29 May 2006 GST/HST Interpretation 44287 - Value of temporary importation of leased aircraft

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.

TO:	XXXXX XXXXX XXXXX XXXXX XXXXX
FROM:	Hugh Dorward Rulings Officer Real Property Unit Financial Institutions and Real Property Division
CASE NUMBER:	44287
DATE:	May 29, 2006

Subject:

New Residential Rental Property Rebate for XXXXX

We refer to your memorandum XXXXX to XXXXX the XXXXX GST/HST Rulings Centre, concerning the eligibility of XXXXX (hereafter "Holdco") to the new residential rental property rebate (hereafter "the NRRP rebate") for a certain facility it is constructing. That office has forwarded your memorandum to us for our response. We apologize for the delay in our response.

All legislative references are to the Excise Tax Act (hereafter "the ETA") unless otherwise noted.

Our understanding of the situation is as follows:

1. Holdco began construction in XXXXX of a certain facility (hereafter "the Facility") located at XXXXX. To the extent that the Facility is, or contains, a residential complex, Holdco is a builder of the Facility.

2. The Facility is a XXXXX:

•   XXXXX.

XXXXX

XXXXX

•   XXXXX:

•   XXXXX;

•   XXXXX;

•   XXXXX;

•   XXXXX;

•   XXXXX;

•   XXXXX.

3. XXXXX:

(a) XXXXX.

(b) XXXXX.

(c) XXXXX.

4. XXXXX:

(a) XXXXX:

(i) XXXXX,

(ii) XXXXX, and

(iii) XXXXX.

(b) XXXXX.

(c) XXXXX.

(d) XXXXX.

(e) XXXXX.

(f) XXXXX:

(i) XXXXX, and

(ii) XXXXX.

(g) XXXXX.

5. XXXXX.

6. The Ministry provides that the term XXXXX recognizes an individual's need for care planning and supervision under the direction of a heath care professional on a daily basis. Individuals at the XXXXX levels are mobile with or without mechanical aids. The characteristics of the different levels of XXXXX are as follows:

•   Level I - The individual requires moderate assistance with activities of daily living and minimal professional care/supervision.

•   Level II - The individual has more complex care needs and requires additional professional care/supervision.

•   Level III - The individual exhibits severe behavioural disturbances on a continuing basis and presents significant management problems. The individual has very heavy care requirements, requiring significant staff time.

7. The Facility is promoted as providing individuals with personalized care and services that allow the individual to age-in-place by addressing their physical, safety and social needs. As an individual grows older and in need of greater care, the Facility can accommodate them, at least up to care Level III, as set out above. In combination with any services required to be provided under the Act and the regulations thereto, services offered at the facility include:

(a) nursing services provided by a registered nurse on a 24-hour per day basis, including the administration of medication and attending to physician prescribed treatments and the individuals' health concerns,

(b) personal care services of bathing, dressing and grooming, available 24 hours per day by care aides,

(c) support services including three meals and two snacks per day,

(d) weekly housekeeping including vacuuming, bathroom cleaning and garbage removal,

(e) laundering of personal clothing, linens and towels,

(f) regularly scheduled social and recreational activities,

(g) security monitoring and an emergency call system, and

(h) transportation to and from medical and dental appointments.

8. Prior to an individual moving into the Facility, the individual's physician completes a medical information form, a sample of which was included with your submissions. The report is used by the operator of the Facility to determine the level of care the individual will require upon moving into the Facility. The report provides an assessment of the individual's abilities in terms of hearing, vision, communication, behaviour, mobility, daily living activities, continence and sleeping habits, as well as their health history and medications currently prescribed. An individual is also to have a dental examination prior to admittance to the Facility, and is expected to have regular dental, optometry, and podiatry examinations while living at the Facility.

9. There are XXXXX units in the Facility, one of which is used as a place of residence by a shareholder (hereafter "the Shareholder") of Holdco and XXXXX family. The Shareholder is a registered nurse who manages the Facility and was the first individual who was given possession of a unit to occupy as a place of residence after substantial completion of construction of the Facility. The remaining XXXXX units in the Facility are used to house individuals (hereafter "the Residents") who stay at the Facility and receive the various care services offered. One Resident occupies each of the XXXXX units. There are no kitchens or cooking facilities in any of the XXXXX units occupied by the Residents. Each Resident's unit includes a sleeping area and contains a toilet and sink; there is a common area that contains a bathing room and a shower room. All Residents have a right to their privacy in that all XXXXX units have locks for which a Resident may request a key. As such, Residents can exclude others from their assigned unit, however, staff of the Facility have a key to each unit in order to clean it and to attend to a Resident's needs.

