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: 101290
July 6, 2011
Dear [Client]:
Subject:
GST/HST RULING
GST/HST INTERPRETATION
[...] [GST/HST Treatment of Recreational Vehicle Sites]
Thank you for your letter of December 27, 2007, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to [...] (the Operator). We apologize for the delay in our response.
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 the facts as follows:
1. The [...], on behalf of [Her] Majesty the Queen in Right of Canada (the Crown), entered into a lease agreement (the Head Lease) with [...] (the Developer) for the lease by the Crown to the Developer of two contiguous separate parcels of land (the Property). The two parcels are described as follows: 1) The whole of Lot [...] and 2) The whole of Lot [...]. The Property has not been severed by the Developer since the Head Lease commenced.
2. The Head Lease was entered into on [mm/dd/yyyy] and the terms of the lease are in effect for a period of [...] years expiring in [yyyy]. The lease payments on the Head Lease are calculated annually for the period April 1 - March 31. There is one payment made each year. The Developer has paid the GST/HST on the payments made under the Head Lease since [yyyy].
3. The Head Lease provides that during the term of the Head Lease the Developer may assign, sublet, mortgage, pledge, hypothecate or otherwise encumber the Head Lease with the consent in writing of the Crown. Also, the Developer has the right to sublet each RV Site and each [...] (the Unit) created or constructed on the Property in accordance with the provisions of the Head Lease, provided that with respect to each Unit and each RV Site, the Developer and each sublessee enter into a form of lease approved by the Crown where the term of each sub.tenancy shall expire not later than one day prior to the expiration of the Head Lease.
4. At the inception of the Head Lease, there were no improvements to the Property. The Developer created the Development. "Development" refers to the Property and all buildings, structures and improvements constructed on or made to the Property by or on behalf of the Developer from time to time for use and operation as a recreational development.
5. The Development consists of [...] recreational vehicle sites (the RV Sites), [...] sites, a number of residential units you have referred to as "Leasehold Condominiums" (iFootnote 1) , timeshare operations, and resort facilities. The [...] sites have been developed more recently and do not have the same hook ups as the RV Sites. There is no intention to ever lease the [...] sites on a long-term basis. Approximately [...]% of the Property is used for the RV Sites.
6. The portion of the Property where the RV Sites are situated, together with any buildings, fixtures and other appurtenances reasonably necessary for the use of the RV Sites will be referred to as "the RVs Portion of the Property". The rest of the Property, together with any buildings, fixtures and appurtenances (including the portion where the condominium units are situated) will be referred to as "the Non.RVs Portion of the Property". You have confirmed that the RVs Portion of the Property is solely composed of sites that are, or are intended to be, supplied by way of lease, licence or similar arrangement to Sublessees and Renters (defined below), and other land that is reasonably necessary for the use and enjoyment of the sites by individuals residing in or occupying recreational vehicles situated or to be situated on the sites. All RV Sites are grouped together and are not intermixed with sites for condominium units or other portions of the Development that are unrelated to the supply of the RV Sites.
7. The Developer supplies the RV Sites in the Development under an agreement titled [...] (hereafter, the RV Site Sublease) for a term of more than one year. Persons leasing a site from the Developer under an RV Site Sublease are referred to as "Sublessees". The Sublessees make a lump sum payment for the whole term at the beginning of the sublease term. The Developer has been charging the GST/HST on the supply of sites made under an RV Site Sublease.
8. The RV Site Sublease provides that a Sublessee may assign the RV Site Sublease with the written consent of the Developer. The assignments must be in writing and in a form and content prescribed by the Developer. The assignee named in the assignment shall agree in writing to perform all of the covenants of the Sublessee to the same extent as if the assignee had originally executed the lease in the place and stead of the Sublessee. The Sublessee cannot sublet the RV Site, but under certain conditions may rent the RV Site during the term of the sublease for any period.
9. The following provisions are from the RV Site Sublease:
"Lands" means the Lands leased by the Developer under the provisions of the Head Lease as modified and extended from time to time. (In our response the Lands are referred to as "the Property").
