TEI Liaison Meeting with the Canadian Department of Finance
and Canada Revenue Agency on Excise Tax Questions
December 7-8, 2010
On December 7-8, 2010, representatives of Tax Executives Institute met with officials from Canada Revenue Agency and the Canadian Department of Finance on excise tax matters. The agenda was prepared under the auspices of the Canadian Commodity Tax Committee, whose chair is Kim N. Berjian of Conoco Phillips Canada. Committee Vice Chair Carol Felepchuk of TD Bank Financial Group was the project manager for the agenda. Mary Lou Fahey, TEI General Counsel and legal staff liaison to the committee, coordinated the preparation of the agenda, with the assistance of Daniel J. De Jong, Tax Counsel. The minutes of the liaison meeting will be posted on TEI’s website when they become available.
Tax Executives Institute, Inc. (hereinafter “TEI” or “the Institute”) welcomes the opportunity to present the following questions on Canadian commodity tax issues, which will be discussed with representatives of Canada Revenue Agency (CRA) and the Department of Finance during TEI’s December 7-8, 2010, liaison meetings. If you have any questions about the agenda, please do not hesitate to call Rodney C. Bergen, TEI’s Vice President for Canadian Affairs, at 604.488.5231 (or Bergen@jp-group.com), or Kim N. Berjian, Chair of TEI’s Canadian Commodity Tax Committee, at 403.233.3807 (or kim.n.berjian@conocophillips.com).
Technical Questions
1. Recaptured Input Tax Credits (RITCs)
As a temporary measure beginning July 1, 2010, and effective through June 30, 2018, large businesses and certain financial institutions (other than selected listed financial institutions) are required to recapture input tax credits for the provincial part of the harmonized sales tax (HST) paid or payable on specified property and services in British Columbia and Ontario.
a. Amended Returns. Generally, if a registrant fails to report RITCs in the appropriate reporting period, taxpayers must correct those omissions or errors on an amended return for that period. Questions have arisen concerning what constitutes an error that requires an amended return. For example, an invoice is delayed in the mail and received after the appropriate reporting period. The invoice is paid promptly upon receipt. Does this constitute an error requiring an amended return?
b. Penalties. The penalty for not reporting an amount as required under the RITC rules is calculated as follows:
· A “base penalty” equal to five percent of the amount that should have been reported minus the amount reported; plus
· One-fifth of the amount calculated above for each complete month (up to a maximum of five months) that begins on the day the return was required to be filed and ends on the earlier of (i) the day the person reports the particular amount and reporting period, and (ii) the day the notice of assessment is sent for the particular reporting period.
The penalty imposed under this section is excessive, especially when compared with penalties imposed for failure to answer a demand ($250 for each occurrence) or failure to provide information when required ($100 for each failure).[3] Is there any effort to make the penalty more reasonable?
* * *
In addition to discussing the above issues during both the CRA and Finance liaison meetings, TEI requests a written response from CRA concerning the following two questions:
c. Internet Services. Under the old Ontario Retail Sales Tax (ORST) Act, Ontario was the only province not to tax Internet services. In the Ontario Sales Tax Guide 651, the Ontario Ministry of Revenue provided examples of Internet services that included web hosting, advertising fees, etc. Similar guidance has not been issued under the federal goods and services tax (GST) or HST.
(i) May registrants rely on Guide 651 for determining whether a telecommunication service qualifies as an Internet service and thus is not subject to the RITC rule for HST purposes in Ontario and British Columbia?
(ii) If not, when will CRA issue administrative guidance on what is considered an Internet service to assist registrants in identifying RITCs?
d. Employee Reimbursements. Consider the following example:
A fully commercial GST-registered corporation (i.e., eligible for full ITCs) in Ontario (Supplier A) has a customer in the province who needs repairs to its equipment permanently affixed to the real property in Ontario.
Supplier A sends its employee to the customer’s site to fix the equipment, which will take two days to complete. The round-trip mileage to the customer’s site is 226 kilometers. The employee uses his own vehicle to travel to the site and is reimbursed at 50 cents per kilometer.
Company A also provides the employee the option of submitting his out-of-pocket expenditures or accepting a per diem allowance of $75 per night for lodging and $56.50 per day for meals with no receipts. (For income tax purposes, assume that these allowances are reasonable.)
