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.
Date
December 10, 2010
To:
[Client]
From:
Hugh Dorward
Real Property Unit
Financial Institutions and Real Property Division
Excise and GST/HST Rulings Directorate
Document Number:
108292
Subject:
GST/HST
Inclusion of certain amounts in a GST/HST new housing rebate claim
The following is further to your telephone conversation of September 16, 2008, with Lisa Papineau of this Unit, concerning an amount claimed in a new housing rebate application for an owner-built home where that amount was previously included in a builder-built new housing rebate claim that was denied by Rebates Prepayment Audit (Audit).
All legislative references are to the Excise Tax Act (ETA), unless otherwise indicated.
Our understanding of the situation is as follows.
1. A person (the Builder) bought a number of old [...] houses [...]. Each house was moved [...] to a particular lot with a separate legal description, installed on a foundation, and resold together with the lot. We understand that each house, when installed on a foundation, meets the definition of a "single unit residential complex" as that term is defined in subsection 123(1).
2. In [mm/dd/yyyy], an individual (the Purchaser) bought one of the single unit residential complexes (House 1) from the Builder. The Builder charged the GST/HST on the sale of House 1 and, under subsection 254(4), credited the Purchaser with the amount of the new housing rebate. The new housing rebate in respect of House 1 was allowed by Audit.
3. In [mm/dd/yyyy], the Purchaser bought another single unit residential complex (House 2) from the Builder. The Builder charged the GST/HST on the sale of House 2 and again, under subsection 254(4), credited the Purchaser with the amount of the new housing rebate on the purchase. The new housing rebate credited by the Builder in respect of House 2 was denied by Audit on the basis that the Purchaser did not meet all of the eligibility conditions for claiming the rebate.
4. With respect to House 2, the Purchaser has not subsequently claimed, and is not entitled to claim, a rebate, refund or remission of the tax paid to the Builder under any section of the ETA or other Act of Parliament, other than section 256 which we will examine below in our response.
5. The Purchaser states that their intention in purchasing House 1 was to use it as their primary place of residence while substantially renovating House 2. Upon completion of the substantial renovation, the Purchaser stated that House 2 was to be used as their primary place of residence. The Purchaser is not registered for the GST/HST and did not use or supply House 2 in the course of a commercial activity.
ISSUE
If the Purchaser completes a substantial renovation of House 2 and that the remaining conditions for a new housing rebate are satisfied, you have asked whether the Purchaser may include in a rebate application filed under section 256, an amount that was included in the section 254 rebate claim that was denied by Audit.
RESPONSE
Our response is based on the assumption that the Purchaser has not purchased any of the other single unit residential complexes from the Builder and that the Purchaser did not, prior to acquiring House 1, engage in any similar activities.
We are of the view that the Purchaser will be able to file a rebate application under subsection 256(2), provided that all of the conditions for claiming the rebate are met and an application is made within the time limits imposed under subsection 256(3). It is also our view that subsection 262(2) does not apply in this case. Further, section 263 does not prevent the Purchaser in this case from including in a rebate application filed under section 256 in respect of a substantial renovation of House 2, the tax paid on the purchase of House 2 from the Builder.
We would like to emphasize that we are not concluding that the Purchaser has met all of the criteria for claiming a rebate under section 256 in respect of the renovation of House 2. Specifically, there is no confirmation that:
• a substantial renovation of House 2 has occurred;
• the primary place of residence requirement in paragraph 256(2)(a) is met;
• the fair market value of House 2 is $450,000 or less; and
• the Purchaser or a relation of the Purchaser, was the first individual to occupy House 2 after the purported substantial renovation was begun or failing such occupancy, whether the Purchaser made an exempt sale of House 2 and ownership of the complex was transferred to the recipient before House 2 was occupied by any individual as a place of residence or lodging.
