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, 11th floor
320 Queen Street
Ottawa ON K1A 0L5
Case Number: 196004
Business Number: […]
Dear [Client]:
Subject: GST/HST RULING
Architectural review services
Thank you for your faxes of […][various dates] concerning the application of the goods and services tax/harmonized sales tax (GST/HST) to the supply of architectural review services.
The HST applies in the participating provinces at the following rates: 13% in Ontario; and 15% in New Brunswick, Newfoundland and Labrador, Nova Scotia and Prince Edward Island. The GST applies in the rest of Canada at the rate of 5%.
All legislative references are to the Excise Tax Act (ETA) unless otherwise specified.
STATEMENT OF FACTS
We understand from the information you have provided:
1. […][The Municipality] is a municipality as defined in subsection 123(1) and is registered for GST/HST purposes.
2. An owner of land (i.e., developer) is required to apply to [the Municipality] under […] the Planning Act, R.S.O. 1990, c.P .13 (Act) for site plan approval in respect of its development of the lands. Site plan approval is the statutory process for reviewing the building size, location, design, access, services, parking, loading, and landscaping of proposed developments.
3. Prior to submission of […][a site plan approval application], developers are required to arrange a pre-consultation meeting. An Application for Pre-consultation must be filed, and the concept development plan must be submitted as part of the application. At these meetings, specific requirements relating to site servicing, grading, storm water management, Building Code requirements, landscaping, Fire Department requirements, site design etc. are discussed. The submission of a concept plan may identify major problems associated with a proposal and will provide early feedback prior to the finalization of formal drawings. The concept development plan typically includes a set of elevation plans.
4. [The Municipality] employs architectural control in the site plan review and approval process. This requirement applies to the review of the elevation plans and drawings for exterior design or architectural design. Through pre-consultation, the applicant (who could be the agent acting on behalf of the land owner or the land owner) is advised that the development proposal will be reviewed by a control architect retained by [the Municipality]. This is reflected in the minutes to the meeting, along with the owner/applicant’s obligation to pay for the architectural peer review.
5. […][The site plan approval application] states that, under the authority of the […][By-law]:
Additional costs for the processing of the application may be charged where studies in support of an application must be reviewed by persons not employed by [the Municipality] but retained for that purpose due to an expertise in the area of study. […].
6. [The Municipality]’s [By-law] establishes and requires payment of fees for the processing of applications made in respect of planning matters authorized by subsection […] of the Planning Act, R.S.O. 1990, c. P.13, as amended. The Fees for architectural review services fall under […][the By-Law] which states the applicant shall be responsible for [the Municipality]’s full costs of undertaking the peer review.
7. [The Municipality] requires the developer to enter into a site plan agreement prior to the development, including redevelopment, of the lands and the erection, construction and installation of buildings, structures, facilities and works thereon as permitted by […] the Planning Act.
8. According to […] of the Site Plan Agreement, the registered owner of the lands (Owner) shall, prior to applying for any building permit, comply with [the Municipality]’s architectural control requirements. The Owner shall pay for or reimburse [the Municipality] for the cost of a control architect. Such payments shall be made to [the Municipality] within thirty (30) days of [the Municipality] submitting to the Owner its invoice.
9. The control architect invoices [the Municipality] for architectural review services plus the HST, and [the Municipality] claims the municipal public service bodies’ (PSB) rebate for the HST paid. [The Municipality], in turn, invoices the Owner the cost of the architectural review services plus the amount not recovered by the PSB rebate.
RULING REQUESTED
You would like to know if […] costs invoiced by [the Municipality] are subject to the GST/HST.
RULING GIVEN
Based on the facts set out above, we rule that the total amount invoiced by [the Municipality] is consideration for the taxable supply of architectural review services, and is subject to the GST/HST.
EXPLANATION
Generally, every recipient of a taxable supply (other than a zero-rated supply) is required to pay GST/HST on the value of the consideration for the supply. An exempt supply is a supply that is not subject to GST/HST and that is included in Schedule V.
Paragraph 20(c) of Part VI of Schedule V exempts the following supplies made by a government or municipality or by a board, commission or other body established by a government or municipality:
c) a supply (other than of a right or service supplied in respect of the importation of alcoholic beverages) of
(i) a licence, permit, quota or similar right,
(ii) a service of processing an application for a licence, permit, quota or similar right, or
(iii) a right to have access to, or to use, a filing or registration system to make application for a licence, permit, quota or similar right.
Paragraph 20(c) of Part VI of Schedule V exempts both the supply of a licence, permit, quota or similar right and the supply of a service of processing an application for such a right, even where the licence, permit, quota or similar right is not granted.
However, the exemption does not include supplies of property or services that are conditions leading up to the supply of a right identified in paragraph 20(c) of Part VI of Schedule V. For instance, the exemption in paragraph 20(c) would not apply to separate supplies, such as, inspection, research, survey, consultation, planning and advisory services that may be related to a permit application. Accordingly, supplies of architectural review services by [the Municipality] are not exempt under paragraph 20(c) of Part VI of Schedule V.
Section 21 of Part VI of Schedule V exempts a supply of a municipal service, if
(a) the supply is
(i) made by a government or municipality to a recipient that is an owner or occupant of real property situated in a particular geographic area, or
(ii) made on behalf of a government or municipality to a recipient that is an owner or occupant of real property situated in a particular geographic area and that is not the government or municipality;
(b) the service is
(i) one which the owner or occupant has no option but to receive, or
(ii) supplied because of a failure by the owner or occupant to comply with an obligation imposed under a law; and
(c) the service is not one of testing or inspecting any property for the purpose of verifying or certifying that the property meets particular standards of quality or is suitable for consumption, use or supply in a particular manner.
The architectural review services in the site plan review and approval process are to verify or certify that the proposed development meets the required specifications and standards. Accordingly, the architectural review services are excluded from the exemption by paragraph 21(c) of Part VI of Schedule V.
In addition, paragraph 146(a) deems a supply (that is not an exempt supply) of testing or inspecting any property for the purpose of verifying or certifying that the property meets particular standards of quality or is suitable for consumption, use or supply in a particular manner to be made in the course of a commercial activity. Accordingly, the architectural review services are deemed to be made in the course of a commercial activity, and the supply of the services is subject to the GST/HST. Further, all costs invoiced to the Owner form part of the consideration for the supply of the architectural review services that is subject to the GST/HST.
As a municipality that is a GST/HST registrant, [the Municipality] may be eligible to claim the GST/HST paid or payable on purchases and expenses related to its commercial activities by claiming input tax credits (ITC). Please note, there are special rules regarding entitlement to claim ITCs for capital personal property and capital real property.
A municipality that acquires property or services partly for use in commercial activities, and partly for use in exempt activities must apportion the GST/HST paid or payable on the property or services accordingly in calculating its ITC claim.
For additional information refer to GST/HST guide, GST/HST Information for Municipalities (RC4049).
In accordance with the qualifications and guidelines set out in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service, the Canada Revenue Agency (CRA) is bound by the ruling given in this letter provided that: none of the issues discussed in the ruling are currently under audit, objection, or appeal; no future changes to the ETA, regulations or the CRA’s interpretative policy affect its validity; and all relevant facts and transactions have been fully and accurately disclosed.
If you require clarification with respect to any of the issues discussed in this letter, […]. 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,
Maria Forte-Long
Municipal Sectors Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate
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