30 June 2004 GST/HST Interpretation 44420 - XXXXX

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.

Dear XXXXX:

Thank you for your letter XXXXX concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the sale of vacation points.

All references are to the Excise Tax Act.

Facts

A XXXXX non-profit organization (the Club) is the legal and beneficial owner of XXXXX resort properties situated in XXXXX and XXXXX. The Club does not own any resort properties outside Canada.

The Club sells timeshare points (Club Points) to the public. By buying the Club Points, a person becomes a member of the Club. The cost of XXXXX Club Points and membership in the Club is $XXXXX.

Owners of the Club Points do not have any direct legal interest in the resort properties. They use their Club Points to reserve accommodation in any of the XXXXX XXXXX resorts owned by the Club.

In addition to the up-front purchase of the Club Points, members must pay annual maintenance fees and reservation fees when accommodation is booked. The maintenance fee XXXXX may vary based upon the operating costs and maintenance of the XXXXX XXXXX resort units owned by the Club.

The Club Points may be used to acquire accommodation in over XXXXX participating resorts of XXXXX located throughout the world of which around XXXXX are situated in Canada. Based on information taken from XXXXX web site, it is our understanding that a member of the Club must acquire a membership in XXXXX in order to be able to participate in the XXXXX. It is our understanding that the agreement between a member of the Club and XXXXX is a separate agreement from the agreement that the member has with the Club.

Members must pay an annual fee of $XXXXX for the XXXXX.

A reservation fee of $XXXXX is payable to XXXXX with each timeshare booking.

It is our understanding that the Club is registered for GST/HST purposes.

Interpretation Requested

You have requested an interpretation with respect to the GST/HST status of the following:

1. The supply of the Club Points

2. The annual maintenance fee

3. The annual fee for the XXXXX

4. The reservation fee payable to XXXXX

Interpretation Given

We have not been able to determine all of the facts of the case due to the limited information available with respect to the transactions. Therefore, the following information is based on the limited information you have provided. Further, we cannot comment on the GST/HST status of supplies made by XXXXX to the Club's members without a third party authorization.

The supply of the Club Points

It is our view that the supply of the Club Points by the Club to its members is a supply of intangible personal property (IPP) in respect of real property. Since the resort properties owned by the Club are all situated in Canada, the supply made by the Club is deemed to be made in Canada pursuant to subparagraph 142(1)(c)(ii) and is subject to GST/HST. Since all the resort properties are situated in a non-participating province, the supply is deemed to be made in a non-participating and is subject to GST at the rate of 7%.

The annual maintenance fee

It is our view that the maintenance fee charged by the Club is in respect of a supply made in Canada by the Club and is subject to GST at the rate of 7%.

The annual fee for the XXXXX

As mentioned above, we are not in a position to conclusively characterize these supplies due to the limited information available. It is not clear from the facts provided whether XXXXX is supplied to the Club's members by the Club or by XXXXX. We provide the following general comments for your reference.

•   The provision of a XXXXX may be a separate supply of tangible personal property (TPP) or may be part of another supply made by the Club or by XXXXX depending on which of the two is providing it to the Club's members.

•   If it is a supply of TPP, the relevant place of supply provisions are paragraphs 142(1)(a) and 142(2)(a). Where the TPP is delivered or made available in Canada to the recipient of the supply, the supply is deemed to be made in Canada pursuant to paragraph 142(1)(a). However, subsection 143(1) overrides this rule and deems the supply to be made outside Canada if the supply is made by an unregistered non-resident person who does not carry on business in Canada. Where the TPP is delivered or made available outside Canada to the recipient of the supply, the supply is deemed to be made outside Canada pursuant to paragraph 142(2)(a). However, section 143.1 overrides this rule and deems the supply to be made in Canada if the supplier is registered for GST/HST purposes and the TPP is prescribed tangible personal property (i.e., book, newspaper, periodical, magazine and similar printed publications) that is sent by mail or courier to the recipient of the supply in Canada.

•   If the provision of a XXXXX is part of another supply, the XXXXX fee will have the same tax status as that other supply.

The reservation fee payable to XXXXX

It is our understanding that this fee is consideration for a supply made by XXXXX to the Club's members. As mentioned above, we cannot comment on the GST/HST status of supplies made by XXXXX to the Club's members without a third party authorization. However, we provide the following general comments for your reference.

A reservation fee may be consideration for a supply of a service. The relevant place of supply provisions are paragraphs 142(1)(d), 142(1)(g), 142(2)(d) and 142(2)(g). A supply of a service is deemed to be made in Canada if the service is, or is to be performed in whole or in part in Canada or, in case of a service in relation to real property, if the real property is situated in Canada. Again, subsection 143(1) may override this rule and deem the supply to be made outside Canada if the supplier is an unregistered non-resident person who does not carry on business in Canada. A supply of a service is deemed to be made outside Canada if the service is, or is to be performed wholly outside Canada or, in the case of a service in relation to real property, if the real property is situated outside Canada.

If a supply of a service is deemed to be made in Canada pursuant to section 142 and the recipient is a non-resident person (i.e. a non-resident member), the supply may be zero-rated pursuant to section 7 of Part V of Schedule VI unless it is specifically excluded by paragraphs 7(a) through 7(h) of that section. For example, a service in respect of real property situated in Canada is excluded form zero-rating by paragraph 7(d).

The foregoing comments represent our general views with respect to the subject matter of your letter. Proposed amendments to the Excise Tax Act, if enacted, could have an effect on the interpretation provided herein. These comments are not rulings and, in accordance with the guidelines set out in section 1.4 of Chapter 1 of the GST/HST Memoranda Series, do not bind the Canada Customs and Revenue Agency with respect to a particular situation.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 952-9587.

Yours truly,

B. Mulinda
Real Property Unit
Financial Institutions and Real Property Division
Excise and GST/HST Rulings Directorate

2004/07/13 — RITS 47616 — Articles Specially Designed for the Use of Blind Individuals