Please note that the following document, although correct at the time of issue, may not represent the current position of the Canada Revenue Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence du revenu du Canada.
[Addressee]
Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 15th floor
320 Queen Street
Ottawa ON K1A 0L5
Case Number: 132324
June 7, 2011
Dear [Client]:
Subject:
GST/HST Interpretation
Services Provided By A Non-Resident Supplier
Thank you for your letter of January 27, 2011, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the supply of services provided by a non-resident supplier.
HST applies at the rate of 15% in Nova Scotia, 13% in Ontario, New Brunswick, and Newfoundland and Labrador, and 12% in British Columbia. GST applies at the rate of 5% in the remaining provinces and territories.
All legislative references are to the Excise Tax Act (ETA) unless otherwise specified.
We understand the following background:
• [...] (the "Company") is a Canadian, commercial, [...] corporation registered for the GST.
• The Company entered into an agreement with a non-resident service supplier for the refurbishment of equipment that is used in the Company's commercial activities.
• The non-resident service supplier is registered for the GST.
• The Company's equipment is transported to the registered, non-resident service supplier's location outside Canada where the refurbishment service is performed.
• Upon completion of the refurbishment service, the Company's equipment is returned to Canada by the registered, non-resident service supplier who acts as the importer of record and is responsible for paying the assessed import duties and other taxes, including the GST.
Interpretation Requested
You would like to know the following:
• Is the registered, non-resident service provider required to collect GST in respect of the refurbishment service performed outside Canada?
• Is the registered, non-resident service supplier entitled to claim an input tax credit (ITC) in respect of the GST paid upon importation of the equipment under Division III of the ETA?
• If the registered, non-resident service supplier is not entitled to an ITC in respect of the GST paid, is the Company able to use section 180 of the ETA?
Interpretation Given
Based on the information provided, the registered, non-resident service provider is not required to collect GST in respect of the refurbishment service performed outside Canada.
A taxable supply made in Canada is subject to GST if made in a non-participating province and subject to HST if made in a participating province. The participating provinces are Ontario, Nova Scotia, New Brunswick, British Columbia, and Newfoundland and Labrador.
Pursuant to paragraph 142(2)(g) of the ETA, a supply of a service is deemed to be made outside Canada if, the service is, or is to be, performed wholly outside Canada.
In this case, based on the information provided, the supply of the refurbishment service that is wholly performed outside Canada, is made outside Canada, so the supply is not subject to tax under Division II; that is, the recipient of the supply is not liable to pay the tax and the supplier is not liable to collect the tax.
Section 169 of the ETA sets out the general rules regarding the entitlement of a person to an ITC with respect to tax on acquisitions and importations of goods and services.
Generally, a registrant is entitled to an ITC with respect to tax on the importation of goods that is paid or payable by the registrant, if the registrant imports the goods for consumption, use or supply in the course of its commercial activities. However, the person considered to have imported the goods for consumption, use or supply in the course of its activities is not necessarily the person who imports the goods and is the importer of record. It is only the de facto importer who may be considered to have imported the goods for consumption, use or supply in the course of its commercial activities.
Where a person other than the de facto importer imports goods and is the importer of record, it is only the de facto importer who may be considered to have imported the goods for consumption, use or supply in the course of its activities. The de facto importer will be considered to have paid the tax on the importation if evidence is maintained that the importer of record paid the tax on behalf of the de facto importer. In this regard, the de facto importer will be required to obtain a copy of the import documentation from the importer of record in order to satisfy the documentary requirements for claiming the ITC.
In this case, the Company who is the owner of the imported refurbished equipment is the de facto importer of the equipment and is therefore the only person who is eligible to claim an ITC in respect of the importation. In order to satisfy the documentary requirements for claiming the ITC, the Company must obtain a copy of the customs documentation for the importation of the goods from the non-resident service supplier.
Section 180 of the ETA is not applicable in the case. Section 180 of the ETA allows a registrant to recover the amount of tax that is paid by an unregistered non-resident on the importation of goods where the non-resident has paid tax on the importation of goods where, either the physical possession of the goods is caused by the non-resident to be transferred in Canada to the registrant, in order for the registrant to make a taxable supply of a commercial service in respect of the goods to the non-resident, or the non-resident supplies the goods to the registrant and delivers, or makes them available, in Canada to the registrant before they are used in Canada by or on behalf of the non-resident. Neither of these circumstances exists in this case.
The foregoing comments represent our general views with respect to the subject matter of your request. These comments are not rulings and, in accordance with the guidelines set out in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service, do not bind the Canada Revenue Agency with respect to a particular situation. Future changes to the ETA, regulations, or our interpretative policy could affect this interpretation.
For your convenience, find enclosed a copy of GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-957-8220. Should you have additional questions on the interpretation and application of GST/HST, please contact a GST/HST Rulings officer at 1-800-959-8287.
Yours truly,
Kevin W. Smith
Border Issues Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate
UNCLASSIFIED
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