Published: May 10th, 2007

The recent federal budget contains a proposed amendment to the CRA legislation that would grant Web site owners GST relief for their foreign customers.

In a briefing note, Canada Revenue Agency (CRA) said the amendment will be retroactive to 1990, when the GST came into effect. The CRA also, according to the legislative briefing note, “had taken the view that the rule designed to remove GST from intellectual property provided to non-residents should be read narrowly . . . (now) the budget include(s) a proposal which removes GST from a broader class of intellectual property.”

“This really clarifies things,” said Jonathan Spencer, a Toronto-based tax lawyer with Thorsteinssons LLP who helped draft the legislative briefing note. “Before there was the concern that (the law) wasn’t broad enough.”

In a recent case, the Federal Court of Appeal (FCA) ruled against Dawn’s Place, an adult-oriented Web site, for failing to collect GST from non-residents for fees earned in 2001. Dawn’s Place had won its case before the Tax Court of Canada on the premise that the money it was making for supplying digital content to those outside of Canada should be “zero rated,” under the GST, which means it falls under a clause in the Excise Act that relates to the supply of intellectual property.

CATA, among others, rallied against what they saw as a blow against Canada’s competitiveness.

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