ET/SL 31

October 7, 1996

SUBJECT: Application of the Canadian Air Transportation Tax, as the U.S. Air Transportation Tax Has Been Re-Enacted

Legislation imposing the U.S. Air Transportation Tax (ATT), which had expired December 31, 1995, was re-enacted August 27,1996. The U.S. taxes consist of a $6 departure tax for international travel and a 10 per cent tax for travel within the United States and a 225 mile buffer zone. The imposition of the 10 per cent tax affects the application of the Canadian Air Transportation Tax (ATT).

In most circumstances, for return air transportation within the taxation area, the rate of Canadian ATT is 7% of the amount paid or payable, plus $6, to a maximum of $55. An exception to this general rate occurs when air transportation is purchased outside Canada and is subject to the U.S. ad valorem ATT. Section 9 of the Air Transportation Tax Regulations states that where an amount is subject to the ad valorem ATT imposed by the United States and the ticket is purchased outside Canada, the Canadian ATT is computed as 5% of the amount paid or payable, plus $4, to a maximum of $27.50. Therefore, as the U.S. ATT has been reinstated, the Canadian ATT shall be imposed at the rate of 5% of the amount paid or payable, plus $4, to a maximum of $27.50 for such air travel.

In addition, because of a legislative expiry date of December 31, 1996, in the U.S. legislation, air travel in 1996 will be subject to the American ATT, while air travel in 1997 will not be. The U.S. ad valorem ATT will apply to ½ of the fare for return travel within their buffer zone commencing in 1996 and returning in 1997. For such air transportation purchased outside Canada, the Canadian ATT would also be calculated as 5% of the entire amount paid or payable, plus $4, to a maximum of $27.50.

With the expiration of the 10% U.S. ad valorem ATT effective December 31, 1996, the Canadian ATT will apply at the general rate of 7% of the amount paid or payable, plus $6, to a maximum of $55, after that date.

Should you have any questions, please do not hesitate to contact the local Revenue Canada tax services office.