10 March 2005 GST/HST Interpretation 59013 - FMV XXXXX Meeting

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.

In order to recap our meeting XXXXX and to provide clarification on certain interpretative issues as agreed to, we provide the following.

1. Given the comments provided and the legislative concerns raised XXXXX, XXXXX will not be issued.

2. The Excise Tax Act (ETA) explicitly permits discounting to remove the GST or HST only in accordance with definition of fair market value (FMV) in subsection 123(1) and section 154 of the ETA.

For taxable supplies of residential complexes the definition of FMV in subsection 123(1) and section 154 provide that the GST or HST imposed under Part IX on that taxable supply can be excluded from:

•   the consideration of an actual supply (e.g. a taxable sale of real property between separate persons);

•   the FMV used to calculate the GST or HST of a deemed supply (e.g. a taxable sale triggered under a self-supply rule).

For an exempt or non-taxable supply of a residential complex, section 154 of the ETA does not provide for the consideration for such a supply or the FMV of such property at the time of its supply to be discounted to remove an imbedded or implicit amount of GST or HST.

3. Also, we wish to provide clarification of the following statement in GST/HST Policy Statement P-165R - Fair Market Value for Purposes of Part IX of the Excise Tax Act.

The FMV referred to in the ETA is the FMV before adding any GST and HST, therefore in order to avoid any confusion, the appraisal should state whether or not the GST and HST is included in the appraised value.

The GST or HST referred to in this statement is the same GST or HST referred to in section 154. In other words where the FMV of a residential complex is to be determined, the GST or HST imposed on the recipient of a taxable supply of that residential complex is to be excluded. In addition, where the consideration for a particular supply of another residential complex is used for purposes of a valuation methodology, any GST or HST that was imposed on that supply of the other residential complex can be excluded from the consideration. For example, where a comparable sale of real property is used in the direct comparison method and that comparable is a taxable sale of a residential complex, in estimating the FMV for GST/HST purposes the consideration of that comparable should exclude the GST or HST. However, if a comparable used in the direct comparison method is an exempt sale of a residential complex, section 154 of the ETA does not provide for the consideration of that exempt sale to be discounted to remove an imbedded or implicit amount of GST or HST.

We hope this information assists in the understanding of this matter from a legislative perspective. Should you have any concerns or wish to discuss this further, please contact me.

Daryl Hooley
Senior Rulings Officer
Real Property Unit
Financial Institutions and Real Property Division
Excise and GST/HST Rulings Directorate
(613) 954-8852 (office phone)
(613) 990-3602 (fax)
daryl.hooley@ccra-adrc.gc.ca

2005/03/31 — RITS 59531 — Temporary Importation of Amusement Rides