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.
Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 11th floor
320 Queen Street
Ottawa ON K1A 0L5
[Addressee]
Case Number: 222713
Business Number: […]
Dear [Client]:
Subject: GST/HST RULING
Sale of […][real property by a charity]
Thank you for your letter of [mm/dd/yyyy], concerning the application of the goods and services tax/harmonized sales tax (GST/HST) to the proposed transfer of real property.
The HST applies in the participating provinces at the following rates: 13% in Ontario; and 15% in New Brunswick, Newfoundland and Labrador, Nova Scotia and Prince Edward Island. The GST applies in the rest of Canada at the rate of 5%.
All legislative references are to the Excise Tax Act (ETA) unless otherwise specified.
STATEMENT OF FACTS
Based on the information you provided, we understand the following:
1. […][X] is a registered charity pursuant to subsection 248(1) of the Income Tax Act.
2. [X] has a business number but is not registered for GST/HST purposes. It claims the public service bodies’ rebate as a registered charity.
3. [X] acquired […] vacant land […] for $[…] on [mm/dd/yyyy] in an arm’s length transaction. The acquisition was funded by donated funds. There has not been any title transfer subsequent to this acquisition.
4. [X] hired a construction manager to manage the construction of the Facility. The construction of the Facility was completed in [mm/yyyy] and the first client […][arrived at the Facility] on [mm/dd/yyyy].
5. [X] did not claim any input tax credits (ITCs) in relation to the construction costs. Furthermore, [X] did not self-assess GST/HST under subsection 191(3) when the construction of the Facility was substantially completed and the first client […][arrived at the Facility] based on its understanding that the Facility is not a multiple unit residential complex.
6. […][X offers various programs] .
7. […][Information about programs offered by X].
8. […].
9. [X] receives funding mainly from the […][government] indirectly through the […][Organization], as well as other government funding, charitable donations and fund raising activities to support the operation of […] programs.
10. [Information about] Registration of clients […][in Program B]. [#] documents are developed upon [Program B] registration […][including]: […][Agreement B], and […][Document B].
11. […][Terms of Agreement B]: […]
.
12. […][Key points in Document B]: […]
13. There is no lease agreement developed or entered into between [X] and the client with respect to […][Program B]. […].
14. […].
15. […][Elements of Program B].
16. […].
17. […][Information about operations at the Facility]
18. .[…][More information about operations].
19. […][Information about client services at the Facility]
.
20. A client’s average stay at [the Facility] is [...][less than 30] days in duration.
21. Based on review of the Facility’s floor plan and our phone conversation of [dd/mm/yyyy], we understand the following:
* [Program B] is mainly operated […][at] the Facility, which […][accommodates] […][# clients]. […][Information about accommodations at the Facility]
* The following rooms [in the Facility] are also used by the [Program B]: […]
* […][More information about administration of the Facility]
22. […]
23. […][A supplemental agreement] between the [Organization] and [X] dated [dd/mm/yyyy] [includes specific terms and] governs the funding and obligations between the two parties. […]
24. The proposed reorganization involves transferring the whole legal description of the Facility from [X] to […][Y]. After the reorganization and the title transfer, [Y] will let [X] continue to use the Facility free of charge.
25. In our phone conversation of [dd/mm/yyyy], you confirmed that [X] and [Y] do not deal with each other at arm’s length.
RULING REQUESTED
You would like confirmation that the Facility is not a residential complex for GST/HST purposes. Therefore, the supply of the Facility by way of sale to [Y] would be an exempt supply pursuant to section 1 of Part V.1 of Schedule V.
RULING GIVEN
Based on the facts set out above, we rule that the Facility is not a residential complex for GST/HST purposes. Therefore, the supply of the Facility by way of sale by [X] to [Y] is an exempt supply pursuant to section 1 of Part V.1 of Schedule V.
EXPLANATION
Section 1 of Part V.1 of Schedule V exempts supplies of property or a service made by a charity unless specifically excluded under paragraphs (a) to (p) of that section. Paragraph (j) excludes the supply of a residential complex, or an interest therein, by way of sale.
“Residential complex” is defined in subsection 123(1). Paragraph (a) of the definition, the only relevant paragraph to the case at hand, provides that a residential complex is that part of a building in which one or more residential units are located, together with certain common areas of, appurtenances to, and land subjacent and immediately contiguous to the building.
“Residential unit” is defined in subsection 123(1) as follows:
(a) a detached house, semi-detached house, rowhouse unit, condominium unit, mobile home, floating home or apartment,
(b) a suite or room in a hotel, a motel, an inn, a boarding house or a lodging house or in a residence for students, seniors, individuals with a disability or other individuals, or
(c) any other similar premises,
or that part thereof that
(d) is occupied by an individual as a place of residence or lodging,
(e) is supplied by way of lease, licence or similar arrangement for the occupancy thereof as a place of residence or lodging for individuals,
(f) is vacant, but was last occupied or supplied as a place of residence or lodging for individuals, or
(g) has never been used or occupied for any purpose, but is intended to be used as a place of residence or lodging for individuals.
Based on our review of the documentation and facts as set out above, it is our position that the Facility was not primarily established and operated to provide a place of residence or lodging for individuals. […]. […], […][the accommodations] in the Facility […][where the Program B] clients stay are not residential units as defined in subsection 123(1). Therefore, the Facility is not a residential complex for GST/HST purposes.
In accordance with the qualifications and guidelines set out in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service, the Canada Revenue Agency (CRA) is bound by the ruling(s) given in this letter provided that: none of the issues discussed in the ruling(s) are currently under audit, objection, or appeal; no future changes to the ETA, regulations or the CRA’s interpretative policy affect its validity; and all relevant facts and transactions have been fully and accurately disclosed.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 437-996-1944. 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,
Annie Tao
Real Property Unit
Financial Institutions and Real Property Division
Excise and GST/HST Rulings Directorate
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