Club Intrawest – Federal Court of Appeal splits a service in relation to a cross-border vacation home portfolio into two geographic components

Under the usual approach to applying the GST single-supply doctrine, 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, would have been 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 a single supply here, which would have related to both, would have been deemed to be made both inside and outside Canada.

Dawson JA resolved this dilemma by finding that in this unusual context of services in relation to a cross-border real estate portfolio, there were two supplies, so that the services in relation to the Canadian and foreign real estate were taxable and non-taxable, respectively:

I see no reason in principle that precludes splitting up the supply so that the supply is treated as two supplies in order to recognize that ultimately the services are inherently distinct in one important respect: the services relating to the operation of the vacation homes located in Canada are services in relation to real property situated in Canada and hence are a taxable supply – the services relating to the operation of the Intrawest vacation homes situated outside of Canada are services related to real property situated outside of Canada and hence are a non-taxable supply.

Neal Armstrong. Summaries of Club Intrawest v. Canada, 2017 FCA 151 under ETA s. 142(1)(d) and General Concepts – Agency.