10. Only adults who are vulnerable, as described XXXXX and require the services described therein, are admitted to the Facility. Given the different levels of care provided and the nature of the services, some of the Residents may be individuals with a disability, while others may not. Residents receiving care at Level II or III have, at least to some extent, a disability.

11. Residents of the Facility pay a fee based on the level of care they receive at the Facility. The current fees for the various care levels are $XXXXX per month for Level I, $XXXXX for Level II and $XXXXX for Level III. This all-inclusive fee provides Residents with accommodations at the Facility and the services set out above according to the level of XXXXX the Resident receives. A Resident who moves into the Facility will generally require care at a higher level as their age increases. A Resident whose needs are beyond those set out in Level III would be moved to an extended care facility as space in such a facility becomes available.

12. Holdco has not claimed input tax credits in respect of the construction of the Facility and has not accounted for tax in respect of a self-supply of the Facility under the provisions of section 191. Further, Holdco is not a public service body or other person that is entitled to rebates under section 259.

Issue

You are enquiring as to whether Holdco is eligible for the NRRP rebate in respect of the Facility.

Response

Before addressing the eligibility of Holdco for the NRRP rebate, it will be necessary to consider whether the Facility is a residential complex and to determine the nature of the supply made by Holdco to the Shareholder and to the Residents.

Whether the Facility is a residential complex

With respect to the units in the Facility, we must determine whether the units are, or form part of, a residential complex.

The phrase "residential complex" is defined, in part, in subsection 123(1) to include:

"(a) that part of a building in which one or more residential units are located, together with

(i) that part of any common areas and other appurtenances to the building and the land immediately contiguous to the building that is reasonably necessary for the use and enjoyment of the building as a place of residence for individuals, and

(ii) that proportion of the land subjacent to the building that that part of the building is of the whole building".

A "residential unit" is defined in the same subsection to mean:

"(a) a detached house, semi-detached house, rowhouse unit, condominium unit, mobile home, floating home or apartment,

(b) a suite or room in a hotel, a motel, an inn, a boarding house or a lodging house or in a residence for students, seniors, individuals with a disability or other individuals, or

(c) any other similar premises,

or that part thereof that

(d) is occupied by an individual as a place of residence or lodging,

(e) is supplied by way of lease, licence or similar arrangement for the occupancy thereof as a place of residence or lodging for individuals,

(f) is vacant, but was last occupied or supplied as a place of residence or lodging for individuals, or

(g) has never been used or occupied for any purpose, but is intended to be used as a place of residence or lodging for individuals".

Accordingly, as the Facility contains suites or rooms in a residence for seniors or other individuals and the units are occupied by individuals as a place of residence or lodging, the Facility, or at least a part thereof, ^[xvii]footnote 3 is a residential complex. For ease of reference, we will assume that the entire Facility is a residential complex.

Supply to the Shareholder

Section 6 of Part I of Schedule V to the ETA exempts a supply:

"(a) of a residential complex or a residential unit in a residential complex by way of lease, licence or similar arrangement for the purpose of its occupancy as a place of residence or lodging by an individual, where the period throughout which continuous occupancy of the complex or unit is given to the same individual under the arrangement is at least one month; or

(b) of a residential unit by way of lease, licence or similar arrangement for the purpose of its occupancy as a place of residence or lodging by an individual, where the consideration for the supply does not exceed $20 for each day of occupancy".

With respect to the supply of the unit made by Holdco to the Shareholder, it is likely that this supply is by way of lease, licence or similar arrangement of a unit in the Facility for the purpose of occupying the unit as a place of residence, where continuous occupancy of the unit is made for a period of at least one month. As such, the supply would be exempt under section 6 of Part I of Schedule V to the ETA.

Supplies to Residents

In determining the nature of the supply made by Holdco to the Residents, it is necessary to consider whether Holdco is making a single supply or multiple supplies. In that regard, policy statement P-077R2, Single and Multiple Supplies, provides assistance.

