Schedule VI

Importations of donor eggs

[S]upplies of human sperm and oocytes are not drugs that are included in section 2 of Part I of Schedule VI and therefore are not zero-rated under this section. In addition, section 5 of Part I of Schedule VI zero-rates supplies of human sperm. However, there is no corresponding provision in the Act that zero-rates supplies of human oocytes.

Effect of zero-rating on importations

The first proposed amendment to the Act would add, under section 6 of Part I of Schedule VI to the Act, the supply of an ovum, as defined in section 3 of the Assisted Human Reproduction Act, to the list of drugs and biologicals that are zero‑rated for GST/HST purposes. Consequently, the importation of an ovum would be considered a non‑taxable importation for GST/HST purposes under section 6 of Schedule VII to the Act and therefore no longer subject to tax. Similarly, an ovum brought into a participating province from a non-participating province, or from another participating province for which the rate of the provincial part of the HST is lower, would be considered non-taxable property for GST/HST purposes under section 15 of Part I of Schedule X to the Act and therefore no longer subject to self-assessment for the provincial component of the HST, or part thereof.

Meaning of “ovum”

As defined in section 3 of the Assisted Human Reproduction Act, ovum means a human ovum, whether mature or not.

Treatment of the subject supplies before amendments passed

[S]uppliers can stop charging GST/HST on supplies of human ova in accordance with the proposed amendment as of March 20, 2019. … [C]onsistent with its standard practice, the CRA is administering this measure on the basis of the proposed amendment [and similarly re embryos]

If the proposed amendment becomes law, you may then contact the supplier, who may choose to adjust the amount charged, or refund or credit the amount collected. If so, the supplier must provide you with a credit note for the amount. Alternatively, you can file a rebate claim with the CRA for the amount paid in error … . However, the CRA cannot pay a rebate for an amount paid in error as or on account of tax until the proposed amendment becomes law.

A supplier who has charged or collected GST/HST on human ova supplied after March 19, 2019, must include that amount in the calculation of their net tax on their GST/HST return, and remit that net tax if there is a balance owing, according to the regular rules.

Assimilated to single supply at fertility clinic of institutional health care service

Where a patient of a fertility clinic or other health care facility undergoes treatment or other service at the clinic which includes the implantation of a human donor ovum or the transfer of an in vitro embryo, the CRA considers that the supply of the human donor ovum or in vitro embryo made by the clinic to the patient in these circumstances would generally be part of an exempt supply of an institutional health care service.

At the 2018 CBA Roundtable, Q.5 regarding Brian Hurd, and CRA’s administrative arrangement to allow 35% input tax credits to orthodontal practices, CRA indicated that it would prospectively phase-out that administrative arrangement and that it was preparing a publication discussing ITC availability to dentists and orthodontists.

Davis Dentistry (under appeal), which effectively applied that administrative practice to the orthodontic practice of a professional corporation even though it (contrary to the stated CRA requirement) did not show an allocation in its invoices between the two supply components, conflicted with Brian Hurd.

Regarding the status of its review, CRA stated:

[T]he CRA will wait for the decision of the Federal Court of Appeal before taking any more steps in regard to the 35% ITC administrative arrangement.

In the meanwhile, the administrative arrangement will remain in effect until further notice. The administrative arrangement continues to apply where a dentist or dental corporation follows the terms of the arrangement: the dentist identified the two separate supplies, for example, the invoice issued to the patient identifies the consideration for the supply of the orthodontic appliance or artificial tooth separately from the consideration for the supply of the dental service, and the ITC claim relates to mixed-use purchases (to make both taxable and exempt supplies) such as overhead and general operating expenses and certain direct expenses or inputs (for example, personal property such as arch wires used exclusively to fabricate orthodontic appliances). The administrative arrangement does not include ITCs for capital property.

The following are considered service animals for purposes of section 33:

• seeing-eye horses (miniature ponies);
• seeing-eye dogs;
• hearing-ear dogs;
• seizure alert or response dogs;
• special service skills dogs that can assist pulling a wheelchair, carrying or picking up items or providing balance for an individual with mobility difficulties; and
• other special skills service animals that offer assistance to young adults with autism or provide emotional support for individuals with mental health issues.

