Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
942503
XXXXXXXXXX O. Laurikainen
(613) 957-2116
Attention: XXXXXXXXXX
December 15, 1994
Dear Sirs:
Re: Part XIII Tax re: Shrink-wrap or Packaged Computer Software
This is in reply to your letter dated September 22, 1994 wherein you requested verification of the Department's position concerning the above referenced issue.
As a result of a recent study, Revenue Canada will now treat a transaction whereby a non-resident sells a Canadian resident "shrink-wrap computer software" as a sale of tangible goods, and therefore, Part XIII tax will not be applicable to the proceeds received by a non-resident in respect of such transaction. However, Revenue Canada continues to view a payment to a non-resident for the use of, or the right to use, "custom computer software" for a specified or indefinite period of time as being subject to Part XIII tax under subparagraph 212(1)(d)(i) of the Act.
The term "shrink-wrap computer software" is generally used to describe software that is pre-packaged and commercially available through mail order or at a retail store. Generally, such software is packaged along with a copy of the other related information, including the general licensing agreement, under a plastic shrink-wrapped cover. The general license agreement does not contain the name of the particular end-user of the software or the amount of the license fee. Moreover, the end-user of the software is not normally required to acknowledge in any manner that he has read or agreed to the terms of the software license.
The term "custom computer software" on the other hand, generally describes computer software the use of which is subject to a specific computer software license agreement. As a condition to the end-user acquiring the right to use the computer software, the end-user is required to enter into a computer software license agreement with respect to the use of the software. Such agreement will usually set out the amount of and the description of, the fees to be paid under the particular computer software license and the agreement will usually be signed by both parties to acknowledge acceptance of its terms. While custom computer software includes computer software that has been designed for a particular end-user's needs, the Department views all software as being custom computer software where an end-user acquires the right to use any computer software program under a specific license agreement. It does not matter that copies of the particular software program may also be available to the end-user and other end-users, as shrink-wrap software.
We trust this is the information you require.
Yours Truly,
for Director
Reorganizations and Foreign Division
Rulings Directorate
Policy and Legislation Branch
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© Her Majesty the Queen in Right of Canada, 1994
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© Sa Majesté la Reine du Chef du Canada, 1994
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