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
[Addressee]
Case Number: 196248r
Dear [Clients]:
Subject: GST/HST RULING
[…][Assignment of a right to purchase a residential condominium unit]
Thank you for your [correspondence] of [mm/dd/yyyy], concerning the application of the goods and services tax/harmonized sales tax (GST/HST) to the assignment of a right to purchase a residential condominium unit. We apologize for the delay in the response.
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.
SUMMARY OF FACTS
On [mm/dd/yyyy], a ruling was issued under case 196248 to […](the Corporation) who was your representative for that ruling request. The ruling issued in that case was with respect to an assignment of a right to purchase a residential condominium unit.
As stated in the facts of case 196248, you, […](Assignor 1) and […](Assignor 2), are non-residents living in […][Country X] and are non-registrants for GST/HST purposes. Assignor 1 is Canadian and Assignor 2 has never lived in Canada. You assert that you intended to relocate to Canada.
On [mm/dd/yyyy], you entered into an agreement of purchase and sale (the Agreement) with […](the Vendor) with respect to a [#] bedroom and [#] bathroom residential condominium unit (the Unit) that would have a municipal address [in Canada] […]. The Agreement indicates that you agreed to purchase the Unit for $[…] including [GST/HST]. You assert that you entered into the Agreement for purposes of acquiring the Unit to live in when you relocated to Canada. The First Tentative Occupancy Date was [mm/dd/yyyy], and the Firm Occupancy Date was [mm/dd/yyyy]. You then extended the Firm Occupancy Date to [mm/dd/yyyy].
On [mm/dd/yyyy], you entered into an Assignment of contract of purchase and sale (the Assignment Agreement) with respect to the Unit with an assignment amount of $[…]. There was no indication if this amount was inclusive of [GST/HST] nor which party would be responsible to remit any [GST/HST] payable.
In correspondence dated [mm/yyyy], you explain that you had determined that the sponsoring immigration process for Assignor 2’s permanent residency would not be suitable for your family as Assignor 1 would need to come to Canada ahead of Assignor 2 and obtain employment with a high enough salary to sponsor Assignor 2, who would relocate at a later date. The goal then became to have Assignor 2 secure employment in Canada with his current organization prior to relocating. Assignor 2 provided [correspondence], dated between [mm/yyyy] and [mm/yyyy], after the date of the Assignment Agreement, showing attempts at informal internal networking within his organization to secure employment in Canada. You also confirmed that Assignor 2’s residency application was started in [mm/yyyy] and would be easier since you had Canadian children that were dependent on him. The application had not been submitted as of [mm/yyyy].
In this current submission dated [mm/dd/yyyy], you provide the following additional details as part of your request for reconsideration:
1. You were married in [Country Y] in [yyyy], moved to [Country X] in [mm/yyyy] and still reside there as of [mm/yyyy].
2. Assignor 1’s […][family member 1] passed away [mm/dd/yyyy], prompting a desire to move to Canada.
3. Assignor 2 began his employment with […][Organization A] on [mm/dd/yyyy].
4. You shared [correspondence] dated […][yyyy] between Assignor 1 and her […][family member 2] looking for a condominium unit to purchase […][in Canada], one of them being the Unit purchased.
5. You had a pre-qualification mortgage approval, but it was only valid if you were a resident of Canada.
6. Assignor 1 asserts that she was diagnosed with […][a medical condition] at [#] years old and told that she would not be able to conceive without medical intervention. After trying for a period of time, you conceived naturally in [mm/yyyy] without medical intervention.
7. Your first child was born [mm/dd/yyyy].
8. You were informed on [mm/dd/yyyy] that the Firm Occupancy Date for the Unit would be [mm/dd/yyyy].
9. Your second child was born [mm/dd/yyyy].
10. You qualify Assignor 2’s current employment with [Organization A] as “a once in lifetime opportunity, especially at the early part of his career. It was not a job he could easily give up, especially with young children. It became imperative that we continue to live in [Country X] and keep trying to move to Canada with his company”.
RULING REQUESTED
Given the additional information provided on [mm/dd/yyyy], you would like a reconsideration of the previous ruling that you are not a builder of the Unit under paragraph (d) of the definition of “builder” in subsection 123(1) and that the assignment of your rights in the Agreement is an exempt supply under section 2 of Part I of Schedule V.
RULING GIVEN
Taking into consideration the additional information provided in your [correspondence] of [mm/dd/yyyy], and the review of information provided in the previous ruling in case 196248, we confirm the prior ruling issued to the Corporation in case 196248. You are builders of the Unit under paragraph (d) of the definition of “builder” in subsection 123(1) and the assignment of your rights in the Agreement is a taxable supply.
EXPLANATION
As explained in the previous ruling, the matter of whether an individual is a builder of a residential complex under paragraph (d) of the definition of “builder” in subsection 123(1) depends, in part, on the primary purpose for which the individual acquires an interest in the complex. The primary purpose for which the individual acquires the interest in the complex is a question of fact that can only be judged by outward indicators (that is, the presence or absence of physical actions and/or evidence).
Generally, if an individual acquires an interest in a residential complex (that is, acquires the interest in the complex before it has been occupied by an individual as a place of residence or lodging) and sells the interest before or while the complex is under construction, then the action of selling the interest is viewed strongly as evidence that the individual acquired the interest in the complex for the primary purpose of selling the interest in the course of a business or an adventure or concern in the nature of trade. However, if the individual asserts that they acquired the interest in the complex for the primary purpose of using the residential complex as a place of residence either for themselves or a relation, then outward indicators must support the asserted primary purpose in order for it to be proven true. Practically, this means that the onus is on the individual to prove two things.
First, the individual must prove that the primary purpose for which they assert that they acquired the interest in the residential complex was a firm, fixed and settled intention that was not likely to change. Put differently, the asserted primary purpose of using the complex as a place of residence either for the individual or a relation must have been more than a tentative, provisional or exploratory contemplation and must not have been conditional or dependent on future events occurring.
Second, the individual must prove that, objectively, they had reasonable prospects of bringing the primary purpose for which they assert that they acquired the interest in the residential complex to fruition or fulfillment within a reasonable time. Put differently, the individual must have the means and resources necessary to acquire the complex for use as a place of residence either for themselves or a relation.
Based on the information in the original ruling and the additional information provided as part of this request for reconsideration, your stated primary purpose was highly dependent on future events occurring, more specifically, gaining employment and permanent residency for Assignor 2 in Canada. If this was a firm, fixed and settled intention, we would expect to see outward indicators that demonstrate significant effort to bring the stated purpose to fruition or fulfillment within a reasonable timeframe. However, based on the information provided, Assignor 2 only had a few informal discussions regarding employment in Canada, which referred to employment in […][a larger geographical area], and his residency application was only started after you entered into the Assignment Agreement.
Furthermore, although you obtained a pre-approval for a mortgage to finance the purchase of the Unit, it was only valid if you were in Canada as stated in fact #11. Therefore, you did not have the necessary means and resources to bring your stated primary purpose to fruition within the required timeframe.
Therefore, the CRA is of the view that your stated primary purpose was a tentative, provisional or exploratory contemplation, and was not a firm, fixed and settled intention at the time you entered into the Agreement.
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, please call me directly at 506-349-7596. 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,
Nicole Collins
Real Property Unit
Financial Institutions and Real Property Division
Excise and GST/HST Rulings Directorate
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