GST/HST Rulings and Interpretations
Directorate
Place Vanier, Tower C, 10th Floor
25 McArthur Road
Vanier, Ontario
XXXXX K1A 0L5
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XXXXX
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File 11870-14-25
XXXXX Case: HQR0000921
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Your File: XXXXX
Dear XXXXX
We are writing in response to a memo received from XXXXX of your office, dated October 22, 1997 respecting multiple GST/HST new housing rebate applications for side by side residential condominium units (RCU) connected by way of a sliding door and respecting the primary residence requirement.
Multiple Residential Condominium Unit Purchases
Facts
Our understanding of the facts is based upon XXXXX memo and upon a letter from XXXXX, an auditor at the Verification and Enforcement Branch of XXXXX, dated May 26, 1997, to XXXXX of your office, as well as the agreement of purchase and sale, and statement of adjustments for unit XXXXX and various design plans.
1. On XXXXX the purchasers entered into an agreement of purchase and sale to acquire unit XXXXX in a condominium complex. At or around the same time they appear to have agreed to purchase unit XXXXX being an adjoining unit. The purchaser's intention was to occupy the two units as a single residence. Each unit qualifies as a "residential condominium" unit as defined for GST/HST purposes.
2. The plans for the units show that a portion of the wall that divides the two units was to be replaced by a sliding door, that apparently does not lock.
3. According to the agreement for purchase and sale provided to us, the purchase price for unit XXXXX was $171 900 net of the GST/HST new housing rebate. The agreement stipulated that the purchase price would not include any GST payable for upgrades or changes. The purchase price set out in the agreement of purchase and sale and did not include the cost of any extras.
4. The GST/HST new housing rebate in respect of unit XXXXX was credited to the purchaser. The builder is now filing the rebates with his GST/HST return.
5. Both unit XXXXX are to receive identical treatment for GST purposes.
Interpretation Requested
We have been asked to consider whether the applicant is eligible for a separate GST/HST new housing rebate in respect of each of the RCU's sold to the purchaser, to be calculated on the value of each RCU individually, or whether, only one rebate is available for the two RCU's together as a whole, to be calculated on the total value of the two RCU's. We have also been asked to indicate whether the cost of the upgrades to the RCU should be included in calculating the rebate.
Interpretation Given
Based on the information provided, we conclude that a separate GST/HST new housing rebate application should be allowed with respect to each RCU. The rebate calculation for each application should be based on the cost of the RCU that was acquired by the applicant without reference to the purchase price of the abutting RCU. No additional rebate is payable for the modifications to the RCU.
Analysis
Paragraph 254(2)(b)
At the time that the purchasers became liable under the agreement of purchase and sale to acquire the RCU's, their intention was to use both RCU's as a single primary residence. Thus the condition in paragraph 254(2)(b) is satisfied.
There is nothing in paragraph 254(2)(b) or in any of Revenue Canada's administrative policies that limit the size of a primary residence to a single RCU. In this case, each RCU was intended to form part of a primary residence and since the rebate is payable whenever a builder sells an RCU rather than when a builder sells a primary residence, there is no legislative provision that would exclude the payment of two rebates.
Paragraph 254(2)(c)
This paragraph requires that a rebate may be paid if the consideration for a RCU is less than $450 000. The closing words for subsection 254(2) go on to provide that where the consideration is less than $350 000, the rebate shall be equal to 36% of the GST paid. In this case, each RCU costs less than $350 000, and therefore the applicant would be entitled to a rebate of 36% of the GST paid on each RCU. In other words, the rebate calculations for each RCU should be done independently and without reference to the purchase price paid for any other RCU.
Cost of Modifications
Paragraph 254(2)(c) refers to the total consideration as covering all amounts each of which is consideration payable for the supply of a particular RCU. Arguably, the cost of extra's could have been included in the consideration for the supply of the RCU's, however, the parties in this particular case chose to structure their transaction such that the cost of the extras did not form part of the purchaser price of the RCU's. Both the agreement of purchase and sale and the statement of adjustments refer to the cost of extras separately from the purchase price of the RCU. Moreover, the modifications do not fall within the scope of standard upgrades or additions. Therefore, as outlined in Policy Statement P-052 entitled "Amounts Eligible For s. 254 GST Housing Rebate For Homes Purchased From A Builder", the cost of extras should not be included in the purchase price of the RCU or in the GST rebate calculations
Primary Place of Residence Requirement
Facts
In the first fact situation, a purchaser acquired an RCU for his family and moved in. XXXXX months later, the purchaser, decided that the RCU was too small. The purchaser acquired a larger RCU but kept the smaller RCU as a rental property. The purchaser has claimed GST/HST new housing rebate rebates on both RCU's.