Additionally, section 33 also zero-rates the supply of a service of training an individual to use the service animal if the service is provided by an organization that is operated for the purpose of supplying such specially trained animals to individuals with a disability or impairment. Where an organization’s purpose is to train service animals and individuals to use service animals, rather than supplying the service animal, the supply of any training services provided to an individual to use the service animal is generally taxable.

Design features must assist in coping with incontinence

To be an incontinence product specially designed for use by an individual with a disability, the product must be designed to absorb leakages, reduce odours, control bacteria, maintain dryness, and protect the individual against skin irritation. As such, the product must be designed using high-absorbency materials and typically have a sealed edge to ensure leakage protection. The fact that a product is reusable or disposable, or can be used by an individual who does not have a disability is not sufficient to change the characteristics of a product so that it is no longer considered to be an incontinence product specially designed for use by an individual with a disability.

…Examples of products that are not zero-rated under this provision include waterproof chair pads, sheets and mattress covers.

Children’s diapers…are not zero-rated… .

In finding that a bottled product that was to be mixed with water did not qualify under Sched. VI, Pt II, s. 1, CRA stated:

[T]he CRA considers a product to be a food or beverage if an average consumer would recognize and purchase the product as such in the ordinary course of buying basic groceries. … Consumers usually consume food and beverages to sustain or maintain life, to allay hunger or thirst, or for enjoyment rather than for therapeutic or preventative effects … .

Products commonly referred to as dietary supplements are consumed for their therapeutic or preventative effects (e.g., to correct actual or perceived health problems), or to achieve specific beneficial effects related to performance or physique. This also includes products that are labelled or marketed as products to be consumed primarily to facilitate the intake of ingredients that place an emphasis on such claims. Products commonly referred to as dietary supplements are not considered to be basic groceries and are not within the scope of section 1 of Part III of Schedule VI. …

T]he Product on its own is not a beverage, but rather is taken with water to allow for the ingestion of the Product. The Product is to be consumed in accordance with recommended dilution instructions. The Product is not a food, beverage, or an ingredient. The Product is a dietary supplement and, as such, is not zero-rated as a basic grocery.

Separate supplies of herbal goods by acupuncturist

Sales of products such as dried herbs and herbal goods for medicinal purposes are generally separate supplies made by the acupuncturist and do not form part of an acupuncture service. As such, most sales of these products are subject to the GST/HST. Such products also include botanical medicines, Chinese herbal medicines, and tinctures, ointments, and nutritional supplements, whether or not dispensed by an acupuncturist….

Company B, a registered resident, agreed to sell tangible personal property (the “Property”) to Company C, an unregistered non-resident, using the Incoterms® 2010 DAP Port of Liverpool, U.K. so that delivery and title transfer was to occur at the U.K. destination – although the parties agreed that Company C was to indemnify Company B if the Property were lost or damaged in transit. The Property is then loaded onto Company C’s vessel at the Port of Halifax and was immediately exported.

CRA indicated that it appeared that, because Company C acquired physical possession of the Property in Canada pursuant to the terms of the agreement, s. 142(2)(a) did not apply to deem the supply to be outside Canada. Similarly, CRA indicated that as the delivery of the Property by Company B to Company C appeared to be in Canada, zero-rating under Sched. VI, Pt. V, s. 1 also would not be available for the preceding supply of the Property by a Canadian registered vendor (Company A) to Company B.

Overview of requirements

3. 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 is zero-rated if all of the following conditions are met:

• a. in the case of property that is a continuous transmission commodity that the recipient intends to export by means of a wire, pipeline, or other conduit, the recipient is not registered for GST/HST;

  b. the recipient exports the property as soon after the property is delivered by the person to the recipient as is reasonable having regard to the circumstances surrounding the exportation, and where applicable, to the normal business practice of the recipient;

  c. the recipient has not acquired the property for consumption, use, or supply in Canada before exportation;

  d. after the supply is made and before the recipient exports the property, the property is not further processed, transformed, or altered in Canada, except to the extent reasonably necessary or incidental to its transportation; and

  e. the person maintains evidence satisfactory to the Minister of National Revenue of exportation of the property by the recipient.

Intent to export vs actual export of the property

7. Tangible personal property will generally be regarded as exported where the property is carried or sent out of Canada for trade, consumption, use, or supply by the recipient outside Canada, and the property is not consumed, used, or supplied en route before delivery to a place outside Canada. The recipient must have the intention of exporting the property when the supply is made in order for it to be zero-rated. However, ...[t]he recipient must export the property in fact.

