On April 30, 2010, the Department of Finance released draft regulations regarding the place of supply rules for the Harmonized Sales Tax (“HST”). The substance of these regulations was originally outlined in a preliminary document released on February 25, 2010 and explained in more detail by the Canada Revenue Agency in GST/HST Technical Information Bulletin B-103.
With only one exception, the draft regulations are consistent with the preliminary document and Bulletin B-103. There is, however, an important revision to the place of supply rule for litigation-related services. Initially, it was proposed that a litigation-related service, other than a service rendered before the commencement of such litigation, would be deemed to be made in the province where the litigation is conducted. Pursuant to the draft regulations, however, the place of supply of litigation services related to a matter under the jurisdiction of a court or tribunal established under the laws of a province or an appeal from a decision of such a court or tribunal will be that province. Accordingly, although the venue may change during the course of the litigation process, the place of supply of the associated legal services will remain the same.
The draft regulations also clarify the place of supply for services and intangibles where the place of supply is not deemed by the rules to be in a single participating province and the tax rates for the two or more participating provinces (i.e., the “specified provinces”) related to the supply are the same. In this situation, the place of supply would be: (1) the participating province where the supplier is located if the supplier is located in one of the specified provinces; or (2) the participating province that is closest in proximity to the business address of the supplier that is most closely connected with the supply if the supplier is not located in one of the specified provinces. While this clarification would not affect a supplier’s obligations, it would be relevant to a recipient who may be subject to restricted input tax credits in one or more of the participating provinces.
To view the draft regulations, please click here.
To view GST/HST Technical Information Bulletin B-103, please click here.