In the second fact situation, a purchaser acquired an RCU for an adult child. Prior to either, the child taking possession or to closing, the child began to require constant supervision, and it was felt that the child should move into a home next door to a family member.
Interpretation Requested
We have been asked to consider whether property can be a person's primary place of residence despite either a short period of occupancy or no period of occupancy, or whether there should be some minimum period of occupancy before a property is a primary residence, regardless of the purchaser's intention at the time of acquisition.
Interpretation Given
The length of occupation by the purchaser should not be determinative of the question of primary residence. A short period of occupation is only one factor to be considered in applying a primary residence test.
Analysis
Place of Residence
The first step in establishing that an applicant intended to use an RCU as a primary place of residence is to determine whether or not the applicant intended to use it as a place of residence.
Policy P-130 sets out a list of factors that the Department takes into account in order to determine if a property is a place of residence or if it is being used for transient purposes. Included in this assessment are such factors as:
1. whether the property is the individual's only residence;
2. whether the property is owned or leased;
3. whether the applicant has furnished the property;
4. the reasons for which the person lives in the property i.e. is the RCU being occupied on a temporary basis.
The first example discussed in P-130 considers whether a hotel apartment could be a place of residence where the individual is residing there while looking for work. The response is that the hotel apartment is not a place of residence because the individual maintains his original place of residence and does not intend to make the suite his permanent residence. However, the policy goes on to state that the results could be different if the suite becomes the individual's only home during his job search. This suggests that in circumstances where a person has no other place of residence, it is unlikely that the premises in question would be considered to be a place of lodging.
Application of the Place of Residence Test
In the case of the applicant who moves his family in and out of an RCU in three months, many of the indicia needed to establish the intended use of the RCU as a place of residence, are met including: ownership of the property, responsibility for taxes and utilities etc. The short length of sojournment does not easily displace these other factors, unless it helps to establish that the applicant purchased the property with the intention of moving in just long enough to claim the GST/HST new housing rebate rebate and then renting it out as an income property.
With respect to the case of the adult child, the same indicia are present to establish that the RCU was intended to be used as a place of residence. The failure to occupy does not necessarily defeat the intention to occupy the premises as a place of residence
Primary Place of Residence
If the RCU was intended for use as a place of residence, the next step is to consider whether or not it was intended for use as primary place of residence of the applicant or the applicant's relative. GST Memorandum 500-5 states that in making the determination, consideration should be given to factors such as whether the individual intends to use the home as his primary residence, the length of time that the premises are inhabited and the designation of that address on personal records.
Applying the Primary Place of Residence Test
The issue of whether a place of residence is the primary place of residence of an applicant normally arises only where the applicant has two residences. In those circumstances, it is necessary to distinguish the principal residence from the secondary residence. However, in the case of the applicant who moves his family in and out of the RCU, there does not appear to be any other residence which can be designated as a primary residence. Thus if the RCU was intended to be a place of residence ie. it was not acquired as an income property, it may reasonably, be considered to have been acquired for use as as a primary place of residence.
The results would be basically the same with respect to the adult child situation. If the RCU was intended for occupation as a place of residence it would, be intended for occupation as a primary place of residence, unless the adult child had some other residence that could vie for consideration as a primary residence. In fact, subparagraph 254(2)(g)(ii) explicitly contemplates situations where neither the purchaser nor a relative occupies the premises prior to re-sale and allows the GST rebate to be paid as long as all the other conditions, in subsection 254(2) are met, including the intent to acquire the premises for occupation as a primary residence. Thus the failure to occupy does not automatically preclude an applicant from being eligible for a GST new housing rebate.
Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 954-4393.
Yours truly,
Michael Ezri
A/Rulings Officer
Real Property Unit
Financial Institutions and Real Property Division
GST/HST Rulings and Interpretations Directorate
| c.c.: |
Peter Cairns
Rebates-VECR
13th Floor, 171 Slater Street
Ottawa Ontario |
| Legislative References: |
ETA s. 123, 254, 262;
Interpretation Act s. 33(2). |
| NCS Subject Code(s): |
I-1, 118702, 18870-5 |
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