As soon after the property is delivered by the person to the recipient as is reasonable

9. Whether tangible personal property is exported "as soon after the property is delivered by the person to the recipient as is reasonable" will depend on the facts of each situation, including the type of property involved and the general business practices of the recipient. The CRA will consider the following factors where the supplier can provide documentary evidence why the property was not exported either immediately after the supply was made, or in the time frame originally anticipated:

• a late shipment from a subcontractor delays the shipment of the whole consignment;
• transportation obstacles have been encountered;
• some tangible personal property is held in inventory while awaiting delivery of other property before exporting all of the property at once;
• the delay is attributable to the recipient's normal business practice; or
• other situations have resulted in unexpected delays.

Satisfactory evidence of exportation

16. The acceptability of the evidence of exportation will depend on whether the entire shipment of the tangible personal property can be traced from its origin in Canada to the point where it leaves Canada on its way to a foreign destination. [E]vidence…will vary depending on the mode of transportation…and the nature of the property. Satisfactory evidence may include…:

• sales invoice or purchase contract that identifies the property and the recipient, matched with the respective shipping or delivery instructions on the purchase order;
• transportation document…such as a bill of lading…which is evidence of a contract of carriage as well as proof of delivery of the property on board a vessel (additional information… is available in GST/HST Memorandum 28.2, Freight Transportation Services);
• customs brokers' or freight forwarders' invoice that relates to the exported property;
• import documentation required by the country to which the property is exported;
• in the case of motor vehicles, boats, ships, and aircraft, registration from the foreign regulatory authority where the property has been licensed;
• or any other evidence (…not generated internally by the recipient)…that the property has been exported.

Where the taxpayer has failed to provide information pursuant to a requirement under s. 289.1, "CRA's general policy is to proceed with a compliance order under section 289.1 (civil court remedy) prior to seeking the prosecution provision under section 326.)

RC will be amending its administrative policy to allow certificates to be issued by purchasers containing prescribed information as evidence of exportation. However, the exporter may be required to make available to the Department the shipper's balance sheet statements and any other evidence necessary to verify the zero-rated export purchases.

Example 3

An unregistered non-resident airline is supplied with meals for consumption on board, and parts used to operate the aircraft while the aircraft is transporting passengers or property to a destination outside Canada. The supplies of meals and parts are zero-rated.

Example 4

A cruise ship stops at a Canadian port while transporting passengers between places outside Canada. During the cruise ship's stay in port, the unregistered non-resident operator of the cruise ship rents bicycles for use by some of its passengers. The supplies of rented bicycles to the operator are not zero-rated because they are not acquired for consumption, use or supply by the operator in the course of transporting passengers.

As a small part of its business, a U.S. resident who is not registered for GST/HST purposes (“USco”) supplies information services to Canadian businesses and individuals, who subscribe by credit card through a website hosted on a U.S. web server and with the information services being delivered electronically to them from that server. USco will now receive expanded assistance respecting marketing to its Canadian customers from its Canadian resident affiliate ("Canco"). The "New Services" include much of the marketing work including strategy development, weekly “prospecting” of accounts, assistance in the preparation of term sheets and proposals for delivery to prospective clients and in the negotiation of contract terms and drafting contracts, use of the Canco website as a portal in communicating with current and prospective purchasers and attending key trade events to promote the USco information services.

The Services Agreement between Canco and USco stipulates that Canco is not acting as agent of USco; and Canco does not have contact with the customers.

Ruling that the supplies of New Services by Canco to USco are zero-rated pursuant to Sched. VI, Pt. V, s. 5.

Respecting a certificate of a non-resident that it is not carrying on business in Canada:

CRA has not indicated in GST/HST Memorandum 4.5.1, nor in any other publication, that such a document would be accepted by the CRA as proof that a non-resident is not carrying on business in Canada for purposes of zero-rating a supply under Part V of Schedule VI to the ETA. A supplier may not rely on such documentation as acceptable proof that a non-resident person is not carrying on business in Canada for purposes of zero-rating a supply under Part V of Schedule VI to the ETA.

