[OFFICIAL ENGLISH TRANSLATION]
1999-4070(GST)I
BETWEEN:
CLUB TOUR SAT INC.,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Appeal heard on January 8, 2001, at Montréal, Quebec, by
the Honourable Judge Louise Lamarre Proulx
Appearances
Agent for the Appellant: Marc Robillard
Counsel for the Respondent: Gérald Danis
JUDGMENT
The appeal from the assessment of the Goods and Services Tax made under the Excise Tax Act, notice of which is dated April 18, 1997, and which bears number 868945, is dismissed in accordance with the attached Reasons for Judgment.
Signed at Ottawa, Canada, this 4th day of July 2001.
|
"Louise Lamarre Proulx" |
J.T.C.C.
[OFFICIAL ENGLISH TRANSLATION]
Date: 20010704
Docket: 1999-4070(GST)I
BETWEEN:
CLUB TOUR SAT INC.,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Lamarre Proulx, J.T.C.C.
[1] This is an appeal under the informal procedure from an assessment dated April 18, 1997, concerning the period from November 1, 1996, to November 30, 1996, and bearing number 868945.
[2] The question at issue concerns subsections 252.1(8) and 234(2) of the Excise Tax Act (the "Act"). Subsection 252.1(8) of the Act concerns the rebate claimed by the registrant as an amount paid or credited to a non-resident recipient in respect of a supply of short-term accommodation or a tour package that includes such accommodation. This provision is found in Division VI, Rebates. Subsection 234(2) of the Act provides for the deduction of the rebate given by the registrant. That provision is found in subdivision V(b), Remittance of tax.
[3] Marc Robillard, an accountant, testified for the appellant. The appellant supplies travel-related services in Canada, including short-term accommodation to non-resident clients. The business has a catalogue of the services it offers, and foreign tour organizers can combine them as they wish. In addition to short-term accommodation, there are such services as complete transportation, meals, admissions, guided tours, sports and cultural activities and transportation to the airport. The clients are agencies, individuals and groups.
[4] Since the dispute concerns the period from 1993 to 1996, when Mr. Robillard was not the accountant, he called Ms. G'Sell to testify. She was the president and sole shareholder of Tour Sat from 1993 to 1996. The business was sold in 1997. Ms. G'Sell explained that 10% of what the appellant sold was accommodations alone. Next, approximately 50% was all-inclusive tour packages, the price of which did not change. Next came tour packages organized on request, the price of which varied depending on the supplies or on the number of passengers.
[5] Mr. Robillard explained that the appellant had gone over its invoices since 1993 and had extracted the portion dealing with short-term accommodations. It now claims only a deduction for the tax relating to this supply and nothing for the remainder. According to the appellant's calculations, the deduction would be 8% or 9% over what was claimed on the tax payable in respect of the tour package. Mr. Robillard argued that a person who supplies a greater percentage of short-term accommodation is penalized in comparison to a person who primarily supplies activities instead. He would prefer to be able to offer a credit for 100% of the tax payable on the short-term accommodation alone and abandon the remainder of the credit.
[6] Mr. Robillard admitted that the invoices in question were prepared on the basis of a lump sum (Exhibit I-6). The calculation of this lump sum took the various components, including short-term accommodation, into account. Exhibit A-1 is such a document and shows the price of the various components, but this is not the document that is sent to the client. Exhibit I-6 is the invoice sent to the client.
[7] Luc Potvin testified for the respondent. In March 1997, he was an auditor with Revenu Québec. He explained that section 163 provides that a supplier must separate the supply of a tour package into taxable and non-taxable portions. Subsection 232(4) of the Act allows an agent who has exercised the privilege granted him under subsection 252.1(8) of the Act to deduct, in computing the net tax, the amount of the rebate to which the non-resident would have been entitled. A reference to the rebate must be made on the invoice. Mr. Potvin explained that the appellant had made its entries correctly in respect of the invoices for the tour packages. It defined the taxable portion of the supplies, charged the seven percent tax and credited 50% of the tax to the non-resident recipient, since the number of bednights in Canada was always equal to the total number of bednights indicated on the tour package. In connection with the invoices for short-term accommodation alone, the appellant gave a 100% rebate for the tax.
[8] Along with its claim for the period from November 1 to November 30, 1996, the appellant included claims in respect of previous periods, that is, those from March 1, 1993, to September 1, 1996, for a total amount of $75,212. The Minister disallowed the deduction because the appellant had invoiced the non-resident client on a tour package basis. Mr. Potvin explained that a tour package is a trip for which the client pays one amount for two or more supplies, one of which is short-term accommodation. Moreover, the additional portion claimed would not have been credited to the client.
[9] Counsel for the respondent submitted that the auditor had not seen anything that would have allowed him to conclude that the appellant's claims would be reflected in the invoices in question. In fact, he confirmed that the price for the services was a lump sum and that the method used should be the 50% method.
Finding
[10] Subsection 252.1(8) of the Act provides that a registrant may claim the deduction under subsection 234(2) of the Act as an amount paid or credited to a recipient. Subsection 234(2) of the Act provides that a registrant who credits a person with an amount as a rebate may deduct this amount in computing his net tax.
