30 March 2007 GST/HST Ruling 54331 - Tax status of 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.

Dear XXXXX:

Thank you for your letter XXXXX concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) and XXXXX eligibility to claim a new residential rental property rebate. We apologize for the delay in providing you with our response.

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

Statement of Facts

Our understanding of the facts is as follows:

1. XXXXX (the "Operator") is an incorporated for profit company that currently maintains two separate operating divisions that consist of retirement homes and long-term health care facilities.

2. The Operator constructed and operates a long-term care facility in XXXXX. The Operator also constructed an addition to another long-term care facility that it operates in XXXXX, and an addition to a long-term care facility that it operates in XXXXX. The Operator is licensed by the XXXXX under the XXXXX Act XXXXX to operate these long-term care facilities (the "Facilities") as nursing homes XXXXX.

3. XXXXX regulates access to long-term care facilities. Further, the Operator is required to operate the Facilities in accordance with policies, procedures and manuals published by the XXXXX.

4. In addition to accommodation, residents XXXXX of the Facilities receive nursing and personal care under the direction or supervision of qualified medical and nursing care staff or other personal and supervisory care according to the individual requirements of the residents.

5. The Operator also assists residents of the Facilities with daily living and provides residents with social, recreational and other related services to meet the psycho-social needs of the residents. The Operator also provides meals to all residents of the Facilities

6. Residents of the Facilities have limited physical/mental capacity for self-supervision and self-care.

7. The Operator is not able to supply strictly accommodation or personal care services. All residents of the Facilities receive the services discussed above to the extent that the services are necessary.

8. XXXXX Act indicates the maximum amount that the Operator can charge a resident in respect of various types of accommodations XXXXX. The XXXXX pays an operating subsidy to the Operator to assist in defraying the maintenance and operating costs incurred or to be incurred by the Operator in providing accommodation, care, services, programs and goods to the residents of the Facilities.

9. The Operator specifically assigns rooms to its residents and does not possess the authority to move a resident. The authority must come from either the resident or the person who has power of attorney over the resident.

10. The Operator requires a minimum payment of one month's rent from its residents. The intention is that residents will remain at one of the Facilities for a minimum of a year.

11. The Operator has paid GST on all contractor invoices relating to the construction of, and additions to, the Facilities.

12. An individual wishing to live at one of the Facilities must complete an application for admittance to a nursing home. A XXXXX reviews the application and determines the individual's eligibility for admission. The Operator is not permitted to admit individuals who have not met the eligibility criteria or who have not successfully applied for admittance to a nursing home through a XXXXX.

13. The determination as to whether the eligibility criteria are met involves an assessment of an individual made by a health care practitioner relating to the individual's impairment or incapacity and/or assessment of information relating to the individual's requirements for medical treatment, health care or other personal care. Admissions occur on a priority and chronological basis.

14. The XXXXX requires that a facility-specific written admission contract or residency agreement between the Operator and the resident delineate the accommodation, care, services, programs and goods that will be provided to the resident and the obligations of the resident with respect to their responsibilities and payment for service.

15. Residents of a Facility are generally in varying needs of assistance with activities of daily living, e.g., bathing, dressing and personal hygiene. The Operator is required to develop a personalized plan of care that meets each individual resident's requirements, that is subject to revision as a resident's needs change. The plan must clearly describe the care to be given to the resident including treatments, diet and medications to be given, the assistance with the activities of daily living to be provided and the safety and security precautions to be taken with respect to the resident.

16. The Operator must ensure that 24-hour nursing service is available in a Facility. The XXXXX has established requirements with respect to staffing, such as a medical director (physician), director of nurses (registered nurse), etc. Nursing stations must be located on each floor of a Facility. The list of procedures and services to be provided at a Facility as part of the nursing and personal care services are extensive.

Ruling Requested

You would like to know whether the Operator is eligible to claim a new residential rental property rebate (the "NRRP rebate") pursuant to section 256.2 in respect of the Facilities?

Ruling Given

Based on the facts set out above, we rule that the Operator is not eligible to claim the NRRP rebate in respect of the Facilities.

This ruling is subject to the qualifications in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service. We are bound by this ruling provided that none of the above issues are currently under audit, objection, or appeal, that no future changes to the ETA, regulations or our interpretative policy affect its validity, and all relevant facts and transactions have been fully disclosed.

Explanation

A person who begins construction of a residential complex or an addition to a multiple unit residential complex after February 27, 2000, will qualify for the NRRP rebate if all the conditions in section 256.2 are met.

One of the conditions that must be met for the NRRP rebate is set out in subparagraph 256.2(3)(a)(ii). To meet this condition, the Operator must make a supply of a residential unit in a residential complex by way of lease, licence or similar arrangement where the supply is exempt under section 6 of Part I of Schedule V to the ETA. Further, that supply would have to result in the Operator being deemed to have made and received a taxable supply by way of sale of the complex under section 191.

In determining whether the Operator is making a supply that is exempt under section 6 of Part I of Schedule V to the ETA, it is first necessary to consider whether the Operator is making a single supply or multiple supplies. In that regard, policy statement P-077R2, Single and Multiple Supplies, provides assistance.

In our view, the context in which accommodation, meals, care and other services are provided to residents of the Facilities demonstrates that the Operator is making a single supply that is beyond that covered by the exemption in section 6 of Part I of Schedule V to the ETA.

Accommodation is a necessary aspect of the service that the Operator provides to the residents of the Facilities. However, it is clear from the facts provided that the purpose of being admitted to and lodged in the Facilities is to receive care and services. The accommodation, care and services are interconnected where each is an integral part of a composite whole.

Pursuant to the standards and criteria for resident care established by XXXXX, the Operator is required to enter into an admission contract that describes the accommodation, care, services, programs and goods that will be provided to a resident and the obligation of the resident with respect to their responsibilities and payment for service. The resident receives all of the care and services in return for the basic fee payable by the resident as provided in the admission contract and set out in the XXXXX policies and procedures. It is not possible for the Operator, at least in a nursing home scenario, to provide only accommodation to the exclusion of the other programs and services. The accommodation included in the basic care services provided by the Operator is an integral component of an overall supply of providing care, but is nonetheless only an element of that supply and that element is not the predominant element of the supply.

Since the Operator's supply to a resident is not a supply contemplated by section 6 of Part I of Schedule V to the ETA, at least one of the conditions for claiming the NRRP rebate is not met and a rebate eligibility does not arise.

If you require clarification with respect to any of the issues discussed in this letter, please call Mr. Marcel Boivin, Manager of the Real Property Unit directly at 613-954-3772.

Yours truly,

Béatrice Mulinda
Real Property Unit
Financial Institutions and Real Property Division
Excise and GST/HST Rulings Directorate

XXXXX

2007/03/30 — RITS 59629 — Services Provided to Residents of a Condominium Complex