|
MEMORANDUM FOR: XXXXX
|
File number: 12005-1May 18, 2000
|
This memorandum is in response to your facsimile transmission of March 10, 2000, with attachments, and our subsequent telephone conversation of March 24, 2000, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the operations of XXXXX[.] Based on the information provided, our understanding of the facts is as follows:
In her request, XXXXX outlined two hypothetical itineraries that would be typical of the programs XXXXX handles. These programs would be sold to non-resident, non-registered international tour operators.
The first typical itinerary is described as follows:
XXXXX
XXXXX
XXXXX
XXXXX
XXXXX
XXXXX
XXXXX
XXXXX
XXXXX
XXXXX
XXXXX
XXXXX
XXXXX
XXXXX
XXXXX
XXXXX
XXXXX
XXXXX
XXXXX
XXXXX
The second typical itinerary is described as follows:
XXXXX
XXXXX
XXXXX
XXXXX
XXXXX
XXXXX
XXXXX is a registrant that purchases domestic transportation components on a taxable basis from Canadian suppliers. XXXXX then sells these components to non-resident non-registered international tour operators who in turn supply international air travel together with the coach tour as part of a tour package to non-resident individuals or groups of individuals.
Three different coach companies are used to provide the domestic passenger transportation in the first itinerary whereas one coach company is used for all services in the second itinerary. You stated that XXXXX provides to the non-registered non-resident tour operators one ticket or voucher on which the services of the three coach companies are included.
Interpretation Requested
You are requesting our opinion as to whether the domestic transportation components supplied by XXXXX in the two itineraries described above can be supplied on a zero-rated basis by XXXXX to the non-resident tour operator.
Interpretation Given
The continuous journey rule in Schedule VI to the Excise Tax Act (ETA) allows for the zero-rating of domestic passenger transportation sold by a supplier such as XXXXX to non-resident tour operators who are not registrants provided it is ultimately supplied to an individual or group of individuals as part of a zero-rated continuous journey of the individual or group.
In order to determine if domestic transportation services would qualify for zero-rating as part of a continuous journey, the following conditions must be met:
1. all tickets or vouchers are issued by the same travel service supplier or travel agency acting on behalf of two or more travel service suppliers;
2. all tickets or vouchers are for the same traveller;
3. any intermediate stops between the legs of the journey for which separate tickets or vouchers are issued are for connection purposes only. For administrative purposes, when a transfer to another conveyance is required in order to complete the continuous journey, a period of 24 hours will be considered reasonable within which to make this connection. If a longer stop is required, it is the responsibility of the supplier or travel agency to demonstrate that the length of the stop is for connection purposes only;
4. the continuous journey contains a qualifying international origin, destination or stopover; and
5. the supplier or travel agent must be able to demonstrate to the Minister that the conditions for treating a domestic ticket or voucher as part of a continuous international journey have been met.
The fact that, in the first itinerary submitted, three Canadian coach companies are used to complete the Canadian tour could have been a relevant factor in deciding if the domestic transportation qualifies as a continuous journey. This information is important, because if three separate tickets or vouchers had been issued we would have to examine whether there were any stopovers between those tickets. However, you have advised that a single ticket or voucher is issued to cover the three domestic coach legs.
The term "single ticket" includes a ticket stock, which could list one or more legs of a journey over a period of time. Where different modes of transportation are used (E.g. air to bus; bus to train; coach to coach when supplied on separate tickets or vouchers by different operators; etc[.]), there will usually be at least one ticket or voucher per mode and the stopover rule will apply between those modes in determining if there is a continuous journey. Taking into account that the coach tour is provided on a single ticket or voucher, in the two itineraries that XXXXX has provided for review, there is at least two modes of transportation, i.e., international flight and domestic coach tour. Therefore, the stopover rule is operative at the change of travel modes, i.e. from the international flight to the coach tour and then to the international flight.
The domestic ground transportation in the two itineraries would be considered part of a continuous journey including the international air transportation because the international air transportation and domestic ground transportation are each issued on a single ticket and there are no stopovers between the connections of the ground transportation to the inbound and outbound air transportation. This is provided the tickets or vouchers for the different modes of transportation services are issued by the same non-registered non-resident tour operator to a non-resident individual or group of individuals.
The continuous journey outlined in the two itineraries would be zero-rated provided that the international flight either originates or terminates outside the taxation area. The continuous journey would also be zero-rated if it originated within the taxation area, but outside Canada, and the recipient of the supply tenders the consideration for the supply at a place outside Canada. Also, please note that a proposed amendment to paragraph 3(c) of Part VII of Schedule VI would remove the requirement that consideration be tendered outside Canada for the zero-rating of journeys that include air travel and originate within the taxation area, but outside Canada.
A review of the two itineraries shows that the transfers between the flights to the coaches to the flights are made within the 24 hours reasonable period satisfying the third condition under the continuous journey rule.
On the other hand, even if the coach tours were provided on three separate tickets or vouchers in the first itinerary, the domestic transportation would still qualify for zero-rating given that the transfers between the legs using different coach companies are made within the 24 hours limit.
It is also important to note that one stopover in Canada would not jeopardize this zero-rated treatment provided there is at least one continuous journey either inbound or outbound during the overall trip. For example, if it turns out that the transfer between XXXXX on days eight and nine takes more then the 24 hours limit, the overall itinerary will still be zero-rated given that the XXXXX is linked to the inbound journey and the XXXXX is linked to the outbound journey.
To supply the domestic transportation to the non-resident tour operator on a zero-rated basis, XXXXX must also obtain documentary evidence satisfactory to the Minister that it will be resold as part of a zero-rated continuous journey. Acceptable proof includes a certificate of zero-rated entitlement (sample copy attached), a tour itinerary describing all elements of the journey including the origin, destination, stopovers, arrival and departure dates, and all modes of conveyance and a passenger list. Moreover, the foreign tour operator is responsible to maintain the requisite passenger lists and make them available to CCRA officers upon request during an audit. The foreign tour operator must also agree to pay the GST in respect of any supply of transportation found to be properly exigible during an audit.
Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 957-8223[.]
Carolle Mercier
Services and Intangibles Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate
CERTIFICATE OF ZERO-RATED ENTITLEMENT
To:
(Name and Address of Registered Canadian Supplier of Travel Services)
WE HEREBY CERTIFY that the following supply of transportation services ordered by us from you, namely:
_____________________________________________________________________________________
(describe in appropriate detail the required services to be furnished by the Canadian supplier)
are required and will be utilized by us in the provision of one or more package tours in such a manner as to constitute part of a continuous journey, and will qualify for zero-rated status pursuant to Part VII of Schedule VI to the Excise Tax Act (Canada). We undertake to pay any Goods and Services Tax in respect of any journey found to be properly exigible during an audit of the Registered Canadian Supplier.
DATED at _____________________________
This day of _____________________________ , 20 ____.
______________________________________________
(Name and Address of Foreign Tour Operator)
BY:
______________________________________________
(Authorized Officer)
| c.c.: |
Patrick McKinnon
Carolle Mercier |
Email this Content