Intrawest – Tax Court of Canada finds that time share fees charged to Canadian and U.S. residents respecting resort condos located throughout North America were 100% GST-taxable

A Canadian-resident non-share corporation, most of whose members had time share points which entitled them to book stays at Canadian, U.S. and Mexican resort condos beneficially owned by the corporation, was found to be receiving its annual fees from them as consideration for a single supply of a service, namely, funding the operating costs of the time share program. This gave rise to a conundrum, as ss. 142(1)(d) and 142(2)(d) respectively deem a supply of a service in relation to real property inside Canada or outside Canada to be made in Canada or outside Canada – so that the single supply here which related to both was deemed to be made both inside and outside Canada.

D’Arcy J resolved this quandary by using the following interpretive approach:

[P]aragraphs 142(1)(d) and 142(2)(d)…only apply if the single supply of a service relates solely to real property. The paragraphs do not apply if only a portion of the single supply of the service relates to real property. In such a situation, the supply is subject to the general deeming rules set out in paragraphs 142(1)(g) and 142(2)(g).

The latter general rule deems a supply of a service that is to be performed in whole or in part in Canada to be made in Canada. This produced the tidy result that 100% of the fees was subject to GST - even though many of the members were U.S. residents who were using non-Canadian resort condos. This was also a harsher approach than that of CRA, which was to treat each fee as being taxable only to the extent of 68.5% thereof, being “the ratio of total resort points issued in respect of properties located in Canada to the total resort points issued in respect of all properties."

Neal Armstrong. Summaries of Club Intrawest v. The Queen, 2016 TCC 149 under ETA s. 142(1)(d), ETA s. 306.1(1), General Concepts – Agency.