The employee files the following expense report:
Mileage Allowance $113.00
Lodging Allowance $ 75.00
Meals Allowance $113.00 ($56.50 x 2 days)
Total $ 301.00
The example prompts the following questions:
(i) 13/113 of the $113.00 mileage allowance (i.e., $13.00) may be taken as an initial ITC. Do the recapturing rules apply to the $13.00, i.e., is 5/13 or $5.00 allowed as an ITC and 8/13 reported as an Ontario RITC? Or is the full $13.00 allowed as an ITC?
(ii) 13/113 of the $75.00 lodging allowance ($8.63) may be taken as an initial ITC. Please confirm that the lodging allowance is not subject to the recapture rules.
(iii) 13/113 of the $113.00 ($13.00) meals allowance may be taken as an initial ITC. Company A uses, however, the 50-percent reduction provision when the expense account is initially processed. Thus, the eligible ITC is $6.50. Please confirm that the recapturing rules apply to this $6.50 amount, i.e., only 5/13 or $2.50 is allowed as an ITC and 8/13 ($4.00) reported as an Ontario RITC.
2. Audit Issues (CRA Only)
a. Compliance Relief for Calendar Year 2010. Because of the delay in issuing regulations relating to the HST, TEI recommends that CRA provide some administrative penalty relief upon audit for the 12-month period following the implementation date of the HST (July 1, 2010).
b. Substantiating RITCs and Proxies. ITCs are not subject to recapture in respect of certain specified energy or telecommunication services. To simplify compliance, proxies (eligible recovery percentages) may be used to determine (i) the portion of “specified energy” considered to be used directly in the production of tangible personal property (TPP) for resale, or for activities that are eligible scientific research and experimental development (SR&ED) activities; and (ii) the proportion of the consideration not attributable to specified telecommunications. What documentation will taxpayers be required to provide to substantiate the RITCs and the use of proxies?
c. Use of Formulae. What documentation is required to substantiate the use of formulae in calculating RITCs when not using proxies? Are formulae developed by (i) internal engineers, or (ii) external engineers, acceptable?
3. NETFILE (CRA Only)
a. Use of MyBusiness. MyBusiness is an excellent online tool to permit taxpayers to review their CRA accounts and decrease the administrative burden for both taxpayers and CRA. There are, however, several challenges with accessing MyBusiness. A taxpayer must provide a code or the line 150 amount from his or her personal tax return to receive a password for accessing an employer’s corporate information. The internal policies of many large tax departments forbid employees from providing personal information to access the system.
All corporations must file an RC59 with CRA to authorize an employee to access a corporation’s tax information. Under this process, only authorized persons may access a particular corporate account. The tax director normally signs this document.
TEI recommends that a process similar to that used for the RC59 be used for access to MyBusiness by corporate employees.
b. Issues relating to Electronic Filing of Returns, Electronic Payments, and Amended Returns. TEI members are experiencing some challenges with the electronic filing of excise tax returns. Taxpayers cannot amend the returns electronically once they have been submitted. Assuming CRA can determine that the return has been amended, is an upgrade planned to permit amendments? Also, taxpayers would like to be able to save a draft return for review and approval before filing. Is an upgrade planned to permit this process?
For internal control purposes, many taxpayers are required to have a review process in place for tax filings, including the HST. One process that works well for taxpayers is the integration of the electronic filing process with the banking system, which permits the taxpayer to prepare, review, and approve the returns online. We understand that the CRA wants to continue this process; we request an update on when the new specifications will be given to the selected banks. Is there anything that TEI can do to help accelerate the process?
4. Joint Ventures
Under the GST system, a joint venture (JV) is different from a partnership because the JV is not included in the definition of a “person” and thus cannot register and account for the GST in its own right. Section 273 of the Excise Tax Act provides for a simplified remittance and compliance process for JVs. Under this provision, a joint election can be made by the JV participants to elect one party as the JV “operator,” who accounts for the GST collected by the JV and claims the ITCs in relation to the expenses incurred by the JV.
a. Prescribing Additional Activities. Under the Joint Venture (GST/HST) Regulations, the JV election may generally be made for certain prescribed activities, including activities relating to the construction of real property (e.g., feasibility studies, design work, development activities and the tendering of bids undertaken in the furtherance of a JV for the construction of real property). In addition, CRA has administratively accepted numerous additional activities for the JV election, including the maintenance of roads.
The lack of clarity with respect to whether other activities would similarly be administratively accepted has created audit issues for some TEI members. During the liaison meeting, we would like to address the following issues:
(i) Will Finance prescribe a list of additional administratively accepted activities?
