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.
[Addressee]
Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 15th floor
320 Queen Street
Ottawa ON K1A 0L5
Case Number: 81896
Business Number: [...]
November 23, 2010
Dear [Client]:
Subject:
GST/HST RULING
Supply by [the] [...] Association
Thank you for your fax (with attachments) of July 14, 2006, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to a supply of a "membership" in the [...] Association. We apologize for the delay in responding to your enquiry.
HST applies at the rate of 15% in Nova Scotia, 13% in Ontario, New Brunswick, and Newfoundland and Labrador, 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 as follows:
1. The [...] Association (the Association) was incorporated without share capital on [mm/dd/yyyy], under the laws of the province of Ontario.
2. The Association is a "non-profit organization" as that term is defined in subsection 123(1) and is not registered for purposes of the GST/HST.
3. The Association owns and operates a recreational vehicle park (the Park) that is located in the Township of [...] (the Municipality). The Association is licenced by the Municipality to operate the Park for six months per year, from May 1 to October 31. The Association pays licence fees to the Municipality in respect of the Park.
4. The Park is not covered by condominium property legislation in Ontario.
5. The Park is not a "residential trailer park" as that term is defined in subsection 123(1).
6. The Association's purpose is to operate and maintain the Park and its facilities for the benefit of its members.
7. A sample membership agreement [...] (the Agreement) was included with your submission. When a person acquires a membership in the Association they pay a fee for which they obtain the exclusive right to occupy and use a designated site within the Park and the right to use the common areas of the Park. However, a member does not own the site as ownership of the Park remains with the Association. Members have a right to a share of the assets of the Association, including the real property (i.e., the Park), if it is dissolved and members have the right to vote at Association meetings. There are no other entitlements or rights associated with a membership.
8. The Agreement provides that an annual maintenance fee is also payable by members to the Association. This fee covers the operation of the Park (e.g., water, sewage, hydro, property taxes, wages and routine repairs and maintenance of the Park) and a portion of this fee goes to the reserve fund set up for the purchase and replacement of capital items required to service the Park. Members also pay the Association amounts in respect of the licence fees that are payable by the Association to the Municipality.
9. Under the Agreement, members have the right to bequeath their membership to their heirs or successors.
10. A member may place a recreational vehicle trailer or park model trailer (an RV) on their designated site within the Park. Mobile homes are not permitted on the sites in the Park. However, the Agreement does not require a member to place an RV on their site. A member may choose to camp on the site using a tent or use the site only during the day.
11. Any RV that occupies a site is not permanently affixed to the land. The RVs rests on gravel or on patio slabs and the wheels must remain on each RV. In addition, the hauling tongue, an attachment that is required to move the RV, must remain on the site. Some of the RVs are skirted and some have had decks added.
12. While the Park is open, the RVs are connected to the utilities (i.e., hydro, water and sewer). From November 1 to April 30 (the Off-Season), the RVs must be disconnected from the utilities. During the Off-Season, some members continue to come to the Park for a day or weekend, however, the member's RV cannot be reconnected to the utilities during the OffSeason.
13. During the Off-Season, the majority of the RVs, while unconnected from utilities, are left on their sites in the Park, however, a few RVs are removed during the Off-Season and are returned to a member's site the next year.
14. In accordance with the Agreement, a member may rent their site to a tenant, provided the member notifies the Association in writing. While the site is rented to a tenant, the tenant may use the facilities and services of the Association as if the tenant was a member and the member gives up their right to use the facilities and services of the Association during the rental period. However, a tenant does not have voting rights during the period of rental and the member is responsible for the conduct of the tenant and will be responsible for any damage to the Park, or other members' property, as a result of the tenant's conduct. Additionally, members are not relieved of their obligations under the Agreement by renting out their site.
15. In [yyyy], in addition to sites supplied to members, there were [...] seasonal tenants in the Park who were paying amounts on a monthly or annual basis to the Association for the use of a site in the Park.
16. The Association has not filed an election under section 211 in respect of the real property included in the Park.
Ruling Requested
You would like to know the GST/HST status of the Association's supply made under an Agreement.
Ruling Given
Based on the facts set out above, we rule that the Association's supply made under an Agreement is a supply of the exclusive right to use and occupy a designated site in the Park, which is a supply of real property made by way of lease or similar arrangement. We also rule that this supply is an exempt supply pursuant to section 25 of Part VI of Schedule V to the ETA.
We further rule that the annual amount payable to the Association by a member for site licence fees and the maintenance of common amenities is consideration for the exempt supply referred to above.
These rulings are subject to the qualifications in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service. We are bound by these rulings 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
Under the Agreement, the Association provides a member with the exclusive right to use and occupy a designated site in the Park, as well as the right to use, in common with others, the common areas in the Park for their lifetime subject to the limitations. For GST/HST purposes, the nature of the supply made by the Association under the Agreement is the exclusive right to use and occupy a designated site in the Park for the lifetime of the recipient (and their heirs or successors) which is a supply of a right to use real property made by way of lease or similar arrangement. A supply of a right to use real property by way of lease, licence or similar arrangement is a supply of real property in accordance with subsection 136(1).
Section 25 of Part VI of Schedule V to the ETA provides that a supply of real property made by a public service body (other than a financial institution, municipality or a government) is exempt unless one of the exceptions listed in that section applies. You have indicated that the Association is a non-profit organization for GST/HST purposes. As such, the Association is a public service body and section 25 applies to exempt the supply of real property made by the Association under the Agreement. None of the exclusions in that section apply in this case.
The amount payable upon entering the Agreement and the annual amounts payable to the Association by a member for site licence fees and the maintenance of common amenities is consideration for the exempt supply referred to above.
A "non-profit organization" is defined in subsection 123(1) of the ETA to be a "person (other than an individual, an estate, a trust, a charity, a public institution, a municipality or a government) that was organized and is operated solely for a purpose other than profit, no part of the income of which is payable to, or otherwise available for the personal benefit of, any proprietor, member or shareholder thereof unless the proprietor, member or shareholder is a club, a society or an association the primary purpose and function of which is the promotion of amateur athletics in Canada."
As indicated in GST/HST Policy Statement P-215, Determination of Whether an Entity is a "Non-Profit Organization" for Purpose of the Excise Tax Act ("ETA"), we look at the governing documents to determine whether an entity was organized solely for a purpose other than profit. Where the governing documents of the Association indicate that it was established solely for a purpose other than profit, it must be established whether the Association is operated solely for a purpose other than profit, no part of the income of which is payable to, or otherwise available for the personal benefit of, any member/shareholder.
The determination of whether an entity is operated solely for non-profit purposes is a question of fact at any given time. Therefore any determination of whether an entity is a non-profit organization for purposes of the ETA is specific to the time the determination is made.
If it is determined that the Association is not a non-profit organization at a particular time, any supply of real property made at that time under an Agreement would not be exempt under section 25 of Part VI of Schedule V to the ETA. If the Association is not a non-profit organization, the supply of real property may be subject to the GST/HST or may be exempt under another provision. If this is the case, you can contact us for additional information on the application of the GST/HST.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-954-8852. 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,
Hugh Dorward
Real Property Unit
Financial Institutions and Real Property Division
Excise and GST/HST Rulings Directorate
UNCLASSIFIED
Email this Content