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.
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Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 15th floor
320 Queen Street
Ottawa ON K1A 0L5
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XXXXX
XXXXX
XXXXX
XXXXX
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Case Number: 47935Code: 11950-1
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XXXXX
XXXXX
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April 14, 2004
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Subject:
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GST RULING
GST treatment of supplies made by Condominium Corporation
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Dear XXXXX:
Thank you for your letter XXXXX and subsequent telephone conversations and e-mails concerning the application of the Goods and Services Tax (GST) to supplies made by your client, a condominium corporation ("CC"), to its residential condominium unit ("RCU") owners.
Statement of Facts & Transactions
Our understanding of the facts, the transactions, and the purpose of the transactions is as follows:
Your client operates a condominium that comprises about XXXXX RCUs in XXXXX-storey buildings. In addition to the RCUs, there are XXXXX units situated in these buildings that operate outside the condominium environment: XXXXX commercial units and XXXXX residential units formerly occupied by superintendents.
Your client makes the following supplies to RCU owners and lessees (#1 through #7) and to the public (#8 and #9):
1. Maintenance of common elements for condominium fees of $XXXXX.
We understand that these fees are for supplies of property and services by your client, a duly registered CC, that relate to the occupancy or use of the RCU.
2. Rental of additional parking spaces XXXXX. The lease is over a month, the lessees are owners or lessees of RCUs and the additional parking spaces are in the same buildings as the RCUs.
3. Rental of party room XXXXX. The party room is on the condominium plan but it is not a separate lot or a separate unit number.
4. Issuance of status certificates to prospective buyers XXXXX.
Your client issues status certificates (formerly estoppel certificates) to prospective buyers upon request, for a charge of $XXXXX per certificate. The certificates are described in section XXXXX of the Condominium Act, XXXXX. They provide the prospective buyer with various information such as common expenses, names and addresses of directors and officers of the corporation, by-laws and rules, status of condominium fees, etc. The certificate is binding against your client.
5. Rental of additional storage lockers XXXXX.
The storage lockers are in the same buildings as the RCUs.
6. Charges for late payment on monthly common element fees XXXXX.
7. Sale of membership cards XXXXX and fees for swimming and aerobic classes XXXXX offered at the condominium recreation centre.
Membership is optional and restricted to unit owners and tenants. The membership card is for administrative and control purposes to restrict the use of the recreation centre to RCU owners and occupants. It does not confer any additional rights that the RCU owners and occupants do not already have from paying condominium fees. The recreation centre is in the basement of one of the XXXXX buildings of the condominium at issue. It is on the condominium plan but it is not a separate lot or a separate unit number.
8. Supply to the public by way of lease of XXXXX commercial units (convenience store for example) that have been part of the CC since the beginning XXXXX.
9. Supply to the public of XXXXX residential units. They have been part of the CC since the beginning and were initially used to house the corporation's superintendents. They are now rented on an arm's length basis XXXXX.
Rulings Requested
What is the application of GST to the above supplies #1 through #7 made by your client to RCU owners and lessees and the above supplies #8 and #9 made by your client to the public?
Rulings Given
Based on the facts set out above, we rule that
1. Condominium fees
Under section 13 of Part I of Schedule V to the Excise Tax Act (ETA), condominium fees are not subject to GST where the fees are consideration for supplies of property or service made by your client to the owner or lessee of an RCU, where the property or service relates to the occupancy or use of the unit. Your client generally cannot claim input tax credits in respect of GST paid on goods and services obtained for use in providing such supplies to the RCU owners and lessees.
2. Rental of additional parking spaces
The supply of additional parking by your client is exempt from GST where it meets the requirements of either paragraph (a) or (b) of section 8.1 of Part I of Schedule V to the ETA. Otherwise, the supply is subject to GST under subsection 165(1) of the ETA.
3. Rental of Party Room
The supply of the party room is subject to GST under subsection 165(1) of the ETA.
4. Issuance of status certificates to prospective buyers
The supply of the status certificate is subject to GST under subsection 165(1) of the ETA.
5. Rental of storage lockers
The supply of storage lockers by your client to RCU owners and lessees is exempt from GST under section 13 of Part I of Schedule V to the ETA.
6. Charges for late payment on monthly common element fees
These late payment charges are not subject to GST.
7. Sale of Membership Cards XXXXX and fees for swimming and aerobic classes offered at the recreation centre
The supply of membership cards is exempt from GST under section 13 of Part I of Schedule V to the ETA. The supply of swimming and aerobics classes is subject to GST under subsection 165(1) of the ETA.
8. Supply to the public by way of lease of XXXXX commercial units
The supply by way of lease of the XXXXX commercial units is subject to GST under section 165 of the ETA.
