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
XXXXX
Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 15th floor
320 Queen Street
Ottawa ON K1A 0L5
Case Number: 124917
Attention: XXXXX
XXXXX
XXXXX
July 23, 2010
Dear XXXXX:
Subject:
GST/HST INTERPRETATION
Transitional Rules for Harmonized Sales Tax - Sales of Crown land
Thank you for your letter of XXXXX, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to sales of Crown land by the XXXXX.
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.
Interpretation Requested
The XXXXX sells Crown land to the public. Prior to the implementation of the HST, the sales were subject to the GST at 5%. The majority of Crown land sale transactions occur between the XXXXX and members of the public who, through tenure agreements, currently occupy the Crown land.
You would like us to confirm your interpretation or provide the correct interpretation of the transitional HST rules as they apply in the following situations.
Situation 1: Sale of untenured land
With respect to the sale of untenured land, ownership and possession of the land will transfer to the purchaser when title to the land transfers to the purchaser. Your position is that the GST will apply to the sale if title to the untenured land transfers prior to July 2010. The HST will apply to the sale should title to the untenured land transfer on or after July 1, 2010.
Situation 2: Sale of tenured land to someone other than the current tenure holder
With respect to the sale of tenured land to someone other than the current tenure holder, ownership and possession of the land will transfer to the purchaser when title to the land transfers to the purchaser. Your position is that the GST will apply to the sale if title to the land transfers prior to July 2010. The HST will apply to the sale should title to the land transfer on or after July 1, 2010.
Situation 3: Sale of tenured land to the current tenure holder
With respect to the sale of tenured land to the current tenure holder, your position is that it could be argued that the current tenure holder assumed possession of the land at the point at which their current tenure term began. This would mean that the GST would apply should any tenure holder who entered into a tenure or land use agreement prior to July 2010 purchase that land prior to the expiry of their current tenure.
Situation 4 Sale of up to a half hectare of land on which a used residential building is situated to someone other than the current tenure holder
In this case, your position is that the GST/HST would not be collected on the first half hectare of Crown land when a used residential building is situated on the Crown land is sold to someone other than the current tenure holder. The first half hectare would be exempt for GST/HST purposes.
Situation 5 Sale of up to a half hectare of land when land is sold to the current tenure holder
In this case, you ask whether a residential building constructed on Crown land by a tenure holder during the term of their tenure would be viewed as a leasehold improvement. In addition, you would like our position with respect to the application of the GST/HST to the sale, to the tenure holder, of the land on which they have constructed the residential building.
Interpretation Given
Situation 1
We agree with your interpretation.
Situation 2
We agree with your interpretation.
Situation 3
For GST/HST purposes, a transfer of possession of property to a person is considered to be a sale only if the person takes possession under an agreement to transfer ownership of the property. In this situation, if the current tenure holder has possession of the land under a tenure or land use agreement, the person does not have possession under an agreement to transfer ownership of the land. The current tenure holder will be considered to have possession of the land under an agreement to transfer ownership of the land only at the time that possession is held under an agreement of purchase and sale.
If a separate agreement of purchase and sale is entered into on or after July 1, 2010, the HST would apply to the sale of the land as ownership of the land, under the agreement to transfer ownership of the land, would transfer to the purchaser on or after July 1, 2010 and possession would be held under that agreement on or after July 1, 2010.
If the tenure or land use agreement is in the form of a lease to own agreement or includes an option to purchase the land, you may wish to provide us with additional information together with a sample agreement for an interpretation of the application of the GST/HST.
Situation 4
Land of up to a half hectare that is subjacent and immediately contiguous to a residential building is generally considered to form part of the residential complex as it is considered to be reasonably necessary for the use and enjoyment of the building as a place of residence. In some cases, more than a half hectare may form part of a residential complex. For additional information on these cases, reference may be made to GST/HST Memorandum 19.2.1, Residential Real Property - Sales.
Where the sale of the land includes a residential complex, the XXXXX is considered to have made two separate supplies, the sale of the residential complex and the sale of land that does not form part of the residential complex. Sales of previously occupied residential complexes are generally exempt from the GST/HST. The allocation of the consideration payable for the sale of the residential complex and the sale of the remaining land must be made in a fair and reasonable manner.
If a portion of the half hectare that is subjacent and immediately contiguous to a residential complex is used in commercial activities, that portion would not be considered to form part of the residential complex. That portion of land would form part of the sale of the land that is not a residential complex which would be subject to the GST/HST.
Situation 5
If the current tenure holder constructs a residential complex on the land, this would be viewed as a leasehold improvement.
Should the current tenure holder purchase from the Crown the building and the land on which they have constructed the residential building, the half hectare of land that is subjacent and immediately contiguous to the residential building would generally be considered to form part of the residential complex. As indicated above, sales of previously occupied residential complexes are generally exempt from the GST/HST. The allocation of the consideration payable for the sale of the residential complex and the sale of the remaining land must be made in a fair and reasonable manner.
If under the tenure or land use agreement, the tenure holder is the owner of the building they have constructed on the Crown land, the sale of the half hectare of land that is subjacent and immediately contiguous to the residential building will be exempt from the GST/HST if a sale of the residential complex would be exempt from the GST/HST if the building and the land were sold together. The allocation of the consideration payable for the sale of the land to that part of the land that forms part of the residential complex must be made in a fair and reasonable manner.
As explained above, if a portion of the half hectare that is subjacent and immediately contiguous to a residential complex is used in commercial activities, that portion would not be considered to form part of the residential complex. That portion of land would form part of the sale of the land that is not a residential complex which would generally be subject to the GST/HST. If both ownership and possession of the land transfer, under the agreement to purchase the land, to the purchaser on or after July 1, 2010, HST would apply to the sale of the land.
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 Canada Revenue Agency 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 directly at 613-952-9587.
Yours truly,
Béatrice Mulinda
Real Property Unit
Financial Institutions and Real Property Division
Excise and GST/HST Rulings Directorate
UNCLASSIFIED
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