13 July 2007 GST/HST Ruling 84087 - Federal printed book rebate

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 concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to an assignment fee in respect of the purchase of a condominium unit.

All legislative references are to the Excise Tax Act (ETA) and the regulations thereunder, unless otherwise specified.

Based on your letter and subsequent telephone conversations with our XXXXX Rulings Centre we understand the situation as follows:

1. Mr. B entered into a contract XXXXX to purchase a residential condominium unit, as defined in subsection 123(1) of the Excise Tax Act (the Act) for GST/HST purposes;

2. It was the intention of Mr. B to resell the condominium unit prior to the completion of its construction, which occurred on XXXXX;

3. On XXXXX, Mr. B assigned his contract to purchase the condominium unit to

Ms. F. Ms. F was to pay to Mr. B an assignment fee of $XXXXX on the completion date; and

4. On XXXXX, the condominium unit was XXXXX to XXXXX% complete and reasonably capable of being occupied as a place of residence. All of the units in the condominium complex were at the finishing stages.

Interpretation Requested

You requested an interpretation as to whether Ms. F is required to pay the GST on the $XXXXX assignment fee paid to Mr. B based on the information above.

Interpretation Given

Based on the information provided, we are pleased to provide you with the following interpretation in response to your query. Our XXXXX Rulings Centre has advised you that we could not issue a ruling without specific details of the transactions and copies of the agreement and you have acknowledge that what you required was an interpretation.

Subsection 123(1) of the Act defines a builder of a residential complex, which is also defined in subsection 123(1) of the Act and includes a residential condominium unit, to include a person who acquires an interest in the complex when the complex is under construction unless the only interest in the complex is a right to purchase the complex or an interest in it from a builder of the complex. A builder also includes a person who acquires an interest in the complex where the complex is not yet registered as a condominium or before it has been occupied by an individual as a place of residence or lodging for the primary purpose of making a supply of the complex, or an interest therein by way of sale.

However, a builder does not include a person described above who is an individual who acquires the complex or interest in it otherwise than in the course of business or an adventure or concern in the nature of trade.

Based on the information provided above, Mr. B is a builder for GST/HST purposes since he acquired the residential condominium unit that was to be constructed with a primary intention of its resale. Where no activities were undertaken with respect to the sale to Ms. F (other than those to merely facilitate the resale), the sale of the residential condominium unit by Mr. B would generally be considered as being made in the course of an adventure or concern in the nature of trade. Reference may be made to Appendix C, Business vs. adventure or concern in the nature of trade of GST/HST Memorandum 19.5, Land and Associated Real Property, which is available on our Web site, for additional information on this issue.

Mr. B's assignment of all his rights and obligations under the purchase and sale agreement for the residential condominium unit that he entered into on XXXXX, is a supply of an interest in the residential condominium unit, which is a supply of real property. A supply of real property, other than an exempt supply, is a supply made in the course of a commercial activity as defined in paragraph (c) of the definition of "commercial activity" in subsection 123(1) of the Act. As such, a supply made by way of sale of an interest in a residential condominium unit is a taxable supply unless the supply is an exempt supply under Schedule V to the Act. There are no provisions under the Act that would exempt the supply made by Mr. B to Ms. F under the above circumstances.

Therefore, Ms. F is required to pay GST/HST calculated on the value of the consideration for the supply of the interest in the residential condominium unit made by Mr. B. Based on the above information, the assignment fee of $XXXXX is included in the value of the consideration for this supply.

The foregoing comments represent our general views with respect to the subject matter of your request. These comments are not rulings and, in accordance with the guidelines set out in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service, do not bind the Canada Revenue Agency with respect to a particular situation. Future changes to the ETA, regulations, or our interpretative policy could affect this interpretation.

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-957-8222.

Yours truly,

Francine Ménard
Real Property Unit
Financial Institutions and Real Property Division
Excise and GST/HST Rulings Directorate

2007/07/24 — RITS 84447 — [Application of the GST/HST to the Commission Received on the Sale of Limited Partnership Units]