9. Supply to the public of XXXXX residential units
The supply of these XXXXX residential units XXXXX by way of lease qualifies for exemption from GST under paragraph 6(a) of Part I of Schedule V to the ETA, provided the units are supplied for a period of at least a month for the purpose of their occupancy as a place of residency or lodging by an individual.
Explanations
We provide the following explanations for rulings #2 to #8:
2. Rental of additional parking spaces
Paragraph 8.1(a) of Part I of Schedule V to the ETA exempts the lease of a parking space to an occupant or lessee of a residential unit (e.g., a house or an apartment). If the parking space is situated in the same complex as the residential unit, it does not matter who supplies the parking space, e.g., it could be a tenant subleasing a parking space to another tenant. If the parking space is not situated in the same complex as the residential unit, the lease of the parking space is exempt only if the supplier of the parking space is also supplying the residential unit and the use of the parking space is incidental to the use of the residential unit as a place of residence.
Paragraph 8.1(b) of the same Part and Schedule provides an exemption for the lease of a parking space to an occupant, owner or lessee of a RCU provided the parking space is part of the condominium complex in which the RCU is located. In this case, it does not matter who supplies the parking space.
Where the supply of additional parking by your client meets the requirements of either paragraph (a) or (b) of section 8.1 of Part I of Schedule V to the (ETA), the supply is exempt from GST under that provision. Otherwise, the supply is subject to GST under subsection 165(1) of the ETA.
3. Rental of party room
Please refer to our XXXXX office's interpretation letter to you XXXXX. The party room is considered not to relate to the occupancy or use of the RCUs as it does not relate to residency, which is the purpose of the RCU owners and lessees. Accordingly, the supply of the party room by your client is subject to GST under subsection 165(1) of the ETA.
4. Issuance of status certificates to prospective buyers
It is the CRA's view that the issuance of the status certificate is part of the closing procedure in the sale of a RCU. The supply of the status certificate does not qualify for exemption from GST under section 13 of Part I of Schedule V to the ETA because it is a supply of a service made by your client before possession of the unit. The exemption under the cited provision applies to property and services provided to a RCU owner or lessee after taking possession of the unit. Moreover, the service of issuing the status certificate as described in section XXXXX of the Condominium Act XXXXX relates to the purchase of a RCU and not to its use or occupancy.
5. Rental of storage lockers
The supply of additional storage lockers by the CC to the owner or lessee of a RCU qualifies for exemption from GST under section 13 of Part I of Schedule V to the ETA, as the storage lockers are considered to relate to the occupancy or use of the RCU.
6. Charges for late payment on monthly common element fees
The charges are as a consequence of the breach of an agreement for the making of supplies of property and services that are exempt from GST under section 13 of Part I of Schedule V to the ETA (please see the above Ruling 1 "Condominium fees"). It follows that subsection 182(1) of the ETA will not be applicable, as there is no breach of an agreement to make taxable supplies. As subsection 182(1) of the ETA is not applicable, there would be no GST consequences with respect to the late payment charges on condominium fees.
7. Classes and sale of membership cards XXXXX at the recreation centre
The recreation centre relates to the occupancy or use of the RCUs in the condominium complex. Consequently, the sale of membership cards for the recreation centre is exempt from GST under section 13 of Part I of Schedule V to the ETA.
The swimming and aerobic classes do not relate to the occupancy or use of the RCUs in the condominium complex, as many owners and residents in the condominium complex do not take swimming and aerobic classes at the recreational centre in the complex. The classes are in the nature of personal services to the RCU owners and residents, similar to personal care services (hairstyling, etc.) Consequently the supply of these classes does not qualify for exemption from GST under section 13 of Part I of Schedule V to the ETA, and as there are no other exempting provisions that would apply to the supply, it is subject to GST under subsection 165(1) of the ETA.
8. Supply by way of lease of XXXXX commercial units to the public
The supply of commercial units (a convenience store for example) does not qualify for exemption from GST under any provision of the ETA. Where the commercial units are used in the supply of taxable supplies in the course of commercial activities of your client's tenants, the latter may be eligible for input tax credits if they are registered for GST purposes.
This ruling is subject to the general limitations and qualifications outlined in section 1.4 of Chapter 1 of the GST/HST Memoranda Series. We are bound by this ruling provided that none of the above issues is currently under audit, objection, or appeal; that there are no relevant changes in the future to the Excise Tax Act, or to our interpretative policy; and that you have fully described all necessary facts and transactions for which you requested a ruling.
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 Unit Unit
Financial Institutions and Real Property Division
Excise and GST/HST Rulings Directorate
| Encl.: |
section 1.4 of Chapter 1 of the GST/HST Memoranda SeriesXXXXXXXXXXXXXXX |
| Legislative References: |
ETA Sch V/Part I/s. 6, 8.1, 13; |
| NCS Subject Code(s): |
I 11950-1 |
2004/04/16 — RITS 48059 — [Leasehold Interest in Ground Lease]
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