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.
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Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 15th floor
320 Queen Street
Ottawa ON K1A 0L5
Case Number: 122092
Attention: XXXXX
August 9, 2010
Dear XXXXX:
Subject:
GST/HST RULING
Application of the HST to a residential condominium unit
Thank you for your letter of XXXXX, and subsequent information submitted on
XXXXX, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the purchase of a residential condominium unit.
The HST applies at the rate of 15% in Nova Scotia, 13% in New Brunswick, Newfoundland and Labrador, and Ontario, and 12% in British Columbia. GST applies at the rate of 5% in the remaining provinces and territories.
All legislative references are to the Excise Tax Act (ETA) unless otherwise specified.
Statement of Facts
We understand that the facts are as follows:
1. On XXXXX, XXXXX (the "Seller") and XXXXX entered into a written agreement of purchase and sale (the "original agreement") for a residential condominium unit identified as Unit XXXXX, to be constructed in Ontario.
2. On XXXXX, the original agreement was amended substituting you (the "Buyer") for XXXXX. You indicated that XXXXX, XXXXX, signed the original agreement on your behalf under a power of attorney.
3. Ownership and possession of the residential condominium will likely transfer to the Buyer some time in XXXXX.
4. In XXXXX, notice from the Seller was given to the Buyer that the Seller assigned the original agreement to XXXXX (the "New Seller").
5. In XXXXX, the New Seller provided to the Buyer a proposed amendment to the original agreement to change the residential condominium unit from Unit XXXXX to Unit XXXXX.
6. As of July 1, 2010, the proposed amendment has not gone into effect.
7. The Buyer had originally purchased the unit for her personal use, but due to the delay in construction, the Buyer will sell the unit after final closing.
Ruling Requested
You would like to know if, as a result of the proposed amendment to the original agreement, the Buyer will be liable to pay the HST.
Ruling Given
Based on the facts set out above, we rule that the Buyer will be required to pay the HST at 13% if the purchase and sale agreement is amended such that the Buyer acquires a different residential condominium unit within the condominium complex.
This ruling is subject to the qualifications in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service. We are bound by this ruling provided that none of the above issues are currently under audit, objection, or appeal, that no future changes to the ETA, regulations or our interpretative policy affect its validity, and all relevant facts and transactions have been fully disclosed.
Explanation
Given that the proposed amendment to the original agreement would change the actual residential condominium unit purchased by the Buyer, it is our view that the agreement will be materially altered to the extent that the agreement will be considered to be a new agreement if the amendment takes effect. The new agreement would be entered into on the day that the parties sign the amendment to the original agreement.
Since this new agreement would be entered into after June 18, 2009, and that both ownership and possession of the residential condominium unit, Unit XXXXX, will transfer, in accordance with the agreement, to the Buyer after July 1, 2010, the HST at 13% will apply to the purchase of the unit under the new agreement.
If the amendment does not occur, the purchase of the residential condominium, Unit XXXXX, would be subject to the GST at 5% since the agreement of purchase and sale for the unit was entered into on or before June 18, 2009.
It is noted that the original agreement provides that the purchase price includes the federal goods and services tax net of the new housing rebate, if applicable. The original agreement also provides that any new sales taxes or increases in the rates of existing sales taxes imposed on the sale by the federal, provincial or municipal government will be in addition to the purchase price. It is our view that if the original agreement is amended as proposed, the purchase price under the new agreement would include the 5% federal component of the HST and that the 8% provincial component of the HST would be in addition to the purchase price.
If you purchased the unit for the primary purpose of occupying the unit as your primary place of residence and, due to the delay in construction, later decide to sell the unit, the sale of the unit will be exempt of the GST/HST.
When you sell the unit to a purchaser, you may be entitled to claim the GST/HST new housing rebate in respect of the GST or the federal part of the HST provided that ownership of the unit is transferred to the purchaser before the unit is occupied by any individual as a place of residence or lodging. As indicated in the original agreement, this rebate may already be factored into the purchase price. If you enter into a new agreement with the Seller for a different unit and the sale is subject to the HST, you may also be entitled to claim the Ontario new housing rebate in respect of the provincial part of the HST. Based on the wording of the original agreement and the proposed amendment, it is our view that the purchase price does not take this rebate amount into account.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at (613) 957-8222. 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,
Francine Menard
Real Property Unit
Financial Institutions and Real Property Division
Excise and GST/HST Rulings Directorate
UNCLASSIFIED
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