Dear Sirs:
Re: Non-Resident Withholding Tax & GST
This is in reply to your letter of June 10, 1991 whereby you inquired whether the withholdings required under subsection 215(1) of the Canadian Income Tax Act on 24(1) under Regulation 105 of the Canadian Income Tax Regulations on 24(1) by your company should be made "before or after" the goods and services tax ("GST") imposed under Part IX of the Excise Tax Act, R.S.C. 1985, c. E-13, as amended.
Our Views
The GST is a tax imposed on the recipient of a taxable supply, notwithstanding that it is generally collected and paid to the Canadian government by the person making the supply. Amounts paid by your company as its GST on taxable supplies received by it are not income of the person making the supply. Indeed, as provided by section 222 of the Excise Tax Act, where a person collects GST or amounts as or an account of GST, the person shall, for all purposes, other than the bankruptcy of the person, be deemed to hold the GST or amounts so collected in trust for Her Majesty. Accordingly, your company's GST is not included in the amount in respect of which it must make withholding on account of the federal income tax of the supplier.
Yours truly,Reorganizations and Non-Resident DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch