise Tax Act - Schedules - Schedule VI - Part VII - Section 1 - Subsection 1(1) - Continuous Journey international flight tickets were not issued by agents for Canadian bus tour operator 74

Administrative Policy

GST/HST Memorandum 28.3 Passenger Transportation Services July 2019

Bus trip to Seattle and plane flight to Lima form continuous journey (para. 41)

Example 11

A bus ticket for return travel from Vancouver, British Columbia to Seattle, Washington, USA and a return air ticket from Seattle to Lima, Peru are issued together to a client of a Vancouver travel agency. The individual travels by bus from Vancouver to Seattle and boards a flight to Lima a few hours after arriving in Seattle. Two weeks later, the individual returns from Lima to Seattle by air and boards the bus to Vancouver a few hours after arriving in Seattle.

The passenger transportation services that form part of this continuous journey are zero-rated because the stopover is outside Canada and all places at which the individual embarks or disembarks the aircraft are outside Canada.

GST/HST Info Sheet GI-170 "Charter Flights Supplied to Third-Party Charterers" May 2015

Continuous journey

[T]he supply of a "passenger transportation service" is a supply of a service of transporting or carrying travellers (i.e., an individual or group of individuals) by any mode of transportation available to the public (such as a bus, taxi, train, aircraft, or boat) as long as there is:

  • a mode of conveyance;
  • an operator of the conveyance who is independent of the travellers; and
  • an itinerary.

Generally, the supply of a charter flight to a third-party charterer is considered to be a supply of a passenger transportation service.

A supply that is a supply of property (such as a supply, by way of lease, licence or similar arrangement, of the use or right to use tangible personal property such as an aircraft) is not a supply of a passenger transportation service.

Example of zero-rated flight embarking from Canada

...Example 4

A third-party charterer and a carrier enter into a charter agreement for the supply of a charter flight that is a passenger transportation service that is part of a continuous journey. The charter flight is a one-way trip for a group of individuals travelling from Toronto, Ontario to Nassau, Bahamas. The carrier issues a travel document for the set of all passenger transportation services which specifies Toronto as the origin of the continuous journey.

Although the continuous journey originates in Ontario (a participating province), the supply of the passenger transportation service is zero-rated because the termination of the continuous journey is outside the taxation area.

Single v. multiple supply

A ferry flight is generally considered to be an input to a passenger transportation service. ...

[T]he fuel surcharges and the passenger/goods handling charges incurred by the carrier at airports other than its base are costs that the carrier has no choice but to incur in providing the specific air charter. When these charges are passed onto the third-party charterers, they are part of the consideration payable for the passenger transportation service.

Other costs, such as the ferry flights and the cost of accommodation, meals and ground transportation for aircraft crew, are for elements that are not supplied to the third-party charterer. Rather, these elements are inputs consumed or used by the carrier in providing the passenger transportation service. The charges for the ferry flights and crew costs would therefore form part of the consideration payable for the passenger transportation service.

However…the excess valuation charges for baggage would be viewed as a separate charge in respect of a passenger's baggage and not part of the consideration payable for the supply of the passenger transportation service.

Section 4

Administrative Policy

GST/HST Info Sheet GI-170 "Charter Flights Supplied to Third-Party Charterers" May 2015

[T]he excess valuation charges for baggage would be viewed as a separate charge in respect of a passenger's baggage and not part of the consideration payable for the supply of the passenger transportation service.

For GST/HST purposes, there are specific place of supply and zero-rating provisions that apply to a service of transporting an individual's baggage when made by a supplier of a passenger transportation service that imposes a charge for the service. Generally, under these rules, when a carrier provides a separate service of transporting an individual's baggage in connection with the transportation of the individual (i.e., on a charter flight), the GST/HST applies to any excess valuation charge at the same rate as it applies to the passenger transportation service.

Section 8

See Also

Andrews v. The Queen, 2017 TCC 23 (Informal Procedure)

drving car not transporting it

The taxpayer arranged for drivers to drive back to Canada the cars of those who had suffered an incapacitating medical emergency in the U.S. In finding that this did not qualify as a “service of transporting tangible personal property,” so that it was not zero-rated, V.A. Miller J found that the quoted definition of " freight transportation service" required that the property be carried by some mode of transport such as a vehicle, ship or rail car and that merely driving a car did not qualify as transporting it, stating (at para. 29) that:

[T]he vehicle cannot be both the personal property and the means of carrying it at the same time.

Section 15

Administrative Policy

27 April 2018 Ruling 185888

medical repatriation services not international air ambulance services

The Corporation provides medical repatriation services which involve arranging to transport an individual (the patient) from a foreign hospital to a health care facility in the individual’s home country. This would include transport between the medical facilities and airports via ground transportation (ambulance, taxi, or limo), and commercial airline transportation in the company of a medical escort (registered nurses, physicians and advanced cardiac life support trained paramedics). The Corporation charges a daily rate for the medical escort and a fee for the medical equipment required by the patient.

After ruling that the services supplied by the Corporation were of medical escort services rather than of international air ambulance services, so that zero-rating pursuant to Sched. VI, Pt. VII, s. 15 was not available, CRA stated:

The dictionary definition and definition in the provincial legislation suggest that the meaning of “ambulance” is a special vehicle that is used to transport injured or ill individuals who require the care of a physician, nurse or other health care provider while being transported. …

The addition of a medical escort along with medical equipment and supplies would not transform a commercial aircraft into an air ambulance.