In this case, in addition to the accommodations, Holdco provides, to the level required by a Resident, the support services, personal care services and nursing services described above. These care services are legislated under the Act and the regulations thereto. All of the property and services, including the accommodation, are elements that are interdependent and each element is an integral part of the whole supply made by Holdco. Once a Resident is admitted to the Facility, that individual receives the services set out above according to the care Level they require. As such, based on the terms of the documents submitted, the Act and regulations thereto, the facts surrounding this case and the factors listed in policy P-077R2, we consider Holdco to be making a single supply to a Resident.

In determining the nature of the supply made to a Resident, or the predominant element of such a supply, one must consider a number of factors including the following:

1. The purpose for the Resident acquiring the supply.

2. Holdco's purpose in making the supply and the business in which Holdco is engaged.

3. The consideration charged for the supply and Holdco's cost of providing the property and services.

4. The Act and regulations that govern the supply.

5. The marketing undertaken by Holdco.

The supplies made to the Residents of the Facility would not necessarily be characterized in the same manner. That is, an analysis of the above factors may lead to the conclusion that the supply to an able-bodied Resident receiving Level I care, for example, cannot be characterized in the same manner as the supply to, for example, a Resident with a disability receiving care at Level II or Level III. The purpose of a Resident acquiring the supply in the former situation is not necessarily the same as the purpose of a Resident acquiring the supply in the latter situation. Holdco is in the business of making supplies both to individuals who are largely able to live independently and to individuals who, either when they move into the Facility or over the course of their stay at the Facility, will require additional and more intensive care services. Certainly that is how Holdco markets the Facility, i.e., as one that can cater to all Residents, gearing the supply to the specific needs of each Resident. While the Facility and all Residents thereof are governed by the Act, there is a range as to the level of care the Residents receive.

Accordingly, depending on the facts of a supply to a particular Resident, it is possible to characterize the supply made by Holdco as predominantly that of a residential unit or a supply that is predominantly a service. For example, the predominant element of the supply to an able-bodied Resident receiving Level I care is a residential unit, whereas the predominant element of the supply to a Resident with a disability receiving care at Level II or III may be that of supervision, nursing and personal care services.

Where the predominant element of the supply is that of a residential unit, provided the supply is made for a period of at least one month, the supply is exempt under section 6 of Part I of Schedule V to the ETA. Where the predominant element of the supply is supervision, nursing and personal care services, the supply will not be exempt under that provision. However, such a supply may be exempt under Part II or Part IV of Schedule V to the ETA. For example, further to discussions with the Charities, Non-profit Organizations and Educational Services Unit, a supply to a Resident requiring Level II or III XXXXX may be exempt under section 2 or 3 of Part IV of Schedule V to the ETA, depending on the facts relating to a particular individual. Should you require assistance in determining whether the provisions of Part IV of Schedule V apply, please contact the Charities, Non-Profit Organizations and Educational Services Unit (Donna Harding, Manager, 613-954-7936) or, for assistance in determining whether the provisions of Part II of Schedule V apply, please contact the Municipalities and Health Care Services Unit (Tim Krawchuk, Manager, 613-941-3268).

Conditions for eligibility to an NRRP rebate

In order for Holdco to qualify for the NRRP rebate, the following conditions must be met: ^[xviii]footnote 4:

1. Holdco must be a builder of a residential complex and make an exempt supply of a residential unit in the complex by way of lease, licence or similar arrangement where the supply is included in section 6 of Part I of Schedule V ^[xix]footnote 5 to the ETA and which results in Holdco being deemed to have made and received a taxable supply by way of sale of the complex under section 191.

2. At the time that tax is deemed to be paid in respect of the deemed supply made under section 191, the residential complex includes one or more qualifying residential units.

3. Holdco must not be entitled to include the tax payable on the deemed supply under section 191 in determining an input tax credit.

4. In respect of the tax included in determining the NRRP rebate, Holdco must not otherwise be entitled to include the tax in determining a rebate under section 254, 256, 256.1 or 259.

5. Holdco must file an application for a rebate within two years of the end of the month in which the tax is deemed to have been paid under section 191 in respect of the complex. If the end of that month is before the day on which the legislation received Royal Assent, Holdco will have two years from the date of Royal Assent to claim the rebate.

6. Holdco must have reported the deemed tax in respect of the deemed supply under section 191 in the return for the reporting period during which the tax was deemed to be collected and must have remitted any net tax remittable for that reporting period.

