Metrogate – Tax Court of Canada finds that the degree of completion of a condo project should reflect land costs

The size of the transitional rebate that a developer was entitled to receive on an Ontario condo project turned on whether the cost to it of the land component could be taken into account in determining its degree of “completion” on the transitional date for the introduction of Ontario HST (July 1, 2010).

Favreau J accepted that the purpose of the rebate provision was to provide a mechanism for refunding a rough estimate of the “embedded” retail sales tax on that date in the project, and that it was unlikely that there would be much embedded RST in the cost of the land (albeit, the same could be said about the labour component of the costs, which was clearly eligible). However, 1096288 established (in a different context) that “land is a necessary element in any construction,” and this judicial interpretation of the concept appearing in the plain text before him was sufficient to trump the result he would have arrived at on a purposive interpretation. Thus, the developer got the enhanced transitional rebate.

Neal Armstrong. Summary of Metrogate Inc. v. The Queen, 2018 TCC 91 under New Harmonized Value-added Tax System Regulations, No. 2, s. 57(4)(c)(iv).