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: 213839
[Addressee]
Dear [Client]:
Subject: GST/HST Ruling
Sale of Vacant Land
Thank you for your fax of [mm/dd/yyyy], concerning the application of the goods and services tax/harmonized sales tax (GST/HST) to the sale of vacant land.
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 the following from the documents and information you provided on [mm/dd/yyyy]:
1. On [mm/dd/yyyy], you [...] purchased two adjacent parcels of waterfront property (parcels 1 and 2) in [City 1, Province 1].
2. During the same year, each parcel was subdivided into two, resulting in the following four parcels:
* PID [#] (parcel 1-A)
* PID [#] (parcel 1-B)
* PID [#] (parcel 2-A)
* PID [#] (parcel 2-B)
3. On [mm/dd/yyyy], you purchased a parcel of land abutting the other four parcels noted in Fact #2, PID [#] (parcel 3).
4. All parcels consist of vacant land.
5. On [mm/dd/yyyy], the plan of subdivision [#] (the “Plan”) was registered in [City 1], under the provincial laws of [Province 1]. Under that plan, part of parcel 3 was added to each of parcels 1-A, 1-B, 2-A, and 2-B in such a way as to enlarge each one by extending the boundary lines of those four waterfront parcels into parcel 3. This resulted in the creation of parcels 1-AD, 1-BC, 2-AB and 2-BA, which kept the same PID numbers as parcels 1-A, 1-B, 2-A, and 2-B, respectively.
6. You intend to list for sale each of the four parcels, and each is intended to be sold to an unrelated person.
7. You are not in the business of buying and selling real property, and you are not registered for GST/HST purposes.
RULING REQUESTED
You would like to know whether the sale of parcels 1-AD, 1-BC, 2-AB or 2-BA would be subject to GST/HST.
RULING GIVEN
Based on the facts set out above, we rule that the sale of any of parcels 1-AD, 1-BC, 2-AB or 2-BA would be a taxable supply subject to the GST/HST.
EXPLANATION
Generally, all sales of real property made in Canada are taxable unless specifically exempted.
Subsection 9(2) of Part I of Schedule V exempts the sale of real property by an individual, subject to certain exceptions. In particular, the sale of real property by an individual is excluded from the subsection 9(2) exemption pursuant to paragraph 9(2)(c), if the individual sells part of a parcel of land which the individual has subdivided or severed. However, paragraph 9(2)(c) will not apply in the case of the following exceptions:
* where the parcel of land was subdivided or severed into only two parts, and the individual did not subdivide or sever that parcel from another parcel of land, or
* where the recipient in the sale of a part of the subdivided or severed land is a related individual, former spouse or former common-law partner of the individual, and is acquiring the land for their own personal use and enjoyment, even if the land has been severed or subdivided into more than two parts.
As per the facts provided, the real property subject to a supply in the present case is any of parcels 1-AD, 1-BC, 2-AB or 2-BA. For the purposes of paragraph 9(2)(c), each of these parcels is comprised of a part of parcel 1 or 2, as well as a part of parcel 3.
There is no statutory definition of the words “subdivide” or “sever” provided in the ETA. We consider that it is relevant to look to the ordinary meaning of the words as well as to any special meaning which may attach to the words in the context of real property law and as a result of their use in the ETA.
Black’s Law Dictionary 11th edition defines subdivision as follows:
subdivision… The division of a thing into smaller parts. A parcel of land in a larger development.
legal subdivision… The governmentally approved division of a tract of land into smaller parcels using ordinary and legally recognized methods for surveying and platting land and publicly recording the results.
[…][The relevant Province 1 Legislation] defines subdivision as follows:
[…];
[…][The relevant City 1 By-law] defines subdivision as follows:
[…].
Black’s Law Dictionary 11th edition defines severance as follows:
severance… The act of cutting off or severing; the quality, state, or condition of being cut off or severed.
The word “sever” or “severance” is not defined in […][the relevant Province 1 Legislation] or in […][the relevant City 1 By-law].
We consider that parcel 3 in this case was severed into four parts, further to the addition of the four parts of parcel 3 to enlarge parcels 1-A, 1-B, 2-A and 2-B. Even though the parcel identification numbers remain identical, it is clear that the land composing the remaining four parcels has changed after the consolidation, and includes parts of parcel 3, as well as the subdivided parts of parcel 1 and 2.
As Parcel 3 is considered to have been severed into four parts, once these parts are added to the four other parcels, each of the remaining parcels (1-AD, 1-BC, 2-AB, 2-BA) are comprised of part of a parcel (parcel 3) that was severed into more than two parts, even if another part of the real property (parcels 1-A, 1-B, 2-A, 2-B) is part of a parcel (parcel 1 or 2) which was not severed or subdivided in more than two parts.
The sale of any of the resulting parcels is consequently taxable, as it will be excluded from exemption by reason of paragraph 9(2)(c) of Part I of Schedule V, unless the exception to exclusion in subparagraph 9(2)(c)(ii) applies, for land sold to a related individual or former spouse for personal use and enjoyment.
For more information, please refer to GST/HST Memorandum 19-5, Land and Associated Real Property.
ADDITIONAL INFORMATION
Taxable sale of real property by a non-registrant
When you are not registered for GST/HST purposes, and you make a taxable sale of real property, you generally must charge and collect the tax on the sale, even though you are not registered.
When you collect an amount of tax on a taxable sale of real property, you must then report the tax on line 103 of Form GST62, Goods and Services Tax/Harmonized Sales Tax (GST/HST) Return (Non-personalized), by the end of the month following the month in which the tax became collectible and remit the net tax due with that return. Only Form GST62 in a pre-printed format may be used, therefore, to order a pre-printed Form GST62 go to canada.ca/get-cra-forms.
Please note that you do not collect the tax from the purchaser when you make a taxable sale of real property, if the purchaser is registered for GST/HST purposes. In this case, the purchaser has to pay any tax due on their purchase directly to the CRA.
For more information please refer to GST/HST Guide RC4022, General Information for GST/HST Registrants, under the heading of “Who remits the tax for a taxable sale of real property – Vendor or purchaser?”.
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(s) given in this letter provided that: none of the issues discussed in the ruling(s) 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 514-213-6075. 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,
Stéphanie Blanchette
Real Property Unit 2
Financial Institutions and Real Property Division
Excise and GST/HST Rulings Directorate
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