Canada: Do I Charge HST? New Rules Place Greater Emphasis On The Province Of The Purchaser

On February 25, 2010, the Department of Finance released a press release that proposes significant changes in the rules for determining whether a supply is made in one of the HST provinces (the "participating provinces"), which will now include Ontario and British Columbia for most taxable supplies made on or after July 1, 2010. A non-exempted supply that is made in a participating province will be subject to harmonized sales tax ("HST") of 13% (or 12% in the case of B.C.) rather than to GST of 5%.

The proposals extend to 23 pages, and we refer only to a few highlights. These new place-of-supply rules generally will apply for HST purposes for supplies made on or after May 1, 2010 (as well as to some supplies made before that date where the consideration has not become due, and has not been paid, before that date).


Currently, a taxable supply of services by a registrant typically will be considered to be made for HST purposes in the province where the services are mostly performed or in the province of the "place of negotiation" (typically, the supplier office that entered into the contract).

Under the new rules, the province in which a taxable supply is made typically will be determined based on the address of the purchaser or other recipient of the supply – so that if the recipient provides only one address to the supplier, the supply typically will be considered to be made in the province corresponding to that address. Where the supplier obtains more than one home or business address in Canada of the recipient, the address "that is most closely connected with the supply" will govern.

This general rule is overridden by a number of rules dealing with specific situations:

  • services that are substantially performed in the physical presence of an individual receiving the service (e.g., a haircut or massage – but not an advisory or professional service) will be a supply in the province of such performance
  • the situs of services in relation to real estate (e.g., services of a property management company) generally will be governed by the location of that real estate
  • similarly for services in relation to tangible personal property such as equipment
  • services that relate to a location-specific event (such as a performance or conference) generally will be sited in the related province
  • litigation brought in a particular province will be considered to be supplied there
  • there are minor or no changes to other specific rules respecting services (e.g., transportation and freight, mail delivery, telecommunications, customs brokerage, repair and RRSP-trustee services)

Intangible Personal Property

Significant and complex changes also are proposed for the rules determining the place of supply for HST purposes of intangible personal property (e.g., club memberships, movie passes, options to acquire personal property or any of the various types of intellectual property such as copyright and patent rights). The place of supply often will be governed by a similar address rule to the general rule for services described above – i.e., the province of supply is determined by the address of the recipient. However, this address rule is "trumped" by two sets of rules.

First, if the Canadian rights in relation to the intangible personal property (i.e., the part of the intangible personal property that can be used in Canada) can only be used in a single participating province, that is the place of supply. Conversely, if the Canadian rights can be used only primarily outside participating provinces, the supply will be treated as made in a non-participating province. (If the participating rights can be used only primarily in participating provinces, and under the agreement for the supply the greatest proportion of use of the Canadian rights that are restricted to participating provinces would have to occur in a particular participating province if all such rights were used, the supply will be sited in that particular province.)

If the first set of rules does not apply, a second set of rules may site a supply made for consideration less than $300 in a province where (in very approximate terms) the supply is purchased in person by an individual (e.g., the purchase of a movie pass at a movie chain or vending machine).

The above rules are also overridden where the supply of intangible personal property relates:

  • to a supply of real property or tangible personal property (e.g., an option to acquire a work of art), in which case the location of that property typically will govern the place of supply
  • to services that would all be supplied in a single province if all of those services were provided (e.g., a train pass that can only be used in Ontario), in which that will be the province of supply

Property or Services Brought into or Received in a Participating Province

The current HST rules provide for persons to self-assess themselves for HST where in a wide range of circumstances they make purchases or importations from abroad or from another province and HST is not charged. These rules will be expanded to deal among other things with purchases or importations from a participating province with a lower rate of HST (i.e., B.C.).


No mention is made of Québec. However, given that the alternative would be chaotic, there appears to be an implicit assumption that the place of supply rules for Quebec (which currently imposes a GST-style tax under a separate statute) will be harmonized with the HST rules referred to above.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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