In the railway industry, maintenance orders generally are tracked as either scheduled maintenance - or as “bad orders,” being for repair services of railway rolling stock other than regularly scheduled maintenance, many of which arise where required repairs to rolling stock cannot be timely completed at U.S. facilities. Would all “bad orders” qualify as an emergency repair service? CRA responded:

As described in … 4-5-3 … an “emergency” is an unforeseen event or combination of events that calls for immediate action. The repairs must be of an urgent nature, such that if not immediately undertaken, the existing conditions could seriously affect the safety of the conveyance, the property or passengers being transported, or the people working on or about the conveyance. Whether a particular repair service referred to as a “bad order” would qualify as an emergency repair service for purposes of section 6.1 of Part V of Schedule VI … would depend on the facts of each situation.

Emergency

38. The term "emergency" is not defined in the Act but generally refers to an unforeseen event or combination of events that calls for immediate action. The repairs must be of an urgent nature that if not immediately undertaken, could seriously affect the safety of the conveyance, the property, or passengers being transported, and the people working on or about the conveyance. The application of sections 6, 6.1 and 6.2 of Part V of Schedule VI depends on the facts associated with each situation.

• Example 6 While transporting an empty tank car from Montréal to Québec City, the domestic carrier notices that one of the wheels of the tank car is damaged. The carrier delivers the empty tank car to a repair facility operated by a firm specializing in repairing railway rolling stock. The repair firm contacts the unregistered non-resident lessor of the tank car and obtains authorization to repair the tank car. Following the repairs, the tank car is returned to the carrier for transportation to Québec City. The parts supplied to the unregistered non-resident, along with the emergency repair service, are zero-rated.

The Canadian operator of an internet auction site would be considered, with respect to non-resident vendors, to be arranging for, procuring or soliciting orders for supplies made by them. The payment of an annual fee by vendors for the right to list items on the auction site would be considered to be consideration for a supply to them of a right and would not be eligible for zero-rating and would be deemed by s. 142(1)(c)(i) to be a supply made in Canada.

Supplier responsible for determining zero-rated residency status of recipient including s. 132(2) branches

Non-resident requirement

3. Along with ensuring that all other zero-rated requirements are met, registrants making supplies in Canada to non-resident recipients to which sections 2, 5 to 10, 13, 14, and 17 to 23 of Part V of Schedule VI apply should verify and obtain evidence that the recipients are non-residents for the purposes of the GST/HST prior to zero-rating supplies to those recipients.

Non-resident/deemed non-resident ss 123(1) and s 132

4. Subsection 123(1) defines a non-resident as "not resident in Canada"; however, section 132 provides for certain situations where a person who might otherwise be a non-resident will be deemed to be resident in Canada. …

Responsibility of resident supplier to obtain certificate or other residency evidence

Responsibility of registrant suppliers

16. Suppliers who are registrants are responsible for determining the residence or registration status of their customers. For the supply to be zero-rated, satisfactory evidence should be retained by suppliers, indicating that their customers are non-residents and, where applicable, not registered for GST/HST purposes.

Documentation

17. Appendix A describes the documentation that the Department will generally accept as proof that the person is a non-resident. Appendix B describes the documentation that the Department will generally accept as proof that the customer is both a non-resident and is not registered. This documentation should be dated and signed by the non-resident and be effective on the date the supply is made. The Department will consider other forms of documentation as proof of non-residence and the non-registered status of the customer.

administrative services provided to an RRSP with a non-resident beneficiary and a resident trustee will be zero-rated if paid for by the annuitant and taxable if funded out of the trust.

Software zero-rating (Example 1 under Supplies Made to Non-Residents)

[T]he supply of software is a supply of intellectual property.

Example -zero-rating of global database (para. 51)

Canadian company sells the international rights to operate a global database to a foreign company who pays the royalties to the Canadian company. As the recipient of the supply is a non-resident that is not registered for the GST/HST, the supply of such rights is zero-rated.

Respecting the provision of CD-ROM discs containing databases and software permitting the retrieval of the data, protected by copyright, CRA stated:

Intellectual property includes patents, trade marks, trade names, industrial designs and know-how.

A non-resident lawyer who does not practise law in Canada is a “not in Province” member of a specified Class of a provincial law society, and is provided with access to educational programs as a member. The lawyer is not present in Canada each time a supply of a membership is made to him or her, and is not registered.

Ruling

That as none of the exclusions in s. 10.1 applies, the supply of membership by the society to the lawyer is zero-rated.