"Recreational Vehicle" (RV) means and includes a fully self.contained motorhome, travel trailer, half-ton or three-quarter ton pickup truck with camper attached, and similar recreational vehicles.
"RV Site" means a site located on the Lands, served with water, sewage disposal and electrical connections, for the parking and locating of a Recreational Vehicle.
Clause [...] of the sample RV Site Sublease states that RV Sites are leased for the parking and locating of a recreational vehicle [...] and for the occupancy of such a recreational vehicle as a private recreational dwelling by the Sublessee thereof and their family, and are not to be used for any other purpose or occupied by any other persons, other than transient relatives and friends who are guests of the Sublessee, or permitted third parties where the Sublessee has placed the site in the rental pool. You stated that some Sublessees do not put an RV on their site and instead put the site into a rental pool managed by the Operator.
10. You advised that there are no permanent structures or mobile homes placed on the RV Sites. You also advised that there are no RVs on the sites that have been modified to such an extent that they would be considered similar to a house, mobile home or other residential unit.
11. By [mm/yyyy], of the [...] RV Sites in the Development, [...] were supplied by the Developer under an RV Site Sublease.
12. Of the [...] sites that have been subleased by the Developer, many are put into a rental pool, managed by the Operator, and supplied on a short-term basis. The number of sites in the rental pool varies at any one time; in [mm/yyyy], you estimated that over one-half of the [...] sites were in the rental pool. At that time, you also estimated that [...] sites had a travel trailer situated thereon on a long-term basis while in [mm/yyyy] you estimated that number had increased to [...]. (iiFootnote 2) The RV Sites are served with water, sewage disposal and electrical connections that are available all year round.
13. The remaining [...] RV Sites, i.e., [...] sites less the [...] sites supplied under an RV Site Sublease, are rented out, generally for a period of less than one month, to a person who parks an RV on the site. Persons who occupy one of these [...] sites are referred to as "Renters". The number of sites that are supplied to Renters changes at any one point in time. During the summer months all of these sites are leased for less than 30 days at a time. During the winter months, the Developer may have someone rent a site for longer than one month, but this is not very frequent and at any rate, the Renter would not affix a unit to the site in the same manner as a house, mobile home or other residential unit.
14. The Developer is looking to place new [...] foot wide park model trailers [...] on some of the [...] sites reserved for nightly rentals. The Developer has already placed a park model trailer on one of the [...] sites and the trailer and site are used to make supplies of short-term rentals, i.e., periods of continuous occupancy of less than one month. We will assume that the consideration for such rentals exceeds $20 for each day of occupancy.
15. The Operator acts as manager of the Development. In that regard the Operator charges a maintenance fee to the Sublessees and to residents of the condominium units. The "maintenance fee" is an annual fee payable by the Sublessees and the residents of the condominium units that represents their proportionate share of operating costs and any other tax on the maintenance fee imposed by a governmental authority.
RULINGS REQUESTED
You would like to know:
1. Whether the supply made by the Developer to a Sublessee under an RV Site Sublease is a supply by way of lease, licence or similar arrangement or a supply by way of sale.
2. Whether the RVs Portion of the Property meets the definition of a trailer park in subsection 123(1).
3. Whether the RVs Portion of the Property meets the definition of a residential trailer park in subsection 123(1).
4. The GST/HST status of the supply made by the Developer to a Sublessee under the RV Site Sublease.
5. Whether the Developer would be required to self.supply under subsection 190(4) if the percentage of RV Sites that are supplied under an RV Site Sublease increases from less than 90% to 90% or more. If a self-supply is required, you have asked the value on which the GST/HST would apply and whether there would be any credit for the GST/HST collected on the supply of RV Sites that have already been made under the RV Site Subleases.
6. The GST/HST consequences if the Developer placed new [...] foot wide park model trailers [...] on the [...] sites reserved for short-.term rentals and supplied the trailer and site.
7. The GST/HST consequences if the Developer supplied an RV Site under an RV Site Sublease where a park model trailer is situated on the site.
