Citation: 2008 TCC 423
Date: 20080718
Docket: 2007-3856(GST)I
BETWEEN:
FIDUCIE CHRY-CA,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
[OFFICIAL ENGLISH
TRANSLATION]
REASONS FOR JUDGMENT
Favreau J.
[1]
This is an appeal from two
notices of assessment dated July 14, 2006, and bearing the reference
numbers 14454 5837 RT0001 000002 and
14454 5837 RT0001 000003. Both notices of assessment pertain to
the period ended December 31, 2005. By those notices, the Minister of
Revenue of Quebec, acting as agent for the Minister of National Revenue (hereinafter
"the Minister"), disallowed the two claims for a Goods and
Services Tax (GST) rebate in respect of new residential rental complexes
located at 1638-1642 Charles Street in Saint-Hubert, Quebec, and 1502-1508
Saint-Paul Street in Lemoyne, Quebec.
[2]
The issue is whether
the "first use" of the complexes was as a place of residence for
individuals, each of whom had continuous occupancy of a unit under one or more
leases for a period of at least one year, throughout which the property was
used as the primary place of residence of that individual.
[3]
The facts on which the
Minister relied in disallowing the rebate claim are described as follows at
paragraph 15 of the Reply to the Notice of Appeal:
[TRANSLATION]
(a)
The facts admitted to
above.
(b)
During the period in
issue, the Appellant was a registrant for the purposes of Part IX of the Excise
Tax Act, R.S.C. 1985, c. E-15 (hereinafter "the ETA").
(c)
On October 5, 2005, the
Appellant filed a new residential rental property GST rebate application with
the Minister in connection with the triplex at 1638-1642 Charles Street, Saint-Hubert, Quebec.
(d)
On December 21, 2005, the
Appellant filed a new residential rental property GST rebate application with
the Minister in relation to the quadruplex at 1502-1508 Saint-Paul Street, Lemoyne, Quebec.
(e)
The Appellant is the
builder of the triplex and quadruplex described above at subparagraphs (c) and (d).
(f)
The Appellant rented
out all the apartments in the triplex and quadruplex described above at
subparagraphs (c) and (d) to Service LTS Inc.
(g)
The term of the lease
for the apartments at 1638-1642
Charles Street in Saint‑Hubert
is seven and a half months, commencing November 15, 2005, and ending
June 30, 2006.
(h)
The term of the lease
of the apartments at 1502-1508
Saint-Paul Street in Lemoyne is
15 months, commencing April 1, 2005, and ending
June 30, 2006.
(i)
In turn, Service LTS Inc.
leased the apartments at 1638-1642
Charles Street in Saint-Hubert
and 1502-1508 Saint-Paul Street in Lemoyne to individuals for the duration
of the restoration and construction work following incidents that damaged their
primary places of residence.
(j)
The terms of the leases
to the individuals vary in length depending on the duration of the restoration
or construction work, calculated in rental days varying from 30 days to 45 days
to 60 days or some other duration.
(k)
Since the apartments
are not the individuals' primary places of residence for more than one year,
the criteria set out in the definition of "qualifying residential
unit" are not met.
[4]
Rémi Tremblay
testified, specifying that (i) the Appellant was a family trust that he created
for the benefit of his two daughters; (ii) the Appellant had purchased the two
parcels of land necessary for the construction of the two buildings; (iii) the Appellant
had the buildings constructed by Tremtar, a corporation of which he was the
sole owner; and (iv) Service LTS Inc. was a corporation owned by him (75%) and
his spouse (25%). Mr. Tremblay also explained that the lease between the
Appellant and Service LTS Inc. pertained to vacant apartments, and that Service LTS Inc.
furnished those apartments so that they could be leased, fully furnished
and equipped, to incident victims. Service LTS Inc. signed leases with the
incident victims, not the insurers, but the insurers paid the rent costs.
[5]
The leases described
above at subparagraphs 3(g) and 3(h) were adduced in evidence (as
Exhibits I‑2 and I‑3) along with the rental agreements between
Service LTS Inc. and the incident victims in relation to the complexes
concerned (a series of documents forming Exhibit I-4). The following
excerpt from these rental agreements is very telling:
[TRANSLATION]
The Lessee retains the services of Service LTS Inc. (the Lessor) as
a provider of a temporary dwelling for the duration of the post-incident
restoration and construction work done at the Lessee’s residence, and agrees to
pay the Rent stipulated herein.
[6]
Former lessees also
testified about the circumstances under which they occupied an apartment rented
from Service LTS Inc.
Analysis
[7]
The Appellant submits
that the first use in 2005 of the complexes in respect of which it claimed new residential
rental property rebates was long-term residential housing, not short‑term
or temporary residential housing, even though the terms of the incident
victims' leases varied from one month to 12 months.
[8]
The Appellant submits
that the concept of "qualifying residential unit", as defined in
section 256.2 of the ETA, does not require that the dwelling be occupied
by a single individual throughout the year. In the Appellant's submission, the
residential complex can still qualify if several individuals reside in the unit
in succession during the year.
[9]
The definition of
"qualifying residential unit" is contained in subsection 256.2(1)
of the ETA, which reads as follows:
256.2 Definitions − (1) The definitions in this
subsection apply in this section.
