TEI-Revenue Canada liaison meeting: excise tax questions - Tax Executives Institute

Tax Executive, The, Nov, 1998

Company A's invoices to Customer X reflect separately itemized amounts for the time-sharing services depending on whether the calls (and time-sharing services) are initiated in Canada or the calls (and time-sharing services) are initiated from outside Canada. Company A believes that GST does not apply to the time-sharing services where the call is initiated from a customer location outside of Canada, irrespective of which of the two options are used. Please confirm.

15. We invite the Revenue Canada representatives to comment on any actions that have been or will be undertaken in respect of the recommendations made in the report issued by the Minister's Advisory Committee on Electronic Commerce. On September 17, 1998, TEI submitted comments the Advisory Committee's report and recommendations. Hence, we also invite questions and comments from Revenue Canada in respect of TEI's comments.

16. Please confirm whether and why Revenue Canada classifies fees charged for Internet access and Web Site Hosting as telecommunications services. The stringent zero-rating provisions for telecommunications services under the ETA place Canadian suppliers of such services at a severe competitive disadvantage vis-a-vis foreign suppliers. To enable Canadian service providers to be more competitive in the global marketplace for telecommunications services, will Revenue Canada consider recommending that the Department of Finance broaden the zero-rating provisions applicable to such services?

17. Is Revenue Canada considering releasing any guidance on the level of activity or physical presence that triggers a requirement of GST registration for "non-residents" making supplies through the Internet to Canadian residents?

18. Does Revenue Canada consider the provision of software to be a supply of tangible personal property, intangible personal property, or a service? The classification is very important for purposes of the place-of-supply rules, as well as the taxpayer's ability to employ sections 179 and 180. Does the manner in which the software is provided (whether on a physical media or electronically) or licensed (whether a boilerplate, adhesion license or a negotiated, signed agreement) affect the classification? Can software be zero rated as intellectual property under Section 10, Part V, Schedule VI? Again, does the manner in which the software is provided or licensed affect the classification?

19. Section 7, Part V, Schedule VI of the Excise Tax Act generally zero rates services provided to nonresident persons except where services are rendered to an individual while the individual is present in Canada. Please confirm that a supply of services performed in Canada for a non-resident corporation (such as product design or development, purchasing, accounting services (including payroll), accounts payable, or customer invoicing) are included in this zero-rating provision.

20. Revenue Canada has announced a Directive that GST audits should be performed on a "one-plus-one" basis, i.e., the current year plus the previous year. Under what circumstances will this Directive be applied? Within the context of GST audits, TEI members see little or no evidence that the Directive is being applied at the field level. Indeed, when questioned, some field auditors deny that a Directive was issued. We invite the Department's comments.