(ii) If so, will a process be implemented to ensure that new activities may be prescribed on a timely basis?
b. Expansion of Election. Has Finance considered broadening the election to permit all joint ventures engaged in commercial activities to make the election?
c. Activities under the Regulations. In addition, does CRA consider the following activities covered by the current regulations:
(i) Project management services relating to real property to be constructed; and
(ii) Environmental reports, services provided to obtain federal and provincial authorization and permits, as well as supervision and surveillance services directly or indirectly related to construction contracts?
5. Financial Services
a. Pension Plans. During the meeting, TEI would like to discuss the following issues:
(i) On September 23, 2009, the Department of Finance released draft legislation, explanatory notes, and a backgrounder concerning several measures aimed at improving and streamlining the application of the GST to pension plans and the financial services sector. During our liaison meetings, please provide a review of the obligations of employers and pension plans stemming from that backgrounder and the HST regulations relating to registrations, elections, deemed supplies, excluded activities, rebates, the special attribution method (SAM) formula, and returns.
(ii) Would Finance consider exempting pension plans from the selected listed financial institution (SLFI) requirements where less than 10 percent of the members are outside a single participating province or less than 10 percent of the members are outside the non-participating provinces?
(iii) Consider the following example:
A fully commercial, GST-registered corporation (i.e., eligible for full ITCs), in Ontario has a pension plan for its employees set up in a trust. The corporation uses the calendar year.
Pre-2010 and during 2010, the corporation followed Technical Information Bulletin (TIB) 032R in allocating its employer vs. plan trust expenses for GST purposes. Most of the pension plan expenses incurred are initially charged to the corporation, which pays the supplier’s invoices and recaptures the GST. Subsequently, any TIB 032R plan trust expenses are charged to the plan trust with GST invoiced, which the plan trust absorbs as a cost. GST was invoiced in the first two quarters of 2010 and Ontario HST in the last two quarters.
It is our understanding that under the deemed supply rule, these invoiced, plan-trust supplies for the four quarters in 2010 must be included in the deemed supply base for determining the amount of tax that the corporation must remit on December 31, 2010; in effect, it must account for the tax twice on the same supplies.
Although this “perceived duplicated” tax is subsequently factored into the ultimate tax adjustment, it creates cash-flow issues. Please provide the rationale for the inclusion of the GST/HST invoiced, plan-trust supplies in the deemed supply rule.
b. Other Investment Plans. During our liaison meeting, please review the new HST regulations for other investment plans that an employer might use to confer benefits to its employees.
c. Annual Information Return.
(i) Please discuss the changes under consideration for the Annual Information Return. Will de minimis financial institutions be relieved of this obligation? Will entities such as pension plans be required to prepare these returns?
(ii) Is consideration being given to incorporating this return into an SLFI’s annual return to eliminate duplicate reporting.
d. Taxation of Financial Services. Is Finance considering an overall review of the taxation of financial services, including expanding the tax base to include both fee and margin services?
e. Annual Filings. How would a financial institution that is a monthly or quarterly filer change its filing frequency to annual? Would a letter to CRA suffice?
f. Invoicing. The FI Backgrounder explains that financial institutions may ask suppliers to list the federal and provincial portion of the HST separately to permit proper reporting of the amounts. May the HST continue to be shown as a single amount, and the provincial and federal portions displayed as memo items?
6. Point of Sale Rebates
a. Sales Made Off Reserve. In a June 23, 2010 backgrounder, the Ontario Ministry of Revenue provided guidance with respect to First Nations peoples (referred to as Status Indians, Indian Bands and councils of an Indian band living off-reserve in Ontario). Effective September 1, 2010, the “current retail sales tax exemption for Status Indians, Indian bands and councils of an Indian band will continue for qualifying off-reserve supplies (including sales and leases) as Ontario moves to the HST.” Thus, these First Nations peoples are entitled to an exemption from paying the eight-percent Ontario component of the HST on qualifying property or services at point-of-sale. The point-of-sale exemption applies to qualifying off-reserve acquisitions or importations of property or services that are for personal consumption or exclusively for consumption or use by the band or the council of the band. Although framed by the Ontario Ministry of Revenue as an extension of the exemption granted under the prior ORST Act, it nevertheless is a departure from the harmonization of excise taxes across Canada because it creates a special rule based on where the customer lives. In addition, this partial exemption does not apply to all goods and services but only certain ones sold to certain First Nations peoples living off reserve.
