STIKEMAN ELLIOTT LLP

Transcription

1 Tax Executives Institute: Top Ten Indirect Tax Issues For Energy Companies Current Sales Tax, Customs and Other Tax Issues Alan Kenigsberg January 13,

2 Energy Trading in Canada Current Sales Tax, Customs and Other Tax Issues Overview of Taxes Affecting Energy Trading Goods and Services Tax ( GST ) Harmonized Sales Tax ( HST ) Provincial Sales Tax ( PST ) Customs SLIDE 1

3 Energy Trading in Canada Current Sales Tax, Customs and Other Tax Issues Types of Energy Products Continuous Transmission Commodities ( CTCs ) Other fuel products SLIDE 2

4 #10: Canada s economic sanctions may restrict supplies of equipment and services to certain persons/countries Canada has recently expanded sanctions against a number of countries. All exports to Belarus and North Korea require an export permit under the Export and Import Permits Act. Sanctions under the Special Economic Measures Act ( SEMA ) are different depending on the particular country, and are continuously changing. SEMA sanctions against Iran, Syria, and Russia contain restrictions on exports of certain goods used in the oil and gas industry. SLIDE 3

5 #9: CRA s restrictive views on Joint Venture Elections CRA is currently focusing on joint ventures and how they deal with GST/HST. CRA has raised concerns with the elections where: (a) the Operator is a bare trust ; and where (b) there is no joint venture agreement in writing, or it does not contain certain terms. If election is not valid, then each joint-venture participant would be required to claim its proportional share of input tax credits and remit its proportional share of any taxes. SLIDE 4

6 Energy Trading in Canada Current Sales Tax, Customs and Other Tax Issues #8: Only reporting net quantities when Importing and exporting similar types of CTCs Similar quantities of CTC s may be imported and exported from Canada during the same period. CBSA has stated that imports and exports cannot be offset against each other. The CBSA will not allow net reporting and importers/exporters must ensure that they separately report each import and export as a separate transaction. SLIDE 5

7 Energy Trading in Canada Current Sales Tax, Customs and Other Tax Issues #7: Issues with storage of CTCs for export Storage fees are generally taxable supplies. CTC may be zero-rated if CTCs are stored while in-transit as part of an import or export (i.e. CTC purchased for export, and stored during the export for a short time). Where CTC is stored for an indefinite period, it will not be considered in-transit (CBSA does not provide details on what storage time is unacceptable). Some services zero-rated under Part V of Schedule VI, section 4. SLIDE 6

8 Energy Trading in Canada Current Sales Tax, Customs and Other Tax Issues #6: CTC s transferring back and forth across the border sales at border to affiliated company Pipelines and wires often transport CTCs cross back and forth across the Canada U.S. border. Section of the ETA Deemed not an be an export or import in certain circumstances. Tenaska Marketing Canada v. R. [2007] G.S.T.C. 72 [FCA] CRA s response to Tenaska was to try to limit Tenaska to its facts. CBSA Draft D17-1-xx indicates that the government may be taking a broader approach, but there are still some areas of concern. SLIDE 7

9 Energy Trading in Canada Current Sales Tax, Customs and Fuel Tax Issues #5: Use of Drop Shipment Certificates Supplier Sale Delivery Non-Resident, Non- Registrant Sale Consignee CRA has stated drop shipment certificates do not work for CTCs which are commingled in a pipeline (same molecules must be delivered). CRA has stated that if a non-resident, non-registered recipient was carrying on business in Canada, it was required to register, and the drop-shipment certificate will retroactively not be valid. If consignee purchases for resale at the same point in a pipeline, CRA states the drop-shipment rules do not apply. SLIDE 8

10 Energy Trading in Canada Current Sales Tax, Customs and Other Tax Issues #4: Sales to Non-Registrants for Export: Supplier Does Not Maintain Evidence of Export Non-registered purchaser purchases CTC for export or to exchange for a CTC of the same class or kind outside Canada. CTCs for export are generally zero-rated under Part V, Schedule VI, section 1, or Part V, Schedule VI, section 15 (for natural gas). CTCs for exchange are generally zero-rated under Part V, Schedule VI, section Supplier must maintain evidence satisfactory to the Minister of the exportation. SLIDE 9

11 #3: On a sale for export to a GST Registrant, no export declaration is obtained Declaration is required, even if supplier has proof of export. Part V, Schedule VI, section 15.2 zero-rates a supply to a GST registered purchaser of CTCs if the purchaser provides a declaration that the purchaser intends: to export the CTC by wire, pipeline or other conduit; to export the CTC as soon after delivery as is reasonable; that the CTC will not be consumed or re-supplied in Canada; and the CTC will not be further processed, transformed or altered in Canada unless reasonably necessary or incidental for transportation Supplier must not have known and must not have a reason to believe that the CTC would not be exported/exchanged. SLIDE 10

12 #2: GST Registrant purchases a CTC for Export and then does not export all of the CTC purchased CRA has stated that a Purchaser cannot provide an export declaration if the purchaser knows in advance that a portion of the supply is intended for sale in Canada. No issue to Seller who obtains the declaration unless they knew some portion would not be exported. SLIDE 11

13 # 1: Documentary Requirements for ITCs The ETA requires certain documentary requirements before ITCs can be claimed, including: The name of the supplier, date of the supply, total amount paid, amount of tax paid or payable, GST registration number, terms of payment and a description of the supply. When invoices are not issued (which is often the case with supplies of CTCs), the contract should include the supplier s GST registration number and specify if GST is payable. If this is not possible, purchasers should consider issuing a Reverse invoice. SLIDE 12

14 For further information Alan Kenigsberg