The HST Blog : Canada Harmonized Sales Tax Lawyer Cyndee Todgham Cherniak for Assessments, PST & RST Issues in Ontario, British Columbia & Quebec

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On February 25, 2010, the Department of Finance released a News Release about what will be the HST place of supply rules after regulations are promulgated. Interestingly, the Department of Finance is going to create a separate rule for customs brokerage services. "Customs brokerage services" are currently understood to mean:

"a service of arranging for the release of imported goods, or fulfilling, in respect of the importation, (whether before, at the time of or after the release) any accounting,, reporting or information requirements imposed under the Customs Act or the Customs Tariff Act or any requirements under either of those Acts to remit any amount."

Since I wrote on March 17, 2010 about the HST rules for imports, I thought I should share the funny little place of supply rules for customs brokers services.

In the February 25, 2010 News Release, the Department of Finance wrote:

Under the current rules, the place of supply of a service of arranging for the release of imported goods, or fulfilling, in respect of the importation, (whether before, at the time of or after the release) any accounting,, reporting or information requirements imposed under the Customs Act or the Customs Tariff Act or any requirements under either of those Acts to remit any amount is in a province if the goods are situated in that province at the time of their release.

It is proposed that this rule continue to apply in respect of commercial goods. However, in the case of non-commercial goods, generally if the provincial component of HST for a participating province is imposed in respect of the importation of the goods, the supply of the customs brokerage service will be regarded as made in that participating province.

The above rules will not apply to the supply of any service provided in relation to an objection, appeal, re-determination, re-appraisal, review, refund, abatement, remission or drawback, or in relation to a request for any of the foregoing. These types of services will continue to be subject to the place of supply rules for services described in other parts of this document.

The changes to the Excise Tax Act or the Regulations still have to be made public and must undergo the applicable legislative steps to become law.

The CRA clarifies the place of supply rules in GST/HST Technical Information Bulletin B-103 "Harmonized Sales Tax: Place of suppy rules for determining whether a supply is made in a province" as follows:

Rule #1: If the importation is commercial goods (for which HST is not collected), the place of supply of the customs brokerage and related services is in the province in which the goods are released. Therefore, if the goods are released at Toronto Pearson Airport, the Ontario HST would apply. If the goods are released at the Vancouver Port, then British Columbia HST will apply.

However, if goods are placed in a bonded warehouse in Montreal, HST would not be applicable to the brokerage charges.

Rule #2: If the customs brokerage services relate to an objection, appeal, re-determination, re-appraisal, review, refund, abatement, remission or drawback, or in relation to a request for any of the foregoing (called herein "post-importation customs brokerage services"), Rule #1 does not apply. The general place of supply rules for services would be applicable.

The 5 main place of supply rules for services are applied in the following order:

(a) If the recipient's address or the address most closely connected with the supply in in the HST Zone, the applicable HST rate would be applied to the post-importation customs brokerage services;

(b) If the recipient does not have a Canadian address, the post-importation customs brokerage services will be considered to be supplied in the province in which the greatest proportion of the services is performed. For example, if the customs broker is located in Ontario and a customs broker in Ontario completes the B2 adjustments/appeals, then Ontario HST would apply.

(c) If 2 applies and the post-importation customs brokerage services are performed equally in two or more particular HST provinces, the HST province with the highest HST rate would be considered to be the place of supply.

(d) If 3 applies but a single HST province cannot be identified (same 13% rate in more than one province), the post-importation customs brokerage services will be subject to 13% HST.

(e) If the recipient does not have a Canadian address and the customs brokerage service is not performed primarily in an HST province or the HST Zone, then HST would not apply to the post-importation customs brokerage services.

Rule #3: If the importation relates to non-commercial goods, whether HST applies to the customs brokerage service will depend on whether the goods are subject to HST under the place of supply rules for goods.