GST/HST Rulings and Interpretations
Directorate
Place Vanier, Tower C, 10th Floor
25 McArthur Avenue
XXXXX Vanier, Ontario
XXXXX K1A 0L5
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Subject:
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GST/HST INTERPRETATION
Sale of Lots Created by Consolidation and Subdivision
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Dear Sir:
This letter is in reply to your telephone enquiry concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the sale of lots created by a plan of subdivision when the land subdivided was previously owned by the vendor in two or more contiguous parts.
Interpretation Requested
Your enquiry is whether the sale of land by an individual is excluded from exemption under section 9 of Part I of Schedule V to the Excise Tax Act (ETA) by paragraph 9(2)(c) of that section when the land being sold is part of a subdivision consisting of three or more lots that was created from two or more lots previously owned by the vendor. A diagram of the lots before and after the subdivision is as follows:
Interpretation Given
The sale of a lot forming part of a subdivision consisting of three or more lots that was created from two or more lots previously owned by the vendor will be excluded from exemption by reason of paragraph 9(2)(c) of Part I of Schedule V unless the exception to exclusion in subparagraph 9(2)(c)(i) for land sold to a related individual or former spouse for personal use and enjoyment applies.
Please note that the laws regulating real property in the province of XXXXX were taken into account in providing this interpretation. The same conclusion may not apply with respect to land located elsewhere in Canada.
Explanation
The meaning of "subdivide" and "sever" and "parcel" as used in paragraph 9(2)(c) of Part I of Schedule V.
There is no statutory definition of the words subdivide, sever or parcel given in the ETA. We consider that it is relevant to look to the ordinary meaning of the words as well as to any special meaning which may attach to the words in the context of real property law and as a result of their use in the Excise Tax Act.
The Oxford Shorter English Dictionary (1975 ed.) defines "subdivide" as :
To divide (a part of a divided whole) to divide again after a first division ... To break up into subdivisions." "Subdivision" is defined in the same dictionary as "The act or process of subdividing, or the fact of being subdivided ... One of the parts into which a whole is subdivided; part of a part; a section resulting from a further division. ... a subordinate division of a group.
Black's Law Dictionary 6th edition defines "subdivides" and "subdivision as follows:
subdivides ... To divide a part into smaller parts; to separate into smaller divisions ...
subdivision ... Division into smaller parts of the same thing or subject-matter. The division of a lot, tract or parcel of land into two or more lots, tracts, parcels or other divisions of land for sale or development
The XXXXX defines subdivision as follows:
"subdivision" means the division of land into 2 or more parcels, whether by plan, apt descriptive words or otherwise;
This definition expresses the common understanding in the legal real estate community of the word "subdivision" as being the division a larger parcel of land into smaller parcels.
The word "sever" is not defined in the ETA nor is it defined in the XXXXX[.]
The Oxford Shorter English Dictionary defines "sever" and "severance" as:
sever ... To put apart, set asunder ... To divide into (two or more parts) parts .... To part, become divided, be separated into parts.... .
severance .... The act or fact of severing; the state of being severed; separation.
Black's Law Dictionary defines sever and severance as follows:
sever ... To separate, as one from another; to cut off from something; to divide. To part in any way, especially by violence, as by cutting rending, etc. ... .
severance ... Act of severing, or state of being severed; partition; separation ....
The XXXXX defines parcel in section 1 as follows:
"parcel" means a lot, block or other area in which land is held or into which land is subdivided;
Black's Law Dictionary (10th edition) defines "parcel" and "parcels" as follows:
Parcel ... A part or portion of land. A part of an estate. 'Parcel' as used with respect to land generally means a contiguous quantity of land in the possession of an owner. ... A continuous quantity of land in possession of, owned by, or recorded as property of the same claimant, person or company. ... Term may be synonymous with 'lot'."
Parcels ... a description or property, formally set forth in conveyance, together with the boundaries thereof, in order to provide for easy identification."
Merriam Webster's Collegiate Dictionary (10th edition) defines "parcel" as:
Parcel ... a fragment, portion; to divide into parts.
The Concise Oxford Dictionary (7th edition) defines "parcel" as
Parcel ... a piece of land, especially as part of estate.
Subsection 73(1) of the XXXXX provides that a person cannot subdivide land into smaller parcels for any of the purposes referred to in the subsection unless the subdivision has been carried out in compliance with Part 7 of the Act which sets forth the procedures for subdivision of land including the requirements for Descriptions and Plans to be used for the purposes of XXXXX[.]
The effect of the XXXXX is that if two contiguous parcels of land belong to the same person, the interior lot lines can be reconfigured to create three parcels from the 2 contiguous parcels by filing a subdivision plan. The subdivision plan has the effect of wiping out the interior lot lines creating three new lots and is equivalent in effect to a severance although it is not referred to as a severance for the purposes of the XXXXX.
The three new lots are created by means of a severance within the meaning of the word as used in paragraph 9(2)(c) of Part I of Schedule V. Therefore, XXXXX the sale of a lot comprising part of a subdivision consisting of three or more lots that was created from two or more lots previously owned by the vendor will be excluded from exemption by reason of paragraph 9(2)(c) of Part I of Schedule V unless the exception to exclusion in subparagraph 9(2)(c)(i) for land sold to a related individual or former spouse for personal use and enjoyment applies.
The foregoing comments represent our general views with respect to the subject matter of your letter. Proposed amendments to the Excise Tax Act, if enacted, could have an effect on the interpretation provided herein. These comments are not rulings and, in accordance with the guidelines set out in section 1.4 of Chapter 1 of the GST Memoranda Series, do not bind the Department with respect to a particular situation.
For your convenience, find enclosed a copy of section 1.4 of Chapter 1 of the GST Memoranda Series.
Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 957-8221.
Yours truly,
Mark Sylvest
Rulings Officer
Real Property Unit
Financial Services and Real Property Division
GST/HST Rulings and Interpretations Directorate
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