8 July 2004 GST/HST Interpretation 38618 - Temporary Importation of Amusement Rides

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.

We refer to your E-mail query XXXXX to XXXXX and subsequent telephone conversations concerning the application of GST to transactions related to payments to developers from the XXXXX. Your query has been forwarded to us for direct reply and I apologize for the delay taken to answer you.

Our understanding of the facts is as follows:

•   Under XXXXX By-Law, the owner of any land in the XXXXX ("City") who develops or redevelops the land is required to pay a contribution towards the cost of providing such services either at the time of application for a development permit or at the time of commencing development or redevelopment.

Contributions are calculated in accordance with applicable rates provided in the XXXXX By-Law. The contributions made under this by-law will be deposited into a fund called the XXXXX established by the same by-law.

•   The administration of the XXXXX By-Law is assigned to City officials, namely the Director of Building controls, the City Treasurer and the City Engineer. The administration of the XXXXX is assigned to the City Engineer and the City Treasurer.

•   Where a developer or subdivider constructs works identified in the XXXXX By-Law as qualifying for reimbursement, such a reimbursement shall be made from the XXXXX in accordance with XXXXX By-Law.

•   XXXXX sets out the claims policy in the reimbursement of developers or subdividers and it is effective XXXXX. Different requirements are set out for the four groups of qualifying works: minor road works, sanitary sewer pipe works, storm water sewerage works and storm water management works. For example, in XXXXX of the City, sanitary sewer pipe works that qualify for reimbursement are sewers other than major trunk sewers, and pumping stations other than major pumping stations, if these sewers and stations are identified on the City's Sanitary Servicing Study as updated from time to time. Where the works qualify, the developer is required to bear the full cost of the works for the portion that services less than XXXXX hectares, and may claim the full cost of the portion that services XXXXX hectares or more from the XXXXX (non industrial lands) and/or from the Industrial Oversizing Reserve fund (industrial lands).

•   XXXXX cited above, indicates that claims are paid in whole or in part only when there is sufficient money in the XXXXX to honour claims. In all cases, the developer bears the cost of financing the works.

•   Qualifying works may be built/constructed on either developer land or municipal land. Title to the underlying land is transferred to the City, where applicable, at the time of transfer of the works. In such cases, the land costs incurred are reimbursed to the developer at the rates set by XXXXX cited above ($XXXXX per acre for Floodplain land, $XXXXX for parkland, $XXXXX per acre for Table land). The reimbursement of material and construction costs is in addition to the land costs calculated at the above rates.

•   At the time of your query (December 2001), the developer was charging GST on its billings to the City regarding certain qualifying infrastructure works. The City has been paying the GST charged when the infrastructure works met the requirements for reimbursement of costs under the XXXXX By-Law. The City claimed a rebate of 57.14% of the GST amount paid. The City assumed that the developer was remitting the GST charged. It was also assumed that the developer was claiming full input tax credits ("ITCs") in respect of GST paid to the developer's contractors on the acquisition of supplies for use to supply the qualifying infrastructure to the City.

You are asking the following questions:

1. What is the GST application, if any, both for the developer and the City, on the payments from the XXXXX to the developer?

2. Is the developer eligible for ITCs in respect of GST paid to its contractors on supplies acquired for use in the transfer of infrastructure to the City that gave rise to payments from the XXXXX?

Our position on these questions is as follows:

1. The payments from the XXXXX to developers for the cost of qualifying infrastructure works supplied to the City are considered to be consideration for taxable supplies of services, from the developers to the City. The payments from the XXXXX to the developers for the cost of the underlying land transferred to the City are considered to be consideration for taxable supplies of real property, from the developers to the City.

The GST application for the developers and the City is outlined below.

Developers:

(i) Supply of Services: Where a developer builds construction works for the City and the developer is reimbursed for the cost of construction works from the XXXXX, then the provision of such construction works to the City is considered to be a supply of services from the developer to the City for purposes of the Excise Tax Act ("the Act"). Such supplies are taxable under subsection 165(1) of the Act as no exempting provision under the Act applies. The developer is required to collect and remit GST on such supplies of services.

(ii) Supply of Real Property: Where a developer also transfers ownership of the underlying land to the City and the developer is reimbursed for the cost of the land as described in XXXXX cited above, then the provision of the underlying land to the City is considered to be a supply of real property by way of sale from the developer to the City for purposes of the Act. Such supplies are taxable under subsection 165(1) of the Act as no exempting provision under Schedule V to the Act applies. The developer is not required to collect the GST on such supplies by virtue of subsection 221(2) of the Act as the City is registered for GST purposes.

City:

(i) Supply of Services: Where a developer is considered to have made a taxable supply of services to the City, the latter is required to pay the GST to the developer who has supplied the services. The City may file for a rebate in respect of the tax paid, under section 259 of the Act.

(ii) Supply of Real Property: Where a developer is considered to have made a taxable sale of real property to the City, the latter is required to self-assess the GST payable on the sale of real property by the developer under subsection 228(4) of the Act and it may file for a GST rebate in respect of the tax, under section 259 of the Act. The City may offset the amount of such a GST rebate claim against its GST liability on its GST return, under subsection 228(6) of the Act.

2. The developer who acquires goods and services for use in the supply of qualifying infrastructure works to the City may claim ITCs in respect of GST paid upon acquisition of such goods and services, under subsection 169(1) of the Act, irrespective of whether the developer made a supply of services or a supply of real property to the City.

If you have further questions on the above, please contact me at (613) 954-1433 or by E-mail.

XXXXX

2004/06/30 — RITS 44420 — Vacation Points