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.
XXXXX
XXXXX
XXXXX
Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 15th floor
320 Queen Street
Ottawa ON K1A 0L5
Case Number: 122204
Business Number: XXXXX
Attention: XXXXX XXXXX
April 29, 2010
Dear XXXXX:
Subject:
GST/HST INTERPRETATION
PROPOSED LAW/REGULATION
Application of the HST transitional rules in Ontario and British Columbia to real estate services
Thank you for your letter of XXXXX, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the application of the HST transitional rules in Ontario and British Columbia to real estate services. Your request has been transferred from the Ontario GST/HST Rulings Centre to the Services and Intangibles Unit.
The Government of Canada and the Government of Ontario have signed a Comprehensive Integrated Tax Coordination Agreement for the implementation of HST in Ontario. The HST will come into effect in Ontario on July 1, 2010, at a rate of 13%, consisting of a 5% federal part (equivalent to the existing GST) and an 8% provincial part.
The Government of Canada and the Government of British Columbia have signed a Comprehensive Integrated Tax Coordination Agreement for the implementation of HST in British Columbia. The HST is proposed to come into effect in British Columbia on July 1, 2010, at a rate of 12%, consisting of a 5% federal part (equivalent to the existing GST) and a 7% provincial part.
Legislation required to implement the HST in Ontario has received Royal Assent by the Parliament of Canada and the Legislative Assembly of Ontario. Legislation required to implement the HST in British Columbia has received Royal Assent by the Parliament of Canada. Required provincial legislation has been introduced but is still under consideration by the Legislative Assembly of British Columbia. However, many of the rules which would apply to transactions will be contained in regulations made under the Excise Tax Act (ETA). Although the Government of Canada and the Governments of Ontario and British Columbia have announced details of the rules which may eventually apply, the required regulations have not yet been made by the Government of Canada.
The following interpretation is based on the transitional rules as announced in Information Notice No. 3, General Transitional Rules for Ontario HST, released by the Government of Ontario on October 14, 2009, and in Tax Information Notice HST Notice No. 1, General Transitional Rules for British Columbia HST, released by the Government of British Columbia on October 14, 2009. This interpretation is also based on the place of supply rules as announced in the Backgrounder entitled Place of Supply, Self-Assessment and Rebate Rules for the Harmonized Sales Tax (HST) released by the Minister of Finance on February 25, 2010. This interpretation should not be taken as a statement by the Canada Revenue Agency (CRA) that the place of supply rules or the transitional rules for the HST in Ontario and British Columbia will be made in their current form.
We understand that:
• XXXXX. The Company is registered for GST/HST purposes.
XXXXX.
• You have had discussions with your clients and the CRA about how the taxes would be calculated and/or prorated on the agent's real estate services.
• Generally, a real estate commission becomes due and is paid on the closing date of a sale.
Interpretation Requested
You would like to know how the GST/HST transitional rules would apply to a supply of real estate services made in Ontario and British Columbia. Specifically, you would like to know if real estate services would be prorated by considering the firm sale date or the closing date of a sale of property.
Interpretation Given
The Company would use the HST general transitional rules for services when it accounts for its taxable supplies of real estate services in Ontario and British Columbia that straddle the July 1, 2010 implementation date.
Transitional Rules for Services:
The HST would generally apply to any consideration that becomes due, or is paid without having become due, on or after May 1, 2010, for a supply of a service, to the extent that the consideration relates to the portion of the service performed on or after July 1, 2010. However, if 90% or more of the service is performed before July 2010, no HST would be payable on the consideration for the service.
Whether HST applies on an amount is a question of fact and determined on a case by case basis. Realtors often charge a service fee for arranging for the sale of a vendor's property. A common question from realtors is how they determine the portion of their service performed on or after July 1, 2010. For example, a realtor and a vendor enter into a listing agreement on May 1, 2010 (the listing date) and the property is conditionally sold on July 15, 2010 (i.e., a firm sale date) but the sale does not become final until August 15, 2010 (i.e., the closing date). The portion of a realtor's service performed on or after July 1, 2010 may not necessarily be determined by the firm sale date or the closing date. Realtors should determine the portion of their services performed on or after July 1, 2010 in a fair and reasonable manner.
An amount for a supply of a service becomes due on the earliest of the following days:
• the date of an invoice for that amount for the supply;
• the day the supplier first issues that invoice for the amount,
• if there is an undue delay in issuing that invoice, the day the supplier would have issued the invoice; and
• the day the client is required to pay that amount under a written agreement.An amount is paid without having become due when a client pays an amount due for a supply:
• before the date of an invoice, or before a supplier issues, or would have issued, the invoice; or
• before the client is required to pay the amount under a written agreement and no invoice has been issued.Accounting for the GST/HST charged on Services:
When an amount becomes due or is paid without having become due after October 14, 2009 and before May 2010, the supplier charges the purchaser the GST and accounts for the tax in its GST/HST return according to the normal rules.
When an amount becomes due or is paid without having become due on or after May 1, 2010 and before July 2010 for a service that begins on or after July 1, 2010, the supplier accounts for:
• the 5% federal part of the HST in its GST/HST return according to the normal rules; and
• the 8% provincial part of HST in its GST/HST return for the reporting period that includes July 1, 2010.When an amount becomes due or is paid without having become due on or after July 1, 2010, the supplier accounts for the HST in its GST/HST return according to the normal rules.
More information is available in GST/HST Info Sheet GI-056, Ontario and British Columbia: Transition to the Harmonized Sales Tax - Services, on the CRA's Website at: http://www.cra-arc.gc.ca/formspubs/typ/menu-eng.html.
The foregoing comments represent our general views with respect to the transitional rules as announced in the Notices released by the Governments of Ontario and British Columbia on October 14, 2009, as they relate to the subject matter of your request. Any change to the wording of the transitional rules or any regulations regarding the HST in Ontario and British Columbia, if made, could have an effect on the interpretation provided herein. 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.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-954-9700. 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,
Michèle Routhier
Services and Intangibles Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate
UNCLASSIFIED
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