Recently, CRA released two interpretations that deal with section 144 of the Excise Tax Act, a rule that says supplies are made outside Canada (and so not taxable) if they are made before Customs release.
Both CRA interpretations are by the same author and both are founded on this interpretation of section 144:
“One of the requirements of section 144 is that the goods be imported before the supply is made.”
The wording of section 144 doesn’t seem to be so restrictive and it’s hard to see the policy reason for such a restrictive view.
Here’s the essential wording of ETA s. 144 says:
“a supply of goods that have been imported in compliance with the Customs Act or any other Act of Parliament that prohibits, controls or regulates the importation of goods, but have not been released before the goods are delivered or made available in Canada to the recipient of the supply …”
So the author is focused on the “have been imported” words, I gather. But they don’t clearly require that the supply occurred before then importation. You could read the section as requiring that:
- There has been a supply of goods;
- The goods have not been released before “delivery”; and
- The goods [at some point in time] have been imported.
In the interpretations given, the agreement is entered into before the importation. Next, the goods (in one case oil) are shipped (literally) into Canada and later released. The terms of the sale agreement are delivery off the ship. They are imported by the recipient and it arranges release from Customs. Why isn’t that a perfect example of a supply made outside Canada?
The definition of “place outside Canada” in Schedule VI (zero-rated supplies), Part VII, (Transportation Services) is consistent with the view that supplies are not made in Canada until released from Customs. It says in part:
“’ place outside Canada’ in respect of a freight transportation service, includes at a particular time a place in Canada if, at that time, the property being transported has been imported but has not been released and the property is being transported in compliance with the Customs Act or any other Act of Parliament that prohibits, controls or regulates the importation of goods;”
Paragraph 143(1)(a) might also apply, assuming the supplier is not carrying on business in Canada. That rule says that the supply by a non-resident of personal property made in Canada is deemed to be made outside Canada unless the supplier is carrying on business in Canada.