This policy ― announced two weeks before the implementation of the HST in Ontario ― requires changes to the logic of billing and point-of-sale systems, which may or may not be possible based on the hardware and software limitations of such systems.
TEI requests CRA to provide a written response to the following comments:
(i) The less than three-month lead time to implement this new requirement was insufficient to permit many registrants to re-program their billing systems to apply the lower rate to a subgroup of tax-exempt customers. In the future, TEI requests a more reasonable period of time ― such as six months ― be provided to implement the necessary systems changes. In addition, if registrants were unable to comply with the five-percent tax rate because of systems limitations, TEI requests that CRA show administrative tolerance in respect of penalties for the transition period.
(ii) With respect to the point of sale rebate to First Nations peoples, registrants are required to report such amounts on their tax returns. It has been CRA’s position that such rebates may be shown on invoices as a tax of five percent. In these circumstances, please explain why registrants must report the eight-percent portion of the HST that was never charged on the invoice as a form of rebate.
(iii) Because Ontario differentiates between First Nations peoples living off and on reserve, registrants must now determine whether an individual providing a status card is entitled to a full or partial HST exemption. The only tool available to make such decision is the INAC website (http://www.ainc-inac.gc.ca/index-eng.asp), which lists the name of reserves throughout Canada with a postal code. This web site was not established for GST/HST purposes, however, and is a limited tool because the postal code listed on the website is not necessarily the only one that would cover the reserve. TEI recommends that, if the status card is produced and its number noted, that should be sufficient for purposes of the exemption.
7. Carrying on Business
(CRA Only)
Policy Statement P-051R2, Carrying on business in Canada, outlines CRA’s position on when a person is carrying on business in Canada. For leasing, when determining whether a non-resident lessor is carrying on business in Canada, the examples suggest that CRA considers the place where the non-resident lessor acquires the leased property and the place where the property is delivered to the lessee to be the key factors. CRA’s position appears to be contrary to jurisprudence and, as a result, has caused a great deal of uncertainty in the area of cross-border leasing.
Attached in Appendix A are six examples of lease terms. Please identify the relevant factors for determining when a non-resident lessor is considered to be carrying on business in Canada and the basis for this conclusion.
8. Place of Supply Rules
a. Single vs. Multiple Supplies. With the introduction of the HST in Ontario and British Columbia in July 2010, new place of supply rules have been introduced for certain services. These rules include significant changes in the application of taxes to services relating to real property. Generally, the place of supply rules relating to real property contain three basic application rules that can be summarized as follows (similar rules apply to services provided in relation to TPP):
Rule 1:
The service will be considered to be made in a participating province if the real property is located primarily (50 percent) in the participating province. If the work performed is in relation to one building, the location of that building would determine the place of supply. If the services relate to more than one building, the services will be considered performed in the participating province in which the “greatest proportion” of buildings is located; this province will determine the applicable tax rate.
Participating provinces include New Brunswick, Nova Scotia, Newfoundland, Ontario, and British Columbia. Non-participating provinces include Prince Edward Island, Quebec, Manitoba, Saskatchewan, and Alberta, as well as the Northwest and Nunavut Territories and the Yukon. Where the supply is made primarily in non-participating provinces, only GST will apply.
Rule 2:
If the real property is situated primarily in a participating province, but the “greatest proportion” cannot be determined because there is an equal proportion of buildings in two or more participating provinces, the participating province with the highest rate is considered to be the place of supply.
Rule 3:
If the place of supply cannot be determined under Rule 2 because the two participating provinces have the same rate of tax, that particular rate is applied. Generally, the place of supply would be determined by the business address of the supplier most closely connected with the supply, provided that this address is located in one of the specified provinces. Alternatively, the place of supply would be considered to be in the specified province that is closest in proximity to the business address of the supplier that is most closely connected with the supply.
Where services are provided under one agreement and relate to one building, it is easy to apply the place of supply rules ― and determine the applicable tax rate. The location of the building would determine the place of supply and the GST/HST would be collected accordingly. Questions have arisen, however, concerning the application of the rules where services are provided under a single contract for buildings located across Canada.
First, how should one determine the “greatest proportion”? Is it based on the number of buildings, square footage, value of the real property, or another method?
