13 March 2001 GST/HST Interpretation 35089 - Application of GST/HST to a Proposed Sale of Vessels

Dear XXXXX

Thank you for your letter of March 13, 2001 concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to a proposed sale of vessels by XXXXX[.]

Facts

1. XXXXX carry on business in XXXXX and are registered for GST/HST purposes.

2. XXXXX is negotiating an agreement whereby it proposes to sell XXXXX (collectively referred to as the "the vessels"). In addition to the vessels, the purchaser will acquire ownership on closing of specified spare parts and equipment.

3. The purchaser is not resident in Canada and is not registered for GST/HST purposes.

4. The purchaser will pay a deposit upon entering into the agreement and the balance of the purchase price upon closing, which shall occur in XXXXX, within approximately 21 days of entering into the agreement.

5. Closing of the agreement will occur while the vessels are located in Canada at their XXXXX docks. The vessels are the sole responsibility of, and shall remain in the care, custody and control of, XXXXX until closing. The vessels will be the sole responsibility of the purchaser after closing.

6. As a condition of the purchase, the purchaser must provide XXXXX with satisfactory evidence on or before closing date that the purchaser has obtained all appropriate export permits for the vessels and additional assets.

7. For a period of up to 60 days after closing, XXXXX will provide moorage for the vessels at XXXXX cost of such moorage.

8. It is your understanding that the vessels will be removed from Canada by submersible barge or other carrier transportation.

9. XXXXX will use reasonable efforts to facilitate the availability of ships' captains, engineers and other qualified personnel to train the purchaser's personnel on the use and operation of the vessels, which training will not be conducted in Canada.

10. The agreement will include a clause confirming that the purchaser will not receive training services or otherwise use the vessels in Canada prior to their exportation.

11. The purchaser provides the following representations and warranties:

(a) The vessels will be exported from Canada within 60 days of the closing date;

(b) The vessels are to be immediately registered in a jurisdiction other than Canada after closing; and

(c) The purchaser's intended use of the vessels is for domestic passenger and vehicular ferry service in or between countries other than Canada.

Interpretation Requested

The proposed sale of the vessels and related equipment is zero-rated pursuant to Schedule VI, Part V, section 1 of the Excise Tax Act (the Act).

Interpretation Given

In general, Schedule VI, Part V, section 1 to the Act zero-rates 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, if:

(a) the recipient exports the property within a reasonable period of time, having regard to the circumstances surrounding the exportation;

(b) the property is not acquired by the recipient for consumption, use or supply in Canada before the exportation of the property by the recipient;

(c) the property is not further processed, transformed or altered in Canada except to the extent reasonably necessary or incidental to its transportation;

(d) the supplier maintains evidence satisfactory to the Minister of the exportation of the property by the recipient.

Based on the information provided, it appears that the conditions for zero-rating the supply of the vessels made by XXXXX, pursuant to Schedule VI, Part V, section 1 of the Act, would have been met. Therefore it is our interpretation that the supply of the vessels and the related equipment by XXXXX would qualify for zero-rating.

The foregoing comments represent our general views with respect to the subject matter of your letter. Proposed amendments to the Excise Tax Act, if enacted, could have an effect on the interpretation provided herein. These comments are not rulings and, in accordance with the guidelines set out in section 1.4 of Chapter 1 of the GST/HST Memoranda Series, do not bind the Canada Customs and Revenue Agency with respect to a particular situation.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 954-7959.

Yours truly,

J.A. Venne
Director
General Operations and Border Issues Division
Excise GST/HST Rulings Directorate