Do I need to pay taxes on Consultation from abroad?

[S.Shamz]

Hi,

I am applying for study permit application for my son from outside Canada. The RCIC member told me that I have to pay $250 +tax for the consultation fee, $2400 +tax for the processing fee of my application preparation and submission and $235+tax for the forms submissions to the Government/immigration. So I am wondering if I need to pay taxes on all three parts or only some parts? I appreciate if any Accountant here can help me or anyone who is familiar with tax regulation etc for this area.

I have checked multiple website which tells me if for instance you purchase a mattress from Manitoba to be shipped to Ontario you need to pay Ontario Taxes as the supply service is in Ontario. For my case how would this be read? The supply of service is in Canada or at my Country? Since I am ordering this service from abroad do I need to pay that %13 Canada taxes over all three areas of my consultant??

 

[k.h.p.]

Taxes are technically only payable if the service is delivered in Canada. However, the consultant may simply be charging them for ease of accounting or because they haven't set up their accounting system for out-of-cabada transactions.

That being said, do you want to argue with someone you're entrusting with passports and immigration?

 

[Copingwithlife]

There is no need to set up their accounting system for out of canada transactions in regards to collecting/remitting the GST/HST tax. These transactions would fall under what are called Exempt supplies. There would be no taxes applied to them. When the registrant files the GST/HST report, they would be broken down as exempt since the Place of Supply is outside Canada.
An example would be for a company that has Revenue of $150,000 a year, if $125000 is exempt, lets say to the USA, that portion would be exempt from the GST/HST, and only $25000 would have the tax applied to them, however when the registrant files his return, he would indicate he had $150000 in revenue, but only $25000 had the tax collected. Of course the registrant is required to keep all invoice/receipts to support these transactions.
Advise your consultant to look at the following link, and control F the word exempt, it will bring him to the section showing how to file a GST/HST return when exempt supplies are involved.
If your consultant has any questions on how to do this have him call the CRA business line, they can give him further guidance. 1800 959 5525
Another good reference for these type of transactions is the file B-103, produced by the CRA

https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/gst-hst-businesses/complete-file-instructions.html

 

[k.h.p.]

There is no need to set up their accounting system for out of canada transactions in regards to collecting/remitting the GST/HST tax. These transactions would fall under what are called Exempt supplies. There would be no taxes applied to them. When the registrant files the GST/HST report, they would be broken down as exempt since the Place of Supply is outside Canada.
Advise your consultant to look at the following link, and control F the word exempt, it will bring him to the section showing how to file a GST/HST return when exempt supplies are involved.
Another good reference for these type of transactions is the file B-103, produced by the CRA

https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/gst-hst-businesses/complete-file-instructions.html

Sure, but if they haven't ever processed an exempt transaction they may be clueless enough to not know how to exempt HST.

 

[Copingwithlife]

Sure, but if they haven't ever processed an exempt transaction they may be clueless enough to not know how to exempt HST.

This may be true, there are a lot of clueless individuals around ,that is why I also included the telephone number for them to call for assistance. Tax payers should only be expected to pay what is legally owed to the Government, nothing more, nothing less

 

[mad_hatter]

The OP is engaging a company in Canada to do the work in Canada. So GST applies.

 

[Copingwithlife]

The OP is engaging a company in Canada to do the work in Canada. So GST applies.

Please give a reference from the CRA then indicating this
Key cornerstone of the Place of Supplies rules is WHERE the service is being delivered too, not where it’s performed
Example ; Architect is in Ontario , which is a participating province , rate is 13%, client is in Illinois, USA. Because the client is outside of Canada , in this situation the client is not charged the 13% on this service
The architect still puts the sale on his GST/HST return as noted above , but it’s exempt/zero rated
Another example :
Architect is in Ontario, client is in Alberta a non participating province . The client is charged the rate of 5%, which is the rate in effect in that province, NOT the 13%
GST in non participating province , HST in participating provinces
If the customer is charged for this service he maybe able to claim a rebate for this amount.
The rebate is the GST 189, code 1C , amounts charged in error/incorrectly
If the client is charged , I would advise him to reach out to the CRA, Business line, ask to be transferred to the department dealing in GST/HST rebates

 

[mad_hatter]

In this case, the end product, the study permit, is to be used in Canada, I don't see why GST would not apply.

