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
Attention: XXXXX
Case Number: 78828
July 23, 2010
Dear XXXXX:
Subject:
GST/HST INTERPRETATION
Application of GST/HST to Condominium fees
Thank you for your letter concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to condominium fees billed to owners of condominium units. We apologize for the delay in providing our response.
All legislative references are to the Excise Tax Act (the Act) and the regulations thereunder, unless otherwise specified.
Interpretation Requested
It is our understanding, based on XXXXX you are now seeking our views with respect to whether the use of a survey of the activities of condominium owners (i.e., whether the owners have placed their units in rental pools) would be sufficient to support the application of section 13 of Part I of Schedule V to the Act. You also asked that we provide information with respect to the exclusionary tests in the post-amble of the definition of residential complex in subsection 123(1).
Interpretation Given
Section 13 of Part I of Schedule V to the Act exempts a supply of property or a service, made by a corporation or syndicate established upon the registration, under the laws of a province, of a condominium or strata lot plan or description or similar plan or description, to the owner or lessee of a residential condominium unit described by that plan or description, if the property or service relates to the occupancy or use of the unit.
As you are aware, the terms "residential condominium unit" and "residential complex" are defined in subsection 123(1).
If a condominium unit is not a residential complex, the unit is not a residential condominium unit for GST/HST purposes and the exemption under section 13 of Part I of Schedule V to the Act will not apply to a property or service supplied by a condominium corporation to the owner of the unit. The following are guidelines that may be used to determine whether a condominium unit meets the exclusionary tests in the post-amble of the definition of "residential complex".
A condominium unit is a not a "residential complex" for GST/HST purposes if all of the following three conditions (referred to as the "three tests") in the post-amble of the definition of "residential complex" are met:
(1) the condominium unit (part of the building) is a hotel, motel, inn, boarding house, lodging house or other similar premises, (referred to as the "Hotel Test");
(2) the building in which the condominium unit is located is not described in paragraph (c) of the definition of "residential complex" (referred to as the "Paragraph (c) Test"); and
(3) all or substantially all of the leases, licences or similar arrangements in respect of the condominium unit provide, or are expected to provide, for periods of continuous possession or use of less than sixty days (referred to as the "90% Test").
Hotel Test
GST/HST Policy Statement P-099 - The Meaning of "Hotel", "Motel", "Inn", "Boarding House", "Lodging House" and "Other Similar Premises", as Used in the Definition of "Residential Complex" and "Residential Unit" establishes guidelines for determining if a property is a hotel, motel, inn, etc. for purposes of the definition of residential complex. With respect to a condominium complex, the "Hotel Test" is applied on a condominium unit-by-unit basis.
The conditions set out in the guidelines should generally be present throughout the year for the condominium unit to be considered a hotel. The CRA has ruled that where the conditions are met for only a portion of the year, the building or part of the building (e.g., a condominium unit) is not a hotel, but rather a residential complex used to make taxable supplies of accommodations.
Paragraph (c) Test
The "Paragraph (c) Test" will be met unless the whole of the building is owned by, or has been supplied by way of sale to an individual and is used primarily as a place of residence of the individual, an individual related to the individual or a former spouse or common law partner of the individual. In respect of a condominium complex where all of the condominium units are in one building, the "Paragraph (c) Test" is applied in respect of the whole building and the test will be met if various individuals own the condominium units in the building.
Where one individual owns all of the condominium units in the building, the "Paragraph (c) Test" will not be met if the entire building (i.e., the combined use of all the units) is primarily used as a place of residence of the individual, an individual related to the individual or a former spouse or common law partner of the individual, a situation that is unlikely to happen.
90% Test
GST/HST Policy Statement P-053 - Application of All or Substantially All to Residential Complexes provides guidelines for the application of the "90% Test". In respect of a condominium complex, the "90% Test" is applied on a unit-by-unit basis.
The time period for applying the "90% Test" should be reasonable for the particular supplies in question and used on a consistent basis. Normally, a one-year interval would be considered appropriate. Where a one-year interval was reasonable for purposes of the "Hotel Test", the CRA would generally use the same time period to apply the "90% Test."
The "90% Test" takes into account all supplies of the condominium unit made by the individual by way of lease, licence or similar arrangement (i.e., both long-term and short-term rentals). The personal use by an individual who is the owner of the unit is not a supply of the unit made by the individual by way of lease, licence or similar arrangement. As such, the personal use does not factor into the "90% Test" although it is a factor to consider for purposes of the "Hotel Test".
If, during a one-year interval, the individual only makes supplies of the condominium unit by way of lease, licence or similar arrangement for periods of continuous possession or use of less than 60 days (i.e., "short-term rentals"), the "90% Test" will be met.
Where all three tests are met, the condominium unit is not a residential condominium unit and is not a residential complex for GST/HST purposes throughout the one-year interval.
With respect to whether a condominium corporation could rely on a survey of the owners' activities to determine whether or not the units meet the definition of "residential complex" in order apply section 13 of Part I of Schedule V to the Act, there is no provision in the Act that would allow such a method to be used. Each supply to each owner of a condominium unit must be analyzed separately to establish whether the supply is taxable or exempt pursuant to section 13 of Part I of Schedule V to the Act. It is a question of fact as to whether a particular unit is a residential complex and a residential condominium unit for GST/HST purposes.
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 Act, 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 at 613-952-9587.
Yours truly,
Béatrice Mulinda
Real Property Unit
Financial Institutions and Real Properties Division
Excise and GST/HST Rulings Directorate
UNCLASSIFIED
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