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: 134045
Business Number: [...]
September 12, 2011
Dear [Client]:
Subject:
GST/HST RULING
Eligibility for input tax credits on the purchase of a solar photovoltaic electrical generation system (solar panel system)
Thank you for the letter provided by [...] (the Supplier), dated [mm/dd/yyyy], concerning the input tax credit (ITC) treatment with respect to the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) paid or payable on your purchase of a solar panel system.
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 following information from the letter provided by the Supplier on your behalf, your telephone conversations with [...] of our offices on [mm/dd] and [mm/dd], [yyyy], a copy of the proposal from the Supplier, and the contents of the [...] Web page [...].
1. You are contemplating purchasing a solar panel system (described below) to participate in the [...] Program. You have received a conditional offer [...] to participate in the [...] Program and supply electricity to the electrical grid.
2. Our understanding of the contractual terms of the [...] Program is as follows:
(a) A participant enters into a [...]-year contract to provide energy to their local distribution company (LDC).
(b) The prices for the energy provided to the LDC are fixed for the term of the contract.
(c) Solar panels may be installed either on the rooftop of a building or be ground-mounted.
(d) All project and installation costs are to be incurred by the participant, i.e., the person supplying electricity to the LDC.
(e) All electricity generated by the solar panels is sold to the LDC. The sale of electricity is a separate transaction from the participant's consumption of electricity.
3. The solar panel system you are contemplating purchasing is composed of solar panels, micro inverters, and mounting rails and brackets. The mounting rails are screwed into the roof trusses using 3 inch lag bolts. The solar panels themselves are not directly attached to the roof. They are mounted to a rail system and held in place with brackets. There are no bolts directly attached to the solar panels. Micro inverters are positioned beneath the solar panels and are mounted to the same rails as the solar panels.
4. The solar panel system is independent of the existing electrical system for the building in that electricity generated from the system is measured by a hydro meter before being made available to the electrical grid. As stated above, none of the electricity generated from the system is for consumption at your residence unless the electricity is first sold to the LDC and then sold back to you.
5. You currently own and reside in a residential complex located at [...] [City 1, Province X]. The residential complex is used primarily as a place of residence for yourself and your spouse. An attached garage forms part of the residential complex. A barn is also located on the property. The solar panel system you are contemplating purchasing would be installed on the roof of your personal residence and attached garage, and possibly the roof of the barn. A [...] shop is located on the same property as your personal residence. You will not be installing solar panels on the roof of the [...] shop.
6. Should you decide to enter into a contract to provide electricity under the [...] Program and purchase a solar panel system, you plan to register for GST/HST purposes as a sole proprietor prior to the installation of the system.
Ruling Requested
You have requested a ruling on the ITC treatment with respect to the GST/HST paid or payable on the acquisition of the solar panel system, assuming you are registered for GST/HST prior to the acquisition of the system.
Ruling Given
Based on the facts set out above, we rule that:
You are eligible to claim full ITCs with respect to the GST/HST paid or payable on the acquisition of the solar panel system if you are registered for GST/HST at the time the tax in respect of the acquisition of the system is paid or becomes payable and you meet the documentary requirements for claiming ITCs.
The documentary requirements for claiming ITCs are set out in the section, "Requirement to support a claim for input tax credits (ITCs)", in guide RC4409, Keeping Records. The rules on the time limit for claiming ITCs are set out in GST/HST Memorandum 8.1, General Eligibility Rules, beginning at paragraph 82. Both of these publications are available on the Canada Revenue Agency's Web site.
This ruling is subject to the qualifications in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service. We are bound by this ruling 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.
ADDITIONAL INFORMATION
If at some point you cease using the solar panel system primarily in your commercial activities (i.e., making taxable sales of electricity) and begin to use it primarily for other purposes, you will be considered to have sold the system and to have collected tax on the sale equal to the basic tax content of the system at the time of sale. The term basic tax content is described in GST/HST Memoranda Series Chapter 19.4.2, Commercial Real Property - Deemed Supplies, beginning at paragraph 20.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-954-4393. If 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,
Melissa Mercer
Real Property Unit
Financial Institutions and Real Property Division
Excise and GST/HST Rulings Directorate
UNCLASSIFIED
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