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.
FROM Johanne Cairo
Real Property Unit
Financial Institutions and Real Property Division
Excise and GST/HST Rulings Directorate
TO [Addressee]
Case Number: 149707
DATE July 26, 2013
SUBJECT GST/HST INTERPRETATION
Goods and Services Tax (GST)/Harmonized Sales Tax (HST) new housing rebate filed in name of the beneficial owner of a trust
This memorandum is in response to your [...] [correspondence] with respect to a GST/HST new housing rebate application, including an application for the [...][Province X] new housing rebate (together, "the Rebate"). [...].
All legislative references are to the Excise Tax Act (ETA), unless otherwise indicated.
Based on the documentation provided, we understand the following:
1. On [mm/dd/yyyy], [...] (the Individual) entered into a purchase and sale agreement (the Purchase Contract) with [...] (the Vendor) for the purchase of real property legally described as [...] (the Property).
2. An addendum to the Purchase Contract provides that the Individual reserves the right to register the Property in an entity that the Individual solely or jointly controls.
3. On [mm/dd/yyyy], the Individual assigned their interest in the Purchase Contract to [...] (the Company), under the Assignment of Interest in Contract of Purchase and Sale (the Assignment) which provides that:
* The Individual absolutely assigns, transfers and sets over to the Company all of its right, title, benefit and interest in, to and under the Purchase Contract;
* The Company shall pay to the Individual the sum of $[...] with the execution of the Assignment (representing the full deposit paid by the Individual).
* The Company agrees to:
- perform and observe all covenants, conditions and obligations of the Individual under the Purchase Contract,
- remove all conditions precedent for the benefit of the Individual and pay any and all increased deposits resulting from the removal of the conditions precedent; and
- indemnify and save harmless the Individual from any and all liabilities of every nature and kind with respect to any breach or non-observance of the covenants, conditions and obligations under the Purchase Contract.
4. On [mm/dd/yyyy], the final statement of adjustments was approved and became effective; it includes the following information:
* Buyer - the Company, as bare trustee and nominee of the Individual;
* Adjustment date - [mm/dd/yyyy];
* Completion date - [mm/dd/yyyy]; and
* Possession date - [mm/dd/yyyy].
5. On [mm/dd/yyyy], the Individual entered into a Declaration of Trust (the Declaration) with the Company which provides that:
* The Individual is the sole director of the Company;
* The Company is registered owner of the Property;
* The Company holds legal title to the Property as bare trustee and nominee of the Individual;
* The Individual is the beneficial owner of 100% of the Property;
* The Company's legal interest in the Property is held on behalf of the Individual as its nominee, and the Company has no interest in the Property other than as bare trustee on behalf of the Individual;
* It is within the Individual's discretion to deal with the Property in any way, such dealings including, without limitation, the sale, transfer or disposition thereof, and the Company will deal in all respects with the Property solely at the instruction of the Individual;
* Any benefits and any and all rights in respect of the Property, including any proceeds arising from the sale, transfer or other disposition thereof, do not in any manner belong to the Company but are the property of, and are subject to the order and sole control of the Individual; and
* The Company will not transfer, assign, mortgage, convey, charge or otherwise deal with the Property without the prior written consent of the Individual.
6. The Real Estate Appraisal Division of CRA has provided the following information:
* [...] - transfer of the Property from the Vendor to the Company, dated [mm/dd/yyyy];
* [...] - the borrower is the Company; digital signature is the Individual, as authorized signatory of the Company;
* [...] - transferor/borrower/party is the Individual, as Covenantor (see below);
* [...], includes the following:
- borrower/mortgagor is the Company;
- the Individual is "Covenantor"; the terms of the [...] provide, in part, that the Covenantor will pay or cause to be paid to the Mortgagee all amounts owing by the Mortgagor; to unconditionally guarantee full performance and discharge of all obligations of the Mortgagor; that the Covenantor is jointly and severally responsible with the Company.
7. [...].
ISSUE
You are enquiring as to whether the Individual is eligible for the Rebate.
Response
Based on the facts as outlined above and the documentary evidence submitted, it is our view that the Individual is not eligible for the Rebate.
Explanation
New housing rebate (NHR) under subsection 254(2)
Subsection 254(2) provides a partial rebate of the GST, or federal part of the HST, paid by an individual that acquires a single unit residential complex or a residential condominium unit ("residential complex") from a builder. Paragraphs 254(2)(a) to 254(2)(g) outline the conditions which must be satisfied in order for the claimant to be eligible to apply for the GST/HST new housing rebate and, generally, a [Province X] new housing rebate. Where any of the conditions described in paragraphs 254(2)(a) through (g) is not satisfied, the NHR is not available under this section.
Paragraph 254(2)(e) requires that ownership of the residential complex be transferred to the particular individual after the construction of the complex is substantially complete. For purposes of paragraph 254(2)(e), the term "ownership" is a reference to legal ownership rather than beneficial ownership of the complex where legal and beneficial ownership are separated. In this case, the documentation submitted indicates that legal ownership of the Property was not transferred to the Individual.
We would also point out that an interest in a residential complex is not itself a residential complex. If it were, the expression "a residential complex or an interest therein" would not be necessary in several places in the ETA in which it appears (such as in paragraphs 254(2)(c) and 254(2)(d), and in section 2 of Part I of Schedule V to the ETA). As the Individual in this case is acquiring only an interest in the Property (i.e., the beneficial interest), the condition in paragraph 254(2)(e), i.e., that ownership of the residential complex transfer to the individual, is not met.
Accordingly, in the circumstances described, the Rebate is not available.
If you require further clarification with respect to any of the issues addressed in this letter, please call me at (780) 495-6029.
Johanne Cairo
Real Property Unit
Financial Institutions and Real Property Division
Excise and GST/HST Rulings Directorate
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