Words and Phrases
ambulance
Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Section 123 - Subsection 123(1) - Supply medical escort services were single supply 215
Tax Topics - Excise Tax Act - Schedules - Schedule V - Part II - Section 6 medical escort services could be single supply of nursing services where nurse etc. involved 200
Tax Topics - Excise Tax Act - Schedules - Schedule V - Part II - Section 5 medical escort services could be single supply of physician’s services where physician involved, but not including delegated paramedic services 199

Part IX

1

Cases

National Bank Life Insurance v. Canada, 2006 FCA 161

zero-rating re insurance was to be dealt with under s. 2

The appellant provided administrative services to a non-resident company (Natcan) which operated in the reinsurance field and for which the appellant provides reinsurance for part of the risks it assumes in respect of customers obtaining mortgage loans. In finding that the supply of such services (which were not zero-rated under s. 2) was also not zero-rated under s. 1, Létourneau J.A. stated (at para. 8):

The only way of understanding section 1 and giving it a coherent meaning consistent with the principles of taxation, zero-rating and exempt supplies contained in the Act is to see and recognize in section 1, in the exception of a supply of services contained in section 2, an intention on the part of Parliament to deal in section 2 specifically and exhaustively with the financial services relating to an insurance policy. In other words, section 2 is a special and specific provision applicable to financial services relating to an insurance policy. In section 2, Parliament has defined the conditions under which the supply of such services will be zero-rated and only the supply of services which meet those conditions shall be so rated. Other supplies of financial services related to insurance policies are, pursuant to Part VII of Schedule V, entitled “Financial Services”, exempt supplies.

Locations of other summaries Wordcount
Tax Topics - Statutory Interpretation - Specific v. General Provisions zero-rating re insurance was to be dealt with exclusively under provision re insurance 135

See Also

CIBC World Markets Inc. v. The Queen, 2018 TCC 103, rev'd 2019 FCA 147

an ETA s. 150(1) election denied zero-rating for services provided to a parent’s non-resident branches

Administrative services provided by the appellant (“WMI”) to its parent (“CIBC”) respecting activities carried on by CIBC through its non-resident branches would have been zero-rated but for an ETA s. 150(1) election that had been made between them. WMI argued inter alia that although those non-resident branches were deemed non-resident persons respecting their branch activities for zero-rating purposes, they could not be members of a closely-related group to the extent of such activities.

Bocock J noted (at para. 56) that finding that the s. 150 election eliminated zero-rating was contrary to the purpose of the zero-rating provisions:

[T]he s.150 election, contemplated legislatively and purposively to add administrative simplicity to exempting inter-entity domestic supplies within listed financial institutions, has levied unrecoverable GST on supplies of services exported and consumed externally; an otherwise domestic consumption tax now renders a “sub-species” of exported financial services less competitive.

Nonetheless, he found that zero-rating was unavailable. On the text, “the non-resident branch is not excluded contextually from being a ‘member of a closely related group’,” (para. 44), and “had Parliament wished to exclude supplies to non-resident branches from application of the s.150 election, the legislation may have specifically done so” (para. 45). Furthermore (para. 54):

Parliament was aware of the general proposition that GST is refunded through ITCs on exports. This was the subsisting situation: section 1 of Part VII of the Exempt Schedule and Part IX of the Zero-rated Schedule were co-extensive prior to the enactment of section 2 [of Sched. V, Pt. VII]. If section 2 of Part VII of the Exempt Schedule had not been enacted, logically and constructively, the enactment of subsection 150 and the s.150 election, “deemed” financial services would have simply slipped into either sleeve of the Exempt Schedule or Zero-rated Schedule; domestically consumed “deemed” financial services falling within Schedule V and exported deemed financial services falling within Schedule VI by virtue of the exception in section 1 of Part VII of the Exempt Schedule. But section 2 was enacted and it deals specifically and exceptionally with “deemed” financial services under subsection 150(1). As such, the more general financial service is not left to simply fall within either Schedule V or Schedule VI based upon domestic or external consumption, but, as a “deemed” financial service, is exclusively diverted into the Exempt Schedule as an exempt supply.

Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Section 150 - Subsection 150(1) s. 150 election precluded zero-rating of services rendered to parent's NR branches 155

Administrative Policy

17 December 2015 Interpretation 153009

potential zero-rating re share issuances and dividends

A corporation, which is not engaged exclusively in commercial activities, issues shares and pays dividends to its shareholders, who are both resident and non-resident. After finding that the issuance of the shares and the dividend payments were financial supplies to the shareholders, CRA quoted Sched. VI, Part IX, s. 1 and stated:

If…the Corporation is a “financial institution”, this section may zero-rate an otherwise exempt supply of a financial service, provided the supply is not excluded by paragraphs (a) to (e) of section 1, or by section 2… .

Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Section 123 - Subsection 123(1) - Supply required shareholder communications not a supply 169
Tax Topics - Excise Tax Act - Section 123 - Subsection 123(1) - Financial Service - Paragraph (f) dividend a financial supply to recipient 81
Tax Topics - Excise Tax Act - Section 123 - Subsection 123(1) - Financial Service - Paragraph (d) share issuance a financial supply to shareholder 164

11 July 1997 Technical Interpretation HQR0000416

Sales commissions and trailer fees received by a dealer who sells units in a mutual fund to non-resident investors would be zero-rated.

Guide for Providers of Financial Services under "Zero-rated Financial Services"

General synopsis of ss.1 and 2.

Articles

David Schlesinger, "De Minimis Financial Institutions", 1995 Commodity Tax Symposium Papers, C. 17: Danny Cisterna, "Hot Topics for Financial Institutions," 1999 Commodity Tax Symposium Papers, C. 7: suggests that "relates to" requires a direct connection.

indicates that an investment by a financial institution in dividend-bearing treasury shares of a non-resident company is a zero-rated supply.

3

Administrative Policy

Guide for Providers of Financial Services

Any supply of precious metals not described in s. 3 will be treated as a supply of a financial service.