7 October 2005 GST/HST Ruling 63065 - Application of GST/HST to 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.

We acknowledge receipt of your XXXXX and the draft letter attached thereto. As you have requested we have reviewed the draft letter to XXXXX. We wish to provide the following comments.

The application of section 211 and subsection 136(2) of the ETA

On page 1 of your draft letter you state:

At this time, we are all in agreement with the follow[ing] application of the Excise Tax Act (the ETA):

For the purposes of section 211, "real property" means the entire estate or interest in real property held by a person. It is an area of land included in a single legal description, an entire leasehold interest of a person or the smallest legal parcel of land that includes the property in respect of which a person intends the election to cover.

"When a section 211 election is filed, the person making the election is deemed to have made a taxable supply of the real property under paragraph 211(2)(a) and to have received a taxable supply of the same property under paragraph 211(2)(b). Where the real property that is the subject of the section 211 election includes both a residential complex and other property that is not part of the residential complex, the deemed supply that is made under subsection 211(2) triggers the application of subsection 136(2) of the ETA ..., where real property is acquired in circumstances where subsection 136(2) applies, the residential complex and other real property continues to be recognized for GST/HST purpose as separate properties subsequent to the supply."

We concur with this statement, as it is in accord with our view of the application of section 211 and subsection 136(2).

In circumstances where subsection 211(2) applies to a real property of a public service body (PSB) and the real property is as described in paragraphs 136(2)(a) and (b) at the times referred to in subsection 211(2), the PSB will be deemed to have made and received a supply of two separate supplies of two separate real properties as set out in subsection 136(2).

The application of subsection 136(2) to a parcel of land with multiple residential complexes

On page 2 of your draft letter you quote from XXXXX, as follows:

XXXXX

We do not concur with this statement, as it is not in accord with our interpretation of subsection 136(2) in circumstances where there is more than one residential complex on a parcel of real property having a single legal description. We therefore concur with your proposed reply to XXXXX on this matter.

Subsection 136(2), on its own or combined with the definition of residential complex (or any other provision in the ETA), does not deem two or more residential complexes to be separate real properties where such complexes are situated on a parcel of real property having a single legal description. Where a single parcel of real property is acquired in circumstances where subsection 136(2) applies, the real property included in all of the residential complexes on the same parcel will be deemed to be a particular real property and the real property not included in any of the residential complexes will be deemed to be a real property separate from the particular real property. In this way subsection 136(2) effectively carves such a parcel of real property into not more than two parts, each of which is deemed to be a separate real property for purposes of Part IX of the ETA.

For claiming input tax credits in respect of residential complexes where subsection 136(2) applies, the capital property described in paragraph 169(1)(b) cannot be less than all of the residential complexes included on a parcel with a single legal description.

While discussions may have taken place with XXXXX on this matter, we confirm to the best of our knowledge that no contrary position on this matter was communicated to XXXXX.

We trust this information will be of assistance to you. Should you require further assistance please contact me at (613) 954-8852.

2005/10/18 — RITS 63115 — Eligibility of Two Corporations to Elect Under Section 156 of the Excise Tax Act