"qualifying residential unit" of a person, at
a particular time, means
(a) a residential unit of which, at or
immediately before the particular time, the person is the owner, a co-owner, a
lessee or a sub-lessee or has possession as purchaser under an agreement of purchase
and sale, or a residential unit that is situated in a residential complex of
which the person is, at or immediately before the particular time, a lessee or
a sub-lessee, where
(i) at the particular time, the unit is a
self-contained residence,
(ii) the person holds the unit
(A) for the purpose of making exempt supplies of the
unit that are included in section 5.1, 6, 6.1 or 7 of Part I of Schedule V, or
(B) if the complex in which the unit is situated
includes one or more other residential units that would be qualifying
residential units of the person without regard to this clause, for use as the
primary place of residence of the person,
(iii) it is the case, or can reasonably be expected
by the person at the particular time to be the case, that the first use of the
unit is or will be
(A) as the primary place of residence of the person
or a relation of the person, or of a lessor of the complex or a relation of
that lessor, for a period of at least one year or for a shorter period where
the next use of the unit after that shorter period is as described in clause
(B), or
(B) as a place of residence of individuals, each of
whom is given continuous occupancy of the unit, under one or more leases, for a
period, throughout which the unit is used as the primary place of residence of
that individual, of at least one year or for a shorter period ending when
(I) the unit is sold to a recipient who acquires the
unit for use as the primary place of residence of the recipient or of a
relation of the recipient, or
(II) the unit is taken for use as the primary place
of residence of the person or a relation of the person or of a lessor of the
complex or a relation of that lessor, and
(iv) except where subclause (iii)(B)(II) applies, if,
at the particular time, the person intends that, after the unit is used as
described in subparagraph (iii), the person will occupy it for the person’s own
use or the person will supply it by way of lease as a place of residence or
lodging for an individual who is a relation, shareholder, member or partner of,
or not dealing at arm’s length with, the person, the person can reasonably
expect that the unit will be the primary place of residence of the person or of
that individual; or
(b) a prescribed residential unit of the person.
[10]
The definition of
"qualifying residential unit" refers to the qualifying residential
unit of a person. The person in question in the case at bar is the person who
claimed the tax rebates, that is to say, the Appellant in its capacity as the
builder of multiple‑unit buildings and dwellings. The Appellant was
required to pay the taxes under the self-assessment provisions, and the taxes
were due when the first unit in each complex was rented. In the instant case,
all the units in each complex were rented to Service LTS Inc.
[11]
Following the signature
of the leases with the Appellant, Service LTS Inc. took possession of the units
and furnished them so that they could be rented out to incident victims fully
equipped. Thus, the first use of the units was not as a place of residence of
individuals, each of whom is given continuous occupancy of the unit, under one
or more leases, for a period of at least one year, throughout which the unit is
used as the primary place of residence of that individual, as required by
subparagraph 256.2(1)(a)(iii) of the ETA.
[12]
In addition, given the
facts adduced in evidence, there is no reason to believe that the first use of
the units concerned was to serve as primary place of residence for Service LTS
Inc., a relation with whom the Appellant was not dealing at arm's length.
[13]
The arguments above are
sufficient to dismiss the appeal, but I will nonetheless consider the
Appellant's argument that Service LTS Inc. was not the first user of the
residential units. In order for the Appellant to succeed, it would have to show
that the residential units in each rental property substantially all served
(i.e., 90% or more) as the primary place of residence of individuals who
were given continuous occupancy of each unit, under one or more leases, for a
period of one year.
[14]
In other words, in
order to be entitled to a tax rebate in respect of its multiple-unit residential
complexes, the Appellant must show that all the lessees were given continuous
occupancy under one or more leases during the first year of use of each unit,
throughout which the unit was used as a primary place of residence of each
lessee.
[15]
Obviously, the
Appellant was unable to make this demonstration in respect of the seven units.
On the contrary, the Respondent's witnesses asserted that the units that they
occupied were not their primary places of residence, and that they never
intended for them to be their primary places of residence.
[16]
Most of the units in
the complexes were first used by incident victims who lived in them temporarily
for one month to six months as they waited for their primary places of residence
to be restored to their normal condition. This is consistent with the purpose
of the rental agreements entered into by Service LTS Inc.
[17]
The phrase "primary
place of residence" is not defined in the ETA. GST/HST Policy Statement
P‑228, issued on March 30, 1999, sets out the position of the
Canada Customs and Revenue Agency ("the Agency") in this regard.
It states that the question whether a unit is a "primary place of
residence" is a question of fact, determined on a case-by-case analysis
(page 1, paragraph 2). It also states that the criteria indicative of a primary
place of residence are as follows:
-
mailing address;
-
income tax (forms or
returns);
-
voting;
-
municipal/school taxes;
and
-
telephone listing.
[18]
Under the wording of
section 256.2 of the ETA, an individual can possess no more than one
primary place of residence. If the individual has more than one place of residence,
the individual's more important one must be determined based on factual
criteria. The criteria taken into account by the Agency in determining the
primary place of residence, as developed in the aforementioned Policy
Statement, strike me as reasonable but not exhaustive. Other indicia can be
relied upon, such as the current primary place of residence being put up for
sale or its lease being cancelled; changes of address; moving arrangements; and
whether or not the individual intends to return to his or her current primary
place of residence.
[19]
The Appellant's
evidence has not satisfied me that each unit in the two complexes in issue was
occupied continuously by lessees, during the first year of use, as their
primary place of residence.
[20]
Consequently, the
appeal is dismissed.
Signed at Montréal, Quebec, this 18th day of July 2008.
"Réal Favreau"
Translation
certified true
on
this 5th day of September 2008.
Susan
Deichert, Reviser
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