Second, the “greatest proportion” factor may be relevant only in determining the place of supply for a national agreement where a single supply is made. Consideration should be given to situations where multiple supplies are made under the same agreement. If there is a single supply, one tax rate will apply to the entire consideration payable under the agreement. If there are multiple supplies, however, we believe that multiple tax rates will apply because the rate determination will be made on a supply-by-supply basis. TEI invites discussion of this issue.
b. Deemed Delivery. TEI requests that CRA provide written responses to the following questions:
(i) Consider the following example:
A Co. is an Ontario-based, GST registrant engaged in 100-percent commercial activity. A Co. supplies tangible personal property (TPP) to B Co., which is located in British Columbia.
The terms of sale are FCA Hamilton, ON, and B Co. takes legal delivery of the goods in that Province. B Co. is a regular customer of A Co. and, at the time of placing a purchase order, instructed A Co. to contact B Co.’s common carrier directly to advise when the TPP would be ready for pickup at A Co.’s premises. B Co. provided the common carrier with contact information when the purchase order was initiated.
In the above example, B Co. retains the common carrier ― it negotiates the freight rate and perils of risk, is accountable to resolve delays, and pays all freight charges, including fuel surcharges associated with the service. TIB B-078, Place of Supply Rules under the HST, discusses “deemed delivery,” as outlined in Schedule IX, Part II, section 3:
Tangible personal property is deemed to be delivered in a particular province, and not to any other province, if the supplier ships the property to a destination in the particular province that is specified in the shipping contract for the property, or otherwise transfers possession of the property to a common carrier or consignee retained by the supplier on behalf of the recipient to ship the property to such a destination in the particular province on behalf of the recipient.
The deemed delivery concept is revisited in the Place of Supply Regulations, Part I, Division I, section 3. Please confirm that Ontario HST applies to the transaction.
(ii) Consider the following examples:
D Co. is a Quebec-based, GST and QST registrant, engaged in 100-percent commercial activity. D Co. supplies corporeal movable property (TPP) to E Co., located in British Columbia.
Under its contract with D Co., E Co. takes legal delivery of the goods in Quebec. Freight is “prepaid and charge”; thus, D Co. contacts a common carrier to ship the goods to E Co.’s manufacturing plant in Victoria, BC.
The common carrier invoices D Co. D Co. will pay the carrier’s invoice and invoice E Co. for the cost of the freight as a separate line item on D Co.’s sales invoice to E Co.
Based on the deemed delivery concept applicable to transactions with harmonized provinces, please confirm that the 12-percent HST applies to the transaction.
(iii) The facts are the same as above, except that E Co. makes all the freight arrangements to pick up the corporeal movable property from D Co.’s Quebec-based plant (i.e., D Co. has no involvement with the freight carrier).
Please confirm that only GST applies to this transaction.
9. Non-GST issues: Insurance Premium Tax
Part I of the Excise Tax Act (ETA) imposes a 10-percent tax on insurance premiums against risks in Canada that are placed with:
· An insurer authorized under the laws of Canada or a province to transact the business of insurance, if the contract is entered into or renewed through a broker or agent outside Canada; or
· An insurer not authorized under the laws of Canada or a province to transact the business of insurance.
This “self-assessed” tax was introduced in 1942 in the Special War Revenue Act (now the ETA). Before April 1997, the tax was administered by the Office of the Superintendent of the Financial Institutions and was transferred at that time to CRA. The statute provides that the tax does not apply “to the extent that the insurance is not, in the opinion of the Commissioner, available in Canada.” The term “not available in Canada” is not defined in the ETA, and the only reasons CRA deems acceptable are the unavailability of the particular class of insurance from authorized insurers or the lack of market capacity at that particular time for that class of insurance. The latter exception has not been defined.
In spite of the lack of guidance, the tax has been imposed retroactively and administered in a subjective and arbitrary manner. Taxpayers have been denied the benefit of the exemption despite possessing letters from an insurer denying coverage.
The insurance premium tax is meant to protect Canada’s insurance business. TEI recommends that it be imposed prospectively only on taxpayers who cannot demonstrate that they have been denied insurance coverage by Canadian insurers.
Conclusion
Tax Executives Institute appreciates this opportunity to present its comments and questions for discussion. We look forward to meeting and discussing our views with you on December 7-8, 2010.
Appendix A, Question 7
FACT PATTTERN #1
1. A non-resident lessor, engaged in the business of supplying industrial equipment outside Canada through a lease, enters into an agreement to lease equipment to a resident registrant.
2. The lease agreement for the equipment is concluded in Canada.
3. Pursuant to the lease, the lessee acquires possession of the equipment outside Canada at the beginning of the lease. The lessee subsequently imports the equipment for use at its business facilities in Canada.