8. The GST/HST status of the maintenance fee charged by the Developer to the Sublessees.
9. Whether the maintenance fee charged by the Developer in respect of the condominium units that are used as a place of residence is exempt pursuant to section 13 of Part I of Schedule V to the ETA.
10. Whether, under the Head Lease, the RVs Portion of Property would be treated separately from the Non.RVs Portion of the Property and the tax status of the supply made by the Crown to the Developer under the Head Lease.
Rulings Given
Based on the facts set out above, we rule that:
1. The supply of an RV Site by the Developer to a Sublessees under an RV Site Sublease is a supply of real property by way of lease, licence and similar arrangement, i.e., a sublease, and is not a supply by way of sale (i.e., the supply is not an assignment of a lease, licence or similar arrangement).
2. There are insufficient facts to determine whether the RVs Portion of the Property is a trailer park as that term is defined in subsection 123(1). Please see Interpretation #1 (below) for further discussion on this issue.
3. The RVs Portion of the Property is not a residential trailer park as that term is defined in subsection 123(1).
4. The supply of an RV Site by the Developer made under an RV Site Sublease is a taxable supply for GST/HST purposes.
5. The Developer is not required to self.-supply under subsection 190(4) if the percentage of RV Sites that are supplied under an RV Site Sublease increases from less than 90% to 90% or more. As such, the remaining questions in Ruling Request #5 are moot.
6. The supply of a short-term rental site on which the Developer has placed a [...] foot wide park model trailer [...] is subject to the GST/HST.
7. The supply of an RV Site under an RV Site Sublease on which the Developer has placed a park model trailer is subject to the GST/HST.
8. The maintenance fee charged by the Developer to the Sublessees is additional consideration for the taxable supply of an RV Site made under the RV Site Sublease and accordingly, is subject to the GST/HST.
9. The maintenance fee charged by the Developer in respect of the condominium units is not exempt under section 13 of Part I of Schedule V to the ETA. Please see Interpretation #2 (below) for further discussion on this issue.
10. The supply of the RVs Portion of the Property made by the Crown under the Head lease is subject to the GST/HST. That part of the Non-RVs Portion of the Property that forms part of one or more residential complexes and that is supplied by the Crown to the Developer under the Head Lease is separate from the supply of the remainder of the Property. There are insufficient facts to determine whether the supply by the Crown to the Developer of that part of the Non-RVs Portion of the Property that forms part of one or more residential complexes is subject to the GST/HST. Please see Interpretation #3 (below) for further discussion on this issue.
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.
EXPLANATIONS
Supply by way of lease, licence or similar arrangement
The term sale is defined in subsection 123(1) to include, in respect of property, any transfer of the ownership of the property and a transfer of the possession of the property under an agreement to transfer ownership of the property.
Ownership of an RV Site is not transferred to Sublessees under the RV Site Sublease, nor does the RV Sublease constitute an agreement to transfer ownership of an RV Site. As such, the Developer does not make a supply by way of sale of an RV Site to a Sublessee under the RV Site Sublease.
The RV Site Sublease grants a Sublessee the right to the use of a particular RV Site and common areas within the Development for the purpose of locating an RV on the site. The right to use is for a defined term as set out in clause [...] of the RV Site Sublease and the Sublessee is to have quiet possession and enjoyment of the RV Site for the term of the agreement. As such, the Developer is making a supply of real property to each Sublessee by way of lease, licence and similar arrangement.
Maintenance fee
A Sublessee is required to pay the maintenance fee pursuant to clause [...] of the RV Site Sublease. The fee is viewed as additional consideration for the taxable supply of the RV Site made under the RV Site Sublease. As that supply is subject to the GST/HST, the maintenance fee is also subject to tax.
Section 13 of Part I of Schedule V exempts certain supplies 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. As the Development is not governed by such condominium or strata legislation, the maintenance fee charged in respect of the condominium units is not exempt under section 13 of Part I of Schedule V.
Supply under Head Lease
Subsection 136(2) provides, in part, that where a supply of real property includes land that forms part of a residential complex and other real property that does not form part of such land, the supply of the land that forms part of the residential complex and the supply of the remaining real property are considered to be separate supplies and neither supply is incidental to the other.