The position taken in this memorandum should not be viewed as authority in other circumstances to allow a new housing rebate claim under section 256 where an individual has already received a rebate for the purchase of a house under section 254. For example, suppose a builder makes a taxable sale of a single unit residential complex to an individual and the individual is eligible for a rebate under subsection 254(2). The builder pays or credits the amount of the rebate to the individual under subsection 254(4). If the individual then makes improvements to the complex (e.g., finishes the basement), the individual cannot file a new housing rebate under section 256 in respect of the tax paid on the costs of finishing the basement. Although such a claim may be viewed as a rebate in respect of a second matter, the rebate claim under section 256 would not be available as finishing the basement is not considered to be a substantial renovation.
The position taken in this memorandum should also not be viewed as authority in other circumstances to include in the calculation of a new housing rebate, amounts that were included in the calculation of a previous new housing rebate that was paid by the Canada Revenue Agency. For example, suppose a builder makes a taxable sale of a single unit residential complex to an individual and the individual is eligible for a rebate under subsection 254(2). The builder pays or credits the amount of the rebate to the individual under subsection 254(4). Some time later, if the individual were to substantially renovate the complex and be eligible for a new housing rebate under section 256 in respect of the substantial renovation, by virtue of section 263 the new housing rebate claim under section 256 may not include the tax paid on the purchase of the complex from the builder.
ANALYSIS
In accordance with policy statement P-154, GST Implications Relating to the Movement of a Building that Previously Formed Part of a Residential Complex, we note that the GST/HST properly applies to the sale of House 1 and House 2 where the supplier is a "builder" as defined in subsection 123(1).
Subsection 262(2) provides that only one rebate application may be made under Division VI (Division VI includes the new housing rebates under sections 254 and 256) with respect to any matter.
The Purchaser's eligibility for a new housing rebate with respect to the substantial renovation of House 2 is not unlike the situation where an individual purchases a residential complex, pays the GST/HST on the purchase and at some later time substantially renovates the complex. For example, suppose an individual acquired a single unit residential complex from a builder in 1991, paid the GST, and qualified for and received a GST new housing rebate in respect of the complex. At some later time, the individual undertakes a substantial renovation of the complex. The substantial renovation of the complex is a matter separate from the purchase of the residential complex. There is nothing in the wording of section 256 or subsection 262(2), or in the ETA as a whole, to suggest that a rebate should not be permitted in such circumstances, assuming of course that the rebate conditions in section 256 are met. (iFootnote 1)
An individual that pays the GST/HST on the acquisition of a supply of land and an affixed building (whether or not the real property is a residential complex) and then substantially renovates the building (including a deemed substantial renovation under subsection 190(1)), may be entitled to claim a new housing rebate under section 256. Paragraph 256(2)(c) provides that the individual may include in the rebate the tax paid on the acquisition of the real property as well as the tax paid on property and services that are improvements (e.g., construction materials and services) that form part of the residential complex.
Section 263 provides, in part, (iiFootnote 2) that a rebate of an amount under section 256 cannot be paid or granted to an individual to the extent that it can reasonably be regarded that the amount has previously been rebated or refunded to the individual under the ETA or any other Act of Parliament. This provision restricts a person from making multiple rebate claims in respect of an amount of tax that has already been refunded or rebated.
In the present case, the amount of tax that was, under subsection 254(4), claimed in a new housing rebate application in respect of House 2 was not rebated or refunded as the rebate was denied and the Purchaser is not entitled to any refund or rebate of the tax paid on the purchase of House 2 under any section, other than section 256, of the ETA or under any other Act of Parliament. In the circumstances, there is nothing in section 263 that would restrict the Purchaser from including in a new housing rebate claim under section 256 the amount of tax paid to the Builder on the purchase of House 2.
If you require clarification with respect to any of the issues discussed in this memo, please call me at 613-954-8852.
i 1 We note that the Department of Finance Explanatory Notes to subsection 262(2) state that the provision is to preclude for the potential doubling-up of rebate claims and includes the example of precluding "a husband and wife from filing separate claims for a new housing rebate in respect of the same residence".
ii 2. Please note that other factors not mentioned herein may apply to restrict a rebate claim in other scenarios. Given our understanding of the facts, we have included here only the relevant provision of section 263.
---------------
------------------------------------------------------------
---------------
------------------------------------------------------------
UNCLASSIFIED
Email this Content