A Canadian GST-registered supplier sells custom software that it has been using to perform a service electronically, with such supplies being made in Canada. The purchaser is a non-resident who does not carry on any business in Canada, and will use the software to supply the same service to Canadian customers, with such supplies being deemed to be made outside Canada pursuant to s. 143.

After stating that the supply would be zero-rated under s. 10 (rather than 10.1) assuming the non-resident was not registered, CRA stated:

[I]f the intangible personal property supplied to the non-resident in the scenario were the type of intangible personal property that can be zero-rated under [s. 10.1]…and again assuming that the non-resident was not registered, the supply would not be excluded from zero-rating under that provision on the basis of the exclusion in subparagraph 10.1(b)(iii).

Operator, a registered resident of province 1, has developed a program that consists of a secure network and various business, communications and software systems. The clients of the Operator are businesses that supply taxable goods and services and independent contract agents ("ICAs") who are contracted by the businesses to provide services. The ICAs are provided access to, and the use of, the program to provide their services. There are no restrictions with respect to where the program may be accessed and used by the businesses and the ICAs. Rulings that the supply made by the Operator to non-resident non-registered businesseses or ICAs of the right of access to, and use of, the program is a zero-rated supply of intangible personal property under section 10.1 of Part V of Schedule VI.

Examples of supplies of IPP that will now be eligible for zero-rating under the proposed provision include:

• subscriptions to Web sites that provide subscribers with a right to access and use digitized content on the site, such as information in a database or images, and that may also include a right to download a copy of the digitized content;
• subscriptions to interactive Web sites that provide subscribers with a right to access and use digitized content, such as games, music and videos, on the sites while they are online;
• digitized information, such as news items or stock market data, that is delivered electronically on a periodic basis to subscribers based on their personal preferences;
• digitized products, such as music, images, and books, that are downloaded from Web sites and paid for individually. ...

The CRA will generally accept an online self-declaration by customers that they are not residents of Canada along with their complete home address as proof of residency, provided it is supported by another satisfactory verification method of residency such as:

• if customers pay for the supplies of IPP by credit card or debit card, either a comparison of the customer's declared home address with the billing address, or
• a comparison of the customer's declared home address with the location of the financial institution that issued the card; or the use of geo-location software.

Factors that generally indicate that a supply made by electronic means is one of intangible personal property are:

• a right in a product or a right to use a product for personal or commercial purposes is provided, such as:

  - intellectual property or a right to use intellectual property (e.g., a copyright); or

  - rights of a temporary nature (e.g., a right to view, access or use a product while on-line);

• a product is provided that has already been created or developed, or is already in existence;
• a product is created or developed for a specific customer, but the supplier retains ownership of the product; and
• a right to make a copy of a digitized product is provided

Common carrier

19. A "common carrier" is not defined in the Act but generally refers to a person engaged in the business of transporting property from place to place, and who offers services to the public for compensation.

• Example 1
• A Canadian resident purchases a vehicle from an automobile dealer located in Toronto. The resident asks the dealer to arrange for a common carrier to pick up the automobile from the dealer's lot and deliver it to the resident's son who is currently living in Portugal. The dealer hires a carrier on behalf of the resident to ship the vehicle to Portugal. The supply of the vehicle by the dealer to the Canadian resident is zero-rated provided the dealer maintains the appropriate documentary evidence of exportation.

Example 8

A manufacturer in Canada charges its customers for moulds required in manufacturing a specific product. The moulds remain in Canada but the goods produced with the use of the moulds are sold to both Canadian and American customers. The supplies of the moulds to the non-resident customers are zero-rated provided the moulds are for use directly in the manufacture or production of goods for the non-resident.

What documentation satisfies Sch. VI, Pt. V, s. 15.1? CRA responded:

In order for the "first seller" to zero-rate the supply of the continuous transmission commodity to the "first buyer" referenced in Section 15.1 of Part V of Schedule VI, the "first buyer", in addition to the other requirements as set out in this provision, must supply evidence satisfactory to the Minister to the "first seller" that the continuous transmission commodity (CTC) has been supplied to a registrant and all or part of the consideration is property of the same class or kind delivered to the first buyer outside Canada.

The CRA would accept invoices and/or written agreements of the CTC exchanged between the first buyer and the registrant. The documentation should contain such information as would be required to determine the following:

• The CTC exchanged is of the same class or kind purchased.
• The place of delivery of the CTC to the registrant inside Canada.
• The place of delivery of the exchanged CTC to the first buyer outside Canada.
• Identity of the registrant including their BN.