4. The lessee is responsible for all maintenance and servicing of the equipment during the term of the lease.
5. The non-resident lessor does not solicit business in Canada.
6. The non-resident lessor has no agents or employees or facilities (either management, sales or service) in Canada.
7. The non-resident lessor is not listed in any directories in Canada.
8. The non-resident lessor has a bank account in Canada.
9. The lease payments are made in Canada.
FACT PATTTERN #2
1. A non-resident lessor, engaged in the business of supplying industrial equipment outside Canada through a lease, enters into an agreement to lease equipment to a resident registrant.
2. The lease agreement for the equipment is concluded in Canada.
3. Pursuant to the lease, the lessee acquires possession of the equipment outside Canada at the beginning of the lease. The lessee subsequently imports the equipment for use at its business facilities in Canada.
4. The lessee is responsible for all maintenance and servicing of the equipment during the term of the lease.
5. The non-resident lessor does not solicit business in Canada.
6. The non-resident lessor has no agents or employees or facilities (either management, sales, or service) in Canada.
7. The non-resident lessor is not listed in any directories in Canada.
8. The non-resident lessor has no bank account in Canada.
9. The lease payments are made outside Canada.
FACT PATTTERN #3
1. A non-resident lessor engaged in the business of supplying industrial equipment outside Canada through a lease enters into an agreement to lease equipment to a resident registrant.
2. The lease agreement for the equipment is concluded in Canada.
3. Pursuant to the lease, the lessee acquires possession of the equipment outside Canada at the beginning of the lease. The lessee subsequently imports the equipment for use at its business facilities in Canada.
4. The lessor is responsible for all maintenance and servicing of the equipment during the term of the lease.
5. The non-resident lessor does not solicit business in Canada.
6. The non-resident lessor has no agents or employees or facilities (either management, sales or service) in Canada.
7. The non-resident lessor is not listed in any directories in Canada.
8. The non-resident lessor has no bank account in Canada.
9. The lease payments are made outside Canada.
FACT PATTTERN #4
1. A non-resident lessor, engaged in the business of supplying industrial equipment outside Canada through a lease, enters into an agreement to lease equipment to a resident registrant.
2. The lease agreement for the equipment is concluded outside Canada.
3. Pursuant to the lease, the lessee acquires possession of the equipment outside Canada at the beginning of the lease. The lessee subsequently imports the equipment for use at its business facilities in Canada.
4. The lessor is responsible for all maintenance and servicing of the equipment during the term of the lease.
5. The non-resident lessor does not solicit business in Canada.
6. The non-resident lessor has no agents or employees or facilities (either management, sales or service) in Canada.
7. The non-resident lessor is not listed in any directories in Canada.
8. The non-resident lessor has a bank account in Canada.
9. The lease payments are made in Canada.
FACT PATTTERN #5
1. A non-resident lessor, engaged in the business of supplying industrial equipment outside Canada through a lease, enters into an agreement to lease equipment to a resident registrant.
2. The lease agreement for the equipment is concluded outside Canada.
3. Pursuant to the lease, the lessee acquires possession of the equipment outside Canada at the beginning of the lease. The lessee subsequently imports the equipment for use at its business facilities in Canada.
4. The lessee is responsible for all maintenance and servicing of the equipment during the term of the lease.
5. The non-resident lessor does not solicit business in Canada.
6. The non-resident lessor has no agents or employees or facilities (either management, sales or service) in Canada.
7. The non-resident lessor is not listed in any directories in Canada.
8. The non-resident lessor has no bank account in Canada.
9. The lease payments are made outside Canada.
FACT PATTTERN #6
1. A non-resident lessor, engaged in the business of supplying industrial equipment outside Canada through a lease, enters into an agreement to lease equipment to a resident registrant.
2. The lease agreement for the equipment is concluded in Canada.
3. Pursuant to the lease, the lessee acquires possession of the equipment outside Canada at the beginning of the lease. The lessee subsequently imports the equipment for use at its business facilities in Canada.
4. The lessee is responsible for all maintenance and servicing of the equipment during the term of the lease.
5. The non-resident lessor does not solicit business in Canada.
6. The non-resident lessor has no agents or employees or facilities (either management, sales or service) in Canada.
7. The non-resident lessor is not listed in any directories in Canada.
8. The non-resident lessor has no bank account in Canada.
9. The lease payments are made in Canada.