 

[k.h.p.]

The service - of consultation - is delivered out of country. The study permit is not the end product. That would be like a lawyer needing the value the judgment itself for taxation purposes and not her legal services.

 

[mad_hatter]

The consultant is to submit the permit application on behalf of the OP in Canada. I don't see why GST would not apply.

 

[mad_hatter]

Lets try this on:

I want to build a house in Vancouver. I engage an architect in Canada to design the house. When the building plan is finished, I will have the plan delivered to me overseas. I will then use this plan to build my house. Do you think I can avoid paying thousands of dollars of GST? Do you think CRA will allow this?

 

[k.h.p.]

Consulting services are zero-rated for taxation when supplied to non-residents outside of Canada. There's even a specific exemption for consulting services to help a non-resident person establish a residence.

From the CRA:

Find out how the GST/HST applies to exported services
You do not charge the GST/HST on services you perform totally outside Canada, or on services that relate to real property situated outside Canada.

Services, other than transportation services, that you perform on temporarily imported goods are zero-rated. The goods must be brought into Canada for the sole purpose of having the service performed on them and must be exported as soon as possible. Any parts supplied along with these services are also zero-rated.

Certain services provided to a non-resident person, but not to an individual while the individual is in Canada, that are performed all or partly in Canada may be zero-rated, such as:

• certain advisory, professional, or consulting services;
• advertising services to an unregistered non-resident person;
• advisory, consulting, or research services to help a non-resident person establish a residence or business in Canada;
• services and parts for goods or real property acquired to fulfill an obligation under warranty for an unregistered non-resident person;
• custodial or nominee services for the non-resident person's securities or precious metals;
• training services to an unregistered non-resident person (other than an individual) to teach non-resident individuals or to give examinations for courses leading to certificates, diplomas, licences, or similar documents, or classes or licence ratings that attest to the individuals' competence or to give an exam to practise or perform a trade or vocation;
• services to an unregistered non-resident person of destroying or discarding goods, or the services of dismantling goods for the purpose of exporting them;
• services to an unregistered non-resident person of testing or inspecting goods acquired or brought into Canada for this service and the goods are to be destroyed or discarded in the course of providing the service or on its completion;
• services of acting as an agent for a non-resident person or services of arranging for, procuring, or soliciting orders for supplies by or to the person when the service relates to a zero-rated property or service, or if the supply to or by the non-resident person is made outside Canada; and
• services made in Canada to a non-resident person by electronic means, may be zero-rated. For more information, see B-090 GST/HST and Electronic Commerce.

I have added the bold underlining.

Source: https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/gst-hst-businesses/charge-collect-imports-exports.html

 

[k.h.p.]

In your example, the architect engaged to draft the building drawings, if supplying to a non-resident outside of Canada, would zero-rate the supply for taxation provided they could prove a non-Canadian supply address.

 

[Copingwithlife]

Lets try this on:

I want to build a house in Vancouver. I engage an architect in Canada to design the house. When the building plan is finished, I will have the plan delivered to me overseas. I will then use this plan to build my house. Do you think I can avoid paying thousands of dollars of GST? Do you think CRA will allow this?

I am not going to actively engage with someone trying to avoid paying tax, you are not the one having to file the GST/HST return with the government, the registrant has to do this. If you have a question regarding specifics, then you would want your query to be sent to GST/HST rulings .
Good grief

 

[mad_hatter]

Consulting services are zero-rated for taxation when supplied to non-residents outside of Canada. There's even a specific exemption for consulting services to help a non-resident person establish a residence.

From the CRA:



I have added the bold underlining.

Source: https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/gst-hst-businesses/charge-collect-imports-exports.html

In this case, the consulting firm is actually prepare the application and physically submit it to the Canada government agency. It is little more then "Advisory, consulting and research".