62. Continuous transmission commodities situated in Canada are frequently exchanged for similar commodities situated outside Canada. For example, natural gas acquired in Canada on a zero-rated basis by an unregistered non-resident who intends to export the gas may instead be sold and delivered in Canada, without having been exported, to a registrant in exchange for the registrant's gas of the same class and kind already situated outside Canada. Persons may enter into such exchange agreements to minimize transportation costs and reduce shipping time without changing the zero-rated status of the transaction.

63. Generally, section 15.1 ensures that specified cross border exchanges of continuous transmission commodities transported by means of wire, pipeline, or other conduit qualify for zero-rating on a transaction basis rather than on the basis of physical flows.

64. Where the registrant who acquires the continuous transmission commodity from the first buyer is not acquiring the commodity for consumption, use, or supply exclusively in the course of commercial activities of the registrant, the supply is an imported taxable supply and the registrant is liable for tax under sections 218 and 218.1, calculated on the value of the consideration for the supply of the commodity.

69. If the recipient subsequently neither exports the commodity as described in paragraph 15.2(a), nor supplies it as described in paragraph 15.2(b), the supply is still zero-rated if the supplier did not know or could not reasonably be expected to have known, at or before the latest time at which GST/HST in respect of the supply would have been payable if the supply were not zero-rated, that the recipient would not supply or export the commodity as required.

70. Where the commodity is not exported or supplied as declared in writing by the registered recipient, the supply to the recipient is an imported taxable supply. The recipient is liable for tax under sections 218 and 218.1, and an amount calculated under section 236.1, unless the commodity is acquired for consumption, use, or supply exclusively in the course of the recipient's commercial activities.

"Where a registrant receives a zero-rated supply of natural gas intended for export and a taxable supply of natural gas that is not zero-rated because it is intended for sale in Canada, the fact that the gas purchased for export may be mixed with the gas purchased for supply in Canada does not affect the entitlement to purchase natural gas using an export declaration, provided that evidence is maintained that the quantity purchased for export is the same as the quantity exported."

Meaning of competence to perform a trade

4. The CRA will consider a course to provide individuals with the competence to practise or perform a trade or vocation if the course has a direct link to skills that are recognized by the CRA as relating to an individual’s ability to gain or retain employment. …

Meaning of certificate, diploma or licence

5. Generally, courses for which students are not issued some form of documentation at their conclusion do not satisfy the “certificate, diploma, licence or similar document” criterion and are therefore not zero-rated under section 18 of Part V of Schedule VI. The CRA accepts, as meeting the documentary requirements, any document that demonstrates that the student has successfully completed a course of study and attests to the competence of the individual to practise or perform a trade or vocation.

Pass/fail element

6. To qualify for zero-rating under section 18 of Part V of Schedule VI, the course or courses leading to the certificate, diploma, licence or similar document must have a pass/fail element based on the evaluation of an individual’s performance on one or more tests, graded materials and/or projects. If a course is part of a series of courses making up a program, the individual’s performance may be evaluated on the program as a whole. Where, upon completion of a course, documentation is provided that does not attest to the competence of an individual to practise or perform a trade or vocation but merely states that the individual has taken and passed the course, the course will not qualify for zero-rating under section 18 … .

Safety training not zero-rated

Example 3

Corporation Tree-NB is a GST/HST registered incorporated non-profit organization resident in New Brunswick that provides, among other supplies, the supply of a service of instructing individuals in a safety training course tailored to appeal to the forest industry. Occasionally, a non‑registrant forestry company resident in northern Maine will send a new employee to Corporation Tree-NB’s day-long course held in New Brunswick. Corporation Tree-NB invoices the non-resident company and not the employee.

… While stand-alone industry safety courses may be beneficial, and in some cases a job requirement, on their own they would not be considered to lead to an occupation. As the course offered by Corporation Tree-NB does not lead to a diploma or certificate attesting to the competence of the individual to practice a trade or vocation, the course is not zero-rated under section 18 … .

No requirement re type of resident supplier

8. Unlike section 8 of Part III of Schedule V, there is no requirement under section 18 of Part V of Schedule VI that the supplier be a specific type of entity. … Zero-rated supplies made under section 18 of Part V of Schedule VI cannot be exempt under section 8 of Part III of Schedule V as section 8 specifically excludes zero-rated supplies.

