Please note that the following document, although correct at the time of issue, may not represent the current position of the Canada Revenue Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence du revenu du Canada.
Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 15th floor
320 Queen Street
Ottawa ON K1A 0L5
[Addressee]
Case Number: 146639
Business Number: [...]
May 13, 2013
Dear [Client]:
Subject: GST/HST RULING
Application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the sale of a lot (the Lot)
Thank you for your letters of [mm/dd] and [mm/dd/yyyy], concerning the application of the GST/HST to the sale of the Lot on which a portion of a residential complex is currently situated.
The HST applies in the participating provinces at the following rates: 13% in Ontario, New Brunswick and Newfoundland and Labrador, 14% in Prince Edward Island (effective April 1, 2013) and 15% in Nova Scotia. The GST applies in the rest of Canada at the rate of 5%.
Effective April 1, 2013, the 12% HST in British Columbia has been replaced by the 5% GST and a provincial sales tax.
All legislative references are to the Excise Tax Act (ETA) unless otherwise specified.
Statement of Facts
We understand the following from your letter dated [mm/dd/yyyy] and the telephone conversation of [mm/dd/yyyy] between yourself and [...][an officer] of our GST/HST Rulings office in the [...] region:
1. [...] (the Municipality) is a municipality for purposes of the ETA.
2. The Municipality has created stand-alone residential lots from land that it owns. The Lot is one of these residential lots.
3. The Lot is located at [...] in [...][Province X] .
4. A structure (the Structure) was built on the Lot in [yyyy]. The Structure is attached to, and forms part of, the existing residential complex (the Building) on the neighbouring property at [...] in [Province X]. The Structure consists of a family/living room, a garage/carport, and multiple patios. It was built by the previous owner of the neighbouring property who did not have a building permit for the construction of the Structure.
5. The Municipality is negotiating to sell the Lot to the current owner (the Owner) of the neighbouring property at [...].
6. If the two parties cannot come to an agreement, the Owner will have to remove the Structure from the Lot and the Lot may be sold by the Municipality to a third party.
Rulings Requested
You would like to know whether the sale of the Lot by the Municipality is a taxable supply of real property subject to the GST/HST in the following circumstances:
a) The Lot with the existing Structure is sold to the Owner.
b) The Owner removes the Structure from the Lot and the Lot is sold to another party.
Rulings Given
Based on the facts set out above, we rule that:
a) The sale of the Lot, including the existing Structure, by the Municipality to the Owner is a taxable supply of real property and is subject to the GST/HST.
b) If the Structure is removed and the Municipality sells the Lot to another party, the sale is a taxable supply of real property and is subject to the GST/HST.
This ruling is subject to the qualifications in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service. We are bound by this ruling provided that none of the above issues are currently under audit, objection, or appeal, that no future changes to the ETA, regulations or our interpretative policy affect its validity, and all relevant facts and transactions have been fully disclosed.
Explanation
Sale of the Lot with existing Structure to the Owner
As you are aware, an amendment was introduced in 2004 whereby supplies of real property made by a municipality are excluded from the exemption under section 25 of Part VI of Schedule V to the ETA. As it applies to this case, this amendment applies to any supply for which consideration becomes due after March 9, 2004 or was paid after that day without having become due. Therefore, a municipality's supply of real property by way of sale after March 9, 2004 is generally taxable, unless an exempting provision applies.
Section 2 of Part I of Schedule V to the ETA exempts the sale of a residential complex or an interest in a residential complex, subject to certain conditions.
The sale of the Lot, including the Structure, by the Municipality to the Owner is not the sale of a residential complex as the Structure and the Lot do not form a residential complex. In addition, the sale is not the sale of an interest in a residential complex as it is only an interest in part of a building that is being sold, not an interest in a residential complex.
As no other exemptions apply, the sale of the Lot, including the Structure, is a taxable supply of real property and is subject to the GST/HST.
Removal of Structure and sale of Lot to another party
If the Structure is removed, the sale of the Lot would be a sale of vacant land. The sale of vacant land by a municipality is a taxable supply unless an exemption applies. As no exemption applies to the sale of the Lot by the Municipality in such circumstances, the sale of the Lot to a third party would be a taxable supply of real property and subject to the GST/HST.
ADDITIONAL INFORMATION
[...]
Interpretation Requested
In your letter of [mm/dd/yyyy], you asked when the GST/HST becomes payable in respect of a sale of real property made under a written agreement of purchase and sale.
Interpretation Given
Subsection 168(5) stipulates that, other than in the scenario described in the next paragraph, tax in respect of a taxable supply of real property by way of sale is payable on the earlier of the day ownership of the property is transferred to the recipient and the day possession of the property is transferred to the recipient under the agreement for the supply.
In the case of a supply of a residential condominium unit where possession of the unit is transferred to a recipient after 1990 and before the condominium complex in which the unit is situated is registered as a condominium, tax is payable on the earlier of the day ownership of the unit is transferred to the recipient and the day that is sixty days after the day the condominium complex is registered as a condominium.
The foregoing comments represent our general views with respect to the subject matter of your request. These comments are not rulings and, in accordance with the guidelines set out in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service, do not bind the Canada Revenue Agency with respect to a particular situation. Future changes to the ETA, regulations, or our interpretative policy could affect this interpretation.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-954-4393. Should you have additional questions on the interpretation and application of GST/HST, please contact a GST/HST Rulings officer at 1-800-959-8287.
Yours truly,
Melissa Mercer
Real Property Unit
Financial Institutions and Real Property Division
Excise and GST/HST Rulings Directorate
Email this Content