The supply of land that forms part of the condominium units is, on the assumption that the condominium units are residential complexes, considered to be a separate supply from the rest of the supply of the Property made under the Head Lease.
The supply of the RVs Portion of the Property made under the Head Lease is not exempt under section 6.1 of Part I of Schedule V to the ETA as the supply of an RV Site made under an RV Site Sublease is not exempt under section 7 of Part I of Schedule V to the ETA. No other exemptions apply to the supply under the Head Lease of the RVs Portion of the Property and the supply is therefore a taxable supply.
INTERPRETATIONS GIVEN
1. A trailer park is defined in subsection 123(1) to include a piece of land that is owned by or leased to a person and that is exclusively composed of one or more sites each of which is, or is intended to be, supplied by the person by way of lease, licence or similar arrangement to the owner, lessee or person in occupation or possession of a mobile home, or a travel trailer, motor home or similar vehicle or trailer, situated or to be situated on the site.
Despite the fact that Clause [...] of the RV Site Sublease indicates the site is being leased to a person who will put a recreational vehicle on the site, you indicated that some Sublessees never put a recreational vehicle on the site they have subleased from the Developer and instead put the site into a rental pool managed by the Operator. It does not appear, therefore, that the RVs Portion of the Property is exclusively composed of sites that are supplied by the Developer to the owner, lessee or person in occupation or possession of a mobile home, or a travel trailer, motor home or similar vehicle or trailer situated on the site.
2. While the maintenance fee charged in respect of the condominium units is not exempt under section 13 of Part I of Schedule V to the ETA, the fee may not be subject to tax. Section 6 of Part I of Schedule V to the ETA exempts the supply of a residential complex by way of lease, licence or similar arrangement for the purpose of its occupancy as a place of residence or lodging by an individual, where the period throughout which continuous occupancy of the complex or unit is given to the same individual under the arrangement is for a period of at least one month. On the assumption that each condominium unit is a residential complex, if the supply by the Developer is described in section 6 of Part I of Schedule V and the maintenance fee is additional consideration for the exempt supply, the maintenance fee in respect of the condominium unit will not be subject to the GST/HST.
3. Section 6.11 of Part I of Schedule V to the ETA, in part, exempts a supply of land that forms part of a residential complex made by way of lease for a lease interval where, throughout the lease interval, the lessee makes, or holds the property for the purpose of making, one or more supplies of the property and all or substantially all of those supplies are exempt supplies included in section 6 of Part I of Schedule V to the ETA. (iiiFootnote 3)
As it applies to this case, it must be noted that the exemption in section 6.11 (or section 6.1) of Part I of Schedule V to the ETA can only apply to the Crown's supply for those lease intervals (April 1 - March 31) throughout which the Developer makes, or holds for the purpose of making, supplies of residential complexes that include the land and all or substantially all of those supplies are exempt under section 6 of Part I of Schedule V to the ETA.
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. 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,
Béatrice Mulinda
Real Property Unit
Financial Institutions and Real Property Division
Excise and GST/HST Rulings Directorate
i (1) You stated that none of the Development is covered under condominium, strata or similar legislation. As such, the residential units in question do not meet the definition of "residential condominium unit" as defined in subsection 123(1). In the remainder of our response, we will refer to these residential units as the condominium units. We assume that the condominium units are residential complexes as that term is defined in subsection 123(1).
ii (2) We assume that those sites on which a travel trailer is situated on a long-term basis at any particular time are not in the rental pool at that particular time.
iii (3) Section 6.11 generally applies to a supply where the consideration for a supply becomes due, or is paid without having become due, after February 26, 2008. Before that time, section 6.1 of Part I of Schedule V to the ETA may have applied to the supply of land made under a lease where the land was used in making an exempt supply under section 6 of Part I of Schedule V to the ETA.
---------------
------------------------------------------------------------
---------------
------------------------------------------------------------
UNCLASSIFIED
Email this Content