Moseley – Tax Court of Canada finds that the ETA s. V-I-9(2) exemption does not apply to a former commercial property and that it could not challenge a retroactive GST de-registration

At the time the appellant acquired a former restaurant (now vacant), he was registered for GST purposes, so that he was not charged GST. After concluding that the sale was not exempted under s. V-I-2 et seq. because the property did not contain a “residential unit,” Rabinovitch J also concluded that the exemption under s. V-I-9(2) (commonly thought of as the “vacant land” exemption) did not apply on the basis that the (vacant) restaurant should be considered to be “used” in commercial activity “immediately before” the transfer of its ownership because it had been “last used” in commercial activity. He indicated that the opposite conclusion would have meant that the property could have been sold on an exempt basis even though the vendor would have been able to claim ITCs regarding its use in the former restaurant business, which would be contrary to the scheme of the ETA as noted by the Supreme Court.

After the sale, Revenu Québec retroactively cancelled the appellant’s registration, effective to before the time of the sale. Rabinovitch J was skeptical that Revenu Québec had the power to cancel a taxpayer's registration retroactively. However, this determination was not within his jurisdiction, so it was necessary for him to proceed on the basis that the appellant's registration had been retroactively invalidated.

He concluded that, even though the appellant thus was not registered at the time of his acquisition and was not charged GST by the vendor, the direct assessment of him by Revenu Québec was valid under s. 296(1)(b).

Note that this may have been an illusory victory for the Crown as ETA s. 278(2) likely indicates that the appellant would not be required to pay that assessment (see Royal Bank).

Neal Armstrong. Summaries of Moseley v. The King, 2026 TCC 59 under ETA s. V-I-9(2)(a), s. 242(1), s. 141.1(3), s. 296(1)(b) and s. 280.1.