With respect to condition 1, the supply of the unit to the Shareholder comes within the exemption in section 6 of Part I of Schedule V to the ETA. As indicated above, certain units supplied to Residents may also be supplied under section 6 of Part I of Schedule V to the ETA[.] As Holdco is a builder of the Facility, which is a residential complex, and the remaining conditions of subsection 191(3) are met, the first NRRP rebate condition is satisfied.

With respect to condition 2, tax was payable by Holdco on the later of the day possession of a unit in the Facility was given to the Shareholder and the day construction of the Facility was substantially complete. At that time, the unit supplied to the Shareholder meets the conditions in subparagraphs (i) and (ii) of the definition of "qualifying residential unit" (as found in subsection 256.2(1) and reproduced in the appendix to this letter). In addition, those units supplied to Residents that are exempt under section 6 of Part I of Schedule V to the ETA will also meet the conditions in subparagraphs (i) and (ii) of the definition. However, where a supply to a Resident is characterized as the supply of a service and is not exempt under section 6, even if the residential unit is an element of the supply of that service, the unit will not be a qualifying residential unit and there will be no NRRP rebate eligibility in respect of that unit.

With respect to condition 3, if the Facility is used exclusively in the course of making exempt supplies, there will be no input tax credit eligibility for Holdco with respect to the tax payable under subsection 191(3). If there is an input tax credit eligibility for any part of the tax payable under subsection 191(3) (i.e., if the Facility is not used exclusively in the making of exempt supplies), this condition will not be met and there will be no NRRP rebate eligibility with respect to the unit supplied to the Shareholder.

Condition 4 is met, as Holdco is not entitled to a rebate under any of the sections listed therein.

With respect to condition 5, we can advise that Royal Assent was given on June 14, 2001, with respect to the legislation that enacted the NRRP rebate. If Holdco is deemed to have paid tax in respect of the deemed supply prior to June 14, 2001, Holdco would be required to file the rebate application before June 15, 2003.

With respect to condition 6, the information provided is that Holdco has not reported the deemed tax in its return for the reporting period in which the tax was deemed to be collected, nor has Holdco remitted such tax. As such, this condition is not met and Holdco is not entitled to claim the NRRP rebate.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 954-4393.

APPENDIX

"qualifying residential unit" of a person, at a particular time, means

(a) a residential unit of which, at or immediately before the particular time, the person is the owner, a co-owner, a lessee or a sub-lessee or has possession as purchaser under an agreement of purchase and sale, or a residential unit that is situated in a residential complex of which the person is, at or immediately before the particular time, a lessee or a sub-lessee, where

(i) at the particular time, the unit is a self-contained residence,

(ii) the person holds the unit

(A) for the purpose of making exempt supplies of the unit that are included in section 5.1, 6, 6.1 or 7 of Part I of Schedule V, or

(B) if the complex in which the unit is situated includes one or more other residential units that would be qualifying residential units of the person without regard to this clause, for use as the primary place of residence of the person,

(iii) it is the case, or can reasonably be expected by the person at the particular time to be the case, that the first use of the unit is or will be

(A) as the primary place of residence of the person or a relation of the person, or of a lessor of the complex or a relation of that lessor, for a period of at least one year or for a shorter period where the next use of the unit after that shorter period is as described in clause (B), or

(B) as a place of residence of individuals, each of whom is given continuous occupancy of the unit, under one or more leases, for a period, throughout which the unit is used as the primary place of residence of that individual, of at least one year or for a shorter period ending when

(I) the unit is sold to a recipient who acquires the unit for use as the primary place of residence of the recipient or of a relation of the recipient, or

(II) the unit is taken for use as the primary place of residence of the person or a relation of the person or of a lessor of the complex or a relation of that lessor, and

(iv) except where subclause (iii)(B)(II) applies, if, at the particular time, the person intends that, after the unit is used as described in subparagraph (iii), the person will occupy it for the person's own use or the person will supply it by way of lease as a place of residence or lodging for an individual who is a relation, shareholder, member or partner of, or not dealing at arm's length with, the person, the person can reasonably expect that the unit will be the primary place of residence of the person or of that individual; or

(b) a prescribed residential unit of the person.

FOOTNOTES

1. XXXXX.
2. XXXXX.

2006/06/23 — RITS 45331 — Supply of Marketing/Promotion Campaign Services