3 May 2004 GST/HST Interpretation 46265 - Visitor Rebate Discounters

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 (with attachments) and subsequent telephone conversations concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the transactions described below.

Statement of Facts

•   XXXXX you purchased a new residential condominium unit XXXXX ("the unit") for $XXXXX plus GST.

•   XXXXX you entered into a contract with XXXXX to receive property management services in respect of the unit. The monthly management fee is XXXXX% plus GST of the rental charged, with a minimum fee of $XXXXX plus GST.

•   The unit has XXXXX bedrooms, an underground parking stall and a storage space. The rent was set at $XXXXX per month.

•   XXXXX could not find a tenant for the unit and the contract was terminated XXXXX and the unit was put up for sale XXXXX.

•   After you received XXXXX from our XXXXX office, to the effect that you are eligible for the New Residential Rental Rebate (subject to recapture if the property was sold under certain circumstances), you have filed an application for the rebate and you have received payment of the rebate. A copy of the XXXXX was sent to us for direct reply to you concerning the issue of recapture.

•   You did not succeed in selling the unit XXXXX and you have leased it for use as a place of residence XXXXX. After the initial XXXXX-month period, the lease has now become a monthly lease. The unit may become vacant again at any time.

Interpretation Requested

Would a possible sale of the unit in the future cause a requirement for you to repay the subject rebate under subsection 256.2(10) of the Excise Tax Act (ETA)?

Interpretation Given

Based on the information provided, our interpretation is as follows:

Subsection 256.2(10) of the ETA provides that, where a person was entitled to claim a New Residential Rental Property Rebate under subsection 256.2(3) of the ETA in respect of a residential condominium unit, the amount of the rebate plus interest is subject to recapture if the unit is sold, within one year after the time it is first occupied, to a purchaser who is not acquiring it for use as the primary place of residence of the purchaser or a relation of the purchaser. Accordingly, the GST consequence of a sale of the unit would be as follows:

(i) If you sell the unit to a purchaser who is acquiring it as the primary place of residence of the purchaser or a relation of the purchaser, subsection 256.2(10) of the ETA would not apply, and you would not be required to repay the subject New Residential Rental Property Rebate.

(ii) If you sell the unit to a purchaser who is not acquiring it for use as the primary place of residence of the purchaser or a relation of the purchaser, and the date of transfer of ownership or transfer of possession under an agreement to transfer ownership is prior to XXXXX, subsection 256.2(10) of the ETA would apply. You would be required to repay the subject rebate plus interest.

(iii) If you sell the unit and the date of transfer of ownership or transfer of possession under an agreement to transfer ownership is after XXXXX, subsection 256.2(10) of the ETA would not apply, regardless whether or not the unit is used by the purchaser as the primary place of residence of the purchaser or a relation of the purchaser. Repayment of the subject rebate would not be required.

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 Revenue Agency with respect to a particular situation.

For your convenience, find enclosed a copy of section 1.4 of Chapter 1 of the GST/HST Memoranda Series.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 954-1433.

Yours truly,

Bao Tran
Specialty Tax Unit
Financial Institutions and Real Property Division
Excise and GST/HST Rulings Directorate

XXXXX

2004/04/29 — RITS 46776 — [Application of the GST/HST to Payments Made by Members to a Club]