No requirement that supplier be a school authority

34. Although section 18 of Part V of Schedule VI is similar to section 8 of Part III of Schedule V, there is no requirement under section 18 that the supplier be a school authority or any other specified type of entity. Where all of the conditions in section 18 of Part V of Schedule VI are satisfied, the supply will be zero‑rated regardless of who is providing the service.

In indicating that legal services provided to a non-resident manufacturer to defend it against product liability claims would be zero-rated, the Directorate stated that:

"Legal services supplied to a manufacturer to defend against a product liability claim are not generally considered to be directly connected to the product, but rather directly connected to the manufacturer's objective of defending itself against the claim to minimize its potential legal liability."

"In respect of" criteria

The following guidelines will be applied by the Department to aid in the determination of whether the connection between the service and the real or tangible personal property is sufficiently direct for the service to be "in respect of" the property for purposes of Schedule VI, Part V, sections 7 and 23:

a) Was the service designed, developed or undertaken to fulfil or serve a particular need or requirement arising from or relating to the property? This guideline involves determining the purpose or objective of the service. The purpose or objective of the service may often be determined by examining a written contractual agreement for the supply between the supplier and the recipient of the service in order to ascertain whether the supply is zero-rated under the Act.

If there is no formal written agreement, other documentation, such as purchase orders, correspondence between the parties or invoices or receipts may be useful in establishing the purpose or objective of the service.

It is important that the supplier's understanding of the purpose or objective of the service, as reflected in the contractual agreement with the non-resident customer, be taken into consideration. The supplier's perspective is important because it is the supplier who must determine whether the supply is zero-rated or whether to collect the GST/HST on the supply.

b) Is the relationship between the purpose or objective of the service and the property reasonably direct? The relationship between the service and the real or tangible personal property must be more direct than indirect in order for the service and the property to be considered by the Department to be "in respect of" each other. If some object comes between the service and the property, the connection becomes increasingly remote.

A legal account rendered to a non-resident insurer was not zero-rated because the services were in respect of the defence of an individual involved in a motor accident in Canada.

Ruling that a contingency fee charged to a non-resident could be pro-rated based on the litigation services provided by the law firm before and after the commencement of the litigation.

48. The following are examples of services that are considered to be in respect of real property for purposes of Part V of Schedule VI:

• (a) services physically performed on the real property (e.g., construction and maintenance);
• (b) services that enhance the value of the real property, affect the nature of the real property, relate to preparing the real property for development or redevelopment, affect the management of the real property, or affect the environment within the limits of the real property (e.g., engineering, architectural services, surveying and subdividing, management services, security services);
• (c) services related to;
• (i) the transfer or conveyance of the real property or the proposed transfer or conveyance of the real property (e.g., real estate services in relation to the actual or proposed acquisition, lease or rental of the real property, legal services rendered to the owner or beneficiary or potential owner or beneficiary of real property as a result of a will or testament);
• (ii) a mortgage interest or other security interest in the real property; or
• (iii) the determination of the title to the real property.

Exclusion if day trip returning to Canada

40. Specifically excluded from this zero-rating provision is a passenger transportation service that is part of a continuous journey if both the origin and termination of the journey are in Canada and, at the time the journey begins, the individual or group is not scheduled to be outside Canada for an uninterrupted period of at least 24 hours during the journey. Such continuous journeys (trans-border day trips) are subject to the GST/HST.

Example 7

A tour boat ride along the St. Lawrence River is not zero-rated if it starts and ends in Canada on the same day, even if the boat docks on the American side for lunch or sightseeing purposes.

Bus trip to Seattle and plane flight to Lima form continuous journey (para. 41)

Example 11

A bus ticket for return travel from Vancouver, British Columbia to Seattle, Washington, USA and a return air ticket from Seattle to Lima, Peru are issued together to a client of a Vancouver travel agency. The individual travels by bus from Vancouver to Seattle and boards a flight to Lima a few hours after arriving in Seattle. Two weeks later, the individual returns from Lima to Seattle by air and boards the bus to Vancouver a few hours after arriving in Seattle.

The passenger transportation services that form part of this continuous journey are zero-rated because the stopover is outside Canada and all places at which the individual embarks or disembarks the aircraft are outside Canada.

