Please note that the following document, although correct at the time of issue, may not represent the current position of the Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence.
Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 15th floor
320 Queen Street
Ottawa ON K1A 0L5
XXXXX
XXXXX
XXXXX
Case Number: 99946
File Number: 11950-1
September 11, 2008
Subject:
GST/HST INTERPRETATION
GST/HST on Assignment Fee
Dear XXXXX:
Thank you for your letter received on XXXXX, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to an assignment fee paid in respect of the purchase of a condominium unit.
All legislative references are to the Excise Tax Act (ETA) and the regulations thereunder, unless otherwise specified.
XXXXX.
Based on your letter, we understand the situation as follows:
An individual (the Seller) entered into a contract of purchase and sale with a builder (Builder A) to purchase a residential condominium unit. The unit was being constructed by Builder A.
In XXXXX, you entered into an agreement with the Seller whereby the Seller's contract of purchase and sale in respect of the unit was assigned to you and you paid an assignment fee to the Seller. At that time, the construction of the unit was substantially completed. The unit is your current residence.
Interpretation Requested
Your view is that the assignment fee you paid is not subject to the GST/HST.
Interpretation Given
The Seller entered into a contract of purchase and sale for the purchase of a completed residential condominium unit from Builder A. The supply made by Builder A to the Seller is a supply of a residential condominium unit although the Seller would not be the legal owner of the unit until ownership of the unit is transferred to him/her.
By signing a binding contract of purchase and sale, the Seller acquired an interest in the unit (under construction) that is an interest in a residential complex for GST/HST purposes. It is that interest in a residential complex that the Seller sold to you by assigning the contract of purchase and sale to you since the ownership and possession of the unit were transferred directly to you by Builder A. In fact, it is Builder A rather than the Seller that sold the unit to you.
For GST/HST purposes, the Seller can also be a "builder" of the unit. If the Seller entered into the contract of purchase and sale with Builder A with the primary intention of reselling the unit or the interest in the unit that the Seller received when he/she entered into the contract of purchase and sale with Builder A, the Seller would be considered a builder for GST/HST purposes regardless of any other intention. The supply made by the Seller would generally be considered to be made in the course of an adventure or concern in the nature of trade (rather than in the course of business) if no activities were undertaken with respect to the supply of the interest in the unit other than those merely to facilitate the supply of the interest by way of sale. Therefore, where the supply of an interest in a residential complex is made to you by the Seller as a builder, the supply would be subject to GST/HST as there are no exemptions applicable to the sale. In this case, you would be required to pay GST/HST to the Seller calculated on value of the consideration for the supply of the interest in the unit, i.e., the amount of the assignment fee.
If the Seller entered into the contract of purchase and sale with the primary intention of using it as his/her place of residence but sold his/her interest in the unit to you, then the Seller would not be a builder for GST/HST purposes because the sale to you would be made otherwise than in the course of a business or an adventure or concern in the nature of trade.
If the Seller is not a builder and has not claimed any input tax credits in respect of the unit, then the supply by the Seller to you would be exempt under paragraph 2(a) of Part I of Schedule V. In this case, you would not be required to pay GST/HST in respect of the assignment fee.
As indicated above, we cannot comment on your views with respect to the Seller's intent on acquiring the unit. Generally, the Canada Revenue Agency (CRA) relies on evidence provided by the supplier to determine the supplier's intent and on any other concrete evidence to support or refute that stated intention.
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 CRA 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 at 613-952-9587. 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,
Béatrice Mulinda
Real Property Unit
Financial Institutions and Real Properties Division
Excise and GST/HST Rulings Directorate
UNCLASSIFIED
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