[11] For the period in question, subsections 252.1(8) and 234(2) of the Act read as follows:
Rebate paid by registrant
(8) Where
(a) a registrant makes a supply of short-term accommodation or a tour package that includes short-term accommodation to a non-resident recipient who is the consumer of the accommodation or who is acquiring the accommodation or tour package for supply in the ordinary course of a business of the recipient of making such supplies,
(b) the registrant pays to, or credits in favour of, the recipient an amount on account of a rebate under subsection (2) or (3) to which the recipient would be entitled in respect of the accommodation if the recipient had paid the tax in respect of the supply and had satisfied the conditions of section 252.2,
(c) the amount paid or credited is equal to
(i) in the case of a supply of a tour package, the amount that would be determined in respect of the supply under paragraph (5)(b), and
(ii) in the case of a supply of short-term accommodation that is not part of a tour package, the tax paid by the recipient in respect of the supply, and
(d) in the case of a rebate under subsection (2),
(i) payment of the consideration for the supply is made at a place outside Canada at which the registrant, or an agent of the registrant, is conducting business, or
(ii) where the accommodation is supplied as part of a tour package that includes other property or services (other than meals or property or services that are provided or rendered by the person who provides the accommodation and in connection with it), a deposit of at least 20% of the total consideration for the tour package is paid
(A) by the recipient to the registrant at least 14 days before the first day on which any short-term accommodation included in the tour package is made available under the agreement for the supply of the tour package, and
(B) by means of a credit card or charge card issued by, or a cheque, draft or other bill of exchange drawn on an account outside Canada with, a non-resident institution that is a bank, cooperative credit society, trust company or similar institution,
the registrant may claim a deduction under subsection 234(2) in respect of the amount paid or credited, and the recipient is not entitled to any rebate or to any refund or remission of tax in respect of the accommodation.
Deduction for rebate in respect of supplies to non-residents
234(2) Where, in the circumstances described in subsection 252(3), 252.1(8) or 252.4(2) or (4), a registrant pays to, or credits in favour of, a person an amount on account of a rebate referred to therein, the registrant may deduct the amount in determining the net tax of the registrant for
(a) the reporting period of the registrant that includes the particular day that is the later of the last day on which any tax to which the rebate relates became payable and the day on which the amount is paid or credited; or
(b) any subsequent reporting period of the registrant for which a return is filed within one year after the particular day.
[12] Paragraph 252.1(8)(c) of the Act clearly explains what amount may be paid or credited to a person. In the case of a supply of a tour package that includes short-term accommodation, it is the amount that would be determined under (5)(b). In the case of a supply of short-term accommodation that is not part of a tour package, it is the entire tax in respect of the supply.
[13] Subsection 252.1(1) refers to subsection 163(3) of the Act for the meaning of "tour package". In subsection 163(3) of the Act, "tour package" is defined as follows:
means a combination of two or more services, or of property and services, that includes transportation services, accommodation, a right to use a campground or trailer park, or guide or interpreter services, where the property and services are supplied together for an all-inclusive price.
[14] Paragraph 252.1(5)(b) read as follows:
Tax paid in respect of tour package
(5) Where a person files an application in which a rebate under subsection (2) or (3) is claimed in respect of one or more supplies of tour packages that include short-term accommodation and in respect of which tax was paid by the person, for the purposes of that subsection, the amount of tax paid in respect of the accommodation shall, for each of those tour packages, be deemed to be equal to
...
(b) in any other case, the amount determined by the formula
B x D
C 2
where
B is the total number of nights for which short-term accommodation included in that tour package is made available under the agreement for the supply of that tour package,
C is the number of nights the non-resident individual to whom the accommodation is made available spends in Canada during the period commencing on the earlier of the first day on which over-night lodging included in the tour package is made available to the individual and the first day any overnight transportation service included in the tour package is rendered to the individual and ending on the later of the last day such lodging is made available to the individual and the last day any such transportation service is rendered to the individual, and
D is the tax paid by the person in respect of the supply of that tour package.
[15] Thus, when the number of nights for which the short-term accommodation was made available to an individual is equal to the number of nights spent in Canada, the amount that may be paid or credited to the person is equal to 50% of the tax payable in respect of the supply of the tour package.
[16] The Statement of Interpretative Policy P-089 submitted to me at the hearing clearly explains what a supplier of tour packages may do in terms of the Act. This statement is, in my opinion, after reviewing the legislative provisions in question, consistent with the Act:
This statement of interpretative policy will discuss the calculation of the non-resident rebate in respect of short-term accommodation included in a tour package where the rebate is paid or credited to non-residents by registered suppliers of tour packages.
The issue is to clarify whether registered suppliers of tour packages that include accommodation have the option to credit to their non-resident clients an amount of rebate equal to the tax on the actual value of the accommodation portion of the tour package or 50% of GST on the tour package.
The policy is that registered suppliers may only credit to their non-resident clients 50% of GST payable on a tour package regardless of the actual value of the accommodation in the tour package.
A tour package means a combination of two or more travel services or of property and services provided at an all inclusive price (i.e. the supplier is not providing the services separately). These could include transportation, accommodation, meals, sightseeing excursions or the services of a guide. For the purpose of section 163, a tour package does not necessarily have to include accommodation or transportation services. However, for the purpose of the non-resident rebate, a tour package must include eligible short-term accommodation.
However, in situations where the short-term accommodation and the other travel services are not sold at an all inclusive price (i.e. each of the property and services listed on the invoice can be purchased separately), it is not a supply of a tour package and the registered supplier cannot use the 50% rule. He/she may only credit 7% of the actual value of the accommodation as shown on the invoice to the non-residents.
[17] The invoices in question in the case at bar are consistent with the definition of tour package. They were established on the basis of a lump sum price for a combination of travel services. Since these services included short-term accommodation, the amount that may be credited to the non-resident recipient is 50% of the tax payable on the entire tour package. Furthermore, subsection 234(2) of the Act explicitly provides that what may be claimed as a deduction in computing the net tax is the amount paid or credited to a person, nothing more. The amounts claimed as a deduction by the appellant were neither paid nor credited to non-resident clients.
[18] Therefore, the appeal is dismissed.
Signed at Ottawa, Canada, this 4th day of July 2001.
|
"Louise Lamarre Proulx" |
J.T.C.C.