Distinction between passenger transportation service to the public, who are independent of the operator, and lease of aircraft

Passenger Transportation Service

For GST/HST purposes, the supply of a “passenger transportation service” is a supply of a service of transporting or carrying travellers (i.e., an individual or group of individuals) by any mode of transportation available to the public (such as a bus, taxi, train, aircraft, or boat) as long as there is:

• a mode of conveyance;
• an operator of the conveyance who is independent of the travellers; and
• an itinerary.

Generally, the supply of a charter flight to a third-party charterer is considered to be a supply of a passenger transportation service.

A supply that is a supply of property (such as a supply, by way of lease, licence or similar arrangement, of the use or right to use tangible personal property such as an aircraft) is not a supply of a passenger transportation service.

Example 1

A potential third-party charterer requests a charter flight from a carrier for travel from Calgary, Alberta to St. John’s, Newfoundland and Labrador. The carrier provides a quote outlining the details of the charter flight, specifying the type of aircraft and capacity, the date and time for departure and expected arrival, the airports where the passengers will embark and disembark the aircraft, the expected flight time, and the cost for the charter flight. The third-party charterer accepts the quote, and is issued an itinerary with more specific details, including the aircraft and the crew, the passenger boarding locations, the specific dates and times of the charter flight, and the expected fuel consumption.

The supply of the charter flight is a passenger transportation service for GST/HST purposes because:

• the aircraft is a mode of conveyance;
• the operator of the conveyance (i.e., the carrier) is independent of the travellers; and
• the charter flight has an itinerary.

[T]he excess valuation charges for baggage would be viewed as a separate charge in respect of a passenger's baggage and not part of the consideration payable for the supply of the passenger transportation service.

For GST/HST purposes, there are specific place of supply and zero-rating provisions that apply to a service of transporting an individual's baggage when made by a supplier of a passenger transportation service that imposes a charge for the service. Generally, under these rules, when a carrier provides a separate service of transporting an individual's baggage in connection with the transportation of the individual (i.e., on a charter flight), the GST/HST applies to any excess valuation charge at the same rate as it applies to the passenger transportation service.

Zero-rating of charge for extending ticket (para. 55)

55. Where the supplier of a passenger transportation service provides a service (listed in paragraph 56 of this memorandum) and the original passenger transportation service would have been zero-rated under section 2 or 3 of Part VII of Schedule VI to the Act, the listed service is zero-rated even if it is supplied at a different time or at a different location.

Example 13

A registered supplier in Canada provides an individual with a return ticket for a zero-rated flight from Toronto, Ontario to Barcelona, Spain. While in Barcelona, the individual decides to stay another week and contacts the supplier to have the ticket for the flight home amended. The supply of a service of amending the ticket to extend the stay in Barcelona is also zero-rated.

The Corporation provides medical repatriation services which involve arranging to transport an individual (the patient) from a foreign hospital to a health care facility in the individual’s home country. This would include transport between the medical facilities and airports via ground transportation (ambulance, taxi, or limo), and commercial airline transportation in the company of a medical escort (registered nurses, physicians and advanced cardiac life support trained paramedics). The Corporation charges a daily rate for the medical escort and a fee for the medical equipment required by the patient.

After ruling that the services supplied by the Corporation were of medical escort services rather than of international air ambulance services, so that zero-rating pursuant to Sched. VI, Pt. VII, s. 15 was not available, CRA stated:

The dictionary definition and definition in the provincial legislation suggest that the meaning of “ambulance” is a special vehicle that is used to transport injured or ill individuals who require the care of a physician, nurse or other health care provider while being transported. …

The addition of a medical escort along with medical equipment and supplies would not transform a commercial aircraft into an air ambulance.

A corporation, which is not engaged exclusively in commercial activities, issues shares and pays dividends to its shareholders, who are both resident and non-resident. After finding that the issuance of the shares and the dividend payments were financial supplies to the shareholders, CRA quoted Sched. VI, Part IX, s. 1 and stated:

If…the Corporation is a “financial institution”, this section may zero-rate an otherwise exempt supply of a financial service, provided the supply is not excluded by paragraphs (a) to (e) of section 1, or by section 2… .

Sales commissions and trailer fees received by a dealer who sells units in a mutual fund to non-resident investors would be zero-rated.

General synopsis of ss.1 and 2.

Any supply of precious metals not described in s. 3 will be treated as a supply of a financial service.