30 March 2007 GST/HST Ruling 59629 - New Residential Rental Property 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 property and services provided to residents of XXXXX (hereafter, "the Condominium"). 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

We understand the following:

1. The Condominium is located at XXXXX and is legally described as XXXXX. The Condominium was designed and is used as a residence for seniors.

2. XXXXX (hereafter, "the Corporation") was created by the registration of a declaration (hereafter, "the Declaration") in respect of the Condominium, as set out in the XXXXX.

3. The Condominium is a "condominium complex" as defined in subsection 123(1) and contains XXXXX residential condominium units. Title to each of these units has passed to an owner under a purchase and sale agreement. The Condominium also contains XXXXX units (hereafter "the Centre") that include a library, lounge, fitness facility, swimming pool, activity rooms and staff offices. You have indicated that XXXXX (hereafter, "XXXXX Ltd.") owns the Centre. The Centre is not a common area of the Condominium and as such, owners of residential condominium units in the Condominium (hereafter, "Residents") do not own an undivided interest in the Centre. You have also indicated that XXXXX Ltd. has leased the Centre to XXXXX (hereafter, "Communities"), which is a wholly owned subsidiary of XXXXX Ltd.

4. Pursuant to the Declaration, each Resident must pay to the Corporation a monthly fee. This fee is equal the Resident's proportionate share, as set out in XXXXX the Declaration, of the "Common Expenses" set out in XXXXX the Declaration, such as:

(a) building maintenance,

(b) building repairs,

(c) garbage removal,

(d) snow removal and landscaping, and

(e) utilities.

5. A separate monthly fee is charged by the Corporation to a Resident equal to the Resident's proportionate share, as set out in XXXXX the Declaration, in respect of the "Common Expenses" set out in XXXXX the Declaration. This fee is for the Basic Services Package.

6. The Basic Services Package is set out in XXXXX the Condominium Services Agreement. The property and services included in the Basic Services Package are as follows:

(a) an on site building manager,

(b) monitoring of fire, security and emergency call systems and on site personnel with emergency training to respond to security and health emergency calls at all times,

(c) use of the Centre,

(d) daily reception and concierge services,

(e) certain health and wellness information, consulting and counselling services,

(f) access to regularly scheduled cultural, educational, recreational and social programs,

(g) regularly scheduled XXXXX transportation to local shopping areas,

(h) in-unit services of 1 hour per month for any combination of cleaning, dusting, vacuuming or laundry,

(i) home handyman services for in-unit emergency repairs, ^[xix]footnote 1

(j) daily lunch and dinner available at the Centre, valued at up to $XXXXX per month, and

(k) use of the XXXXX, a separate building situated on the same property as the Condominium.

7. Under XXXXX the Declaration, it is mandatory for the Corporation to make the Basic Services Package available to all Residents.

8. The Corporation has contracted with Communities to have the latter be the exclusive provider of the Basic Services Package to the Residents. The provisions of the contract are set out in the Condominium Services Agreement (hereafter, "the Agreement"), which, in addition to the provision of the Basic Services Package, includes the following:

(a) Communities is entitled to make available to the Residents, at the Resident's option, additional services (hereafter, "Additional Services") beyond the Basic Services Package. The Additional Services are contracted for directly between Communities and a Resident, are billed to the Resident by Communities and are payable by that Resident. Such amounts do not form part of the Common Expenses for which the Resident pays the Corporation. Communities is solely responsible for determining the nature and level of any such Additional Services provided.

(b) The Corporation agrees to pay Communities $XXXXX per month for the provision of the Basic Services Package to the Residents. This amount remains the same regardless of the number of units in the Condominium that are occupied by Residents from time to time.

9. With respect to the Additional Services, you have enclosed five agreements that outline the Additional Services Packages that Communities makes available to the Residents. The details of each Package are as follows:

(a) XXXXX

•   Daily lunch and dinner meals in the dining room are available at $XXXXX per month;

•   Assistance with acts of daily living (up to XXXXX minutes of assistance is available per day) and an escort to the dining room and activities are available at $XXXXX per month;

•   Medication supervision/ordering and the administration of medication by registered staff is available at $XXXXX per month.

(b) XXXXX

•   Daily lunch and dinner meals in the dining room are available at $XXXXX per month;

•   Weekly assistance with a hydrotherapy bath is available at $XXXXX per month;

•   Medication supervision/ordering and the administration of medication by registered staff is available at $XXXXX per month.

(c) XXXXX

•   Daily lunch in the dining room is available at $XXXXX per month;

•   Bi-weekly laundering of bed linens and towels is available at $XXXXX per month;

•   Medication supervision/ordering by registered staff is available at $XXXXX per month.

(d) Medication Ordering/Administration Service

•   Medication ordering and administration by registered staff up to four times daily is available at $XXXXX per month.

(e) Full Meal Plan

•   Two meals served daily in the dining room are available at $XXXXX per month.

10. It is our understanding that no substitutions are available within each of the Additional Services Packages and that the cost to a Resident remains the same regardless of whether any particular element is actually provided to a Resident. For example, a Resident who acquires the XXXXX package cannot substitute another meal each day instead of receiving the medication services and if the Resident does not attend one of the scheduled meals, there is no credit allowed to the Resident.

11. Communities and a Resident also enter into an Owner's Services Agreement (identified in the documents submitted as XXXXX an Agreement for Purchase and Sale). The first paragraph of that agreement provides that the agreement is suspended as long as the Condominium Services Agreement is in full force and effect ^[xx]footnote 2. If the Condominium Services Agreement ceases to have effect (for any reason other than Communities ceasing to be a lessee of the Centre), the provisions of the Owner's Services Agreement become enforceable.

The provisions of the Owner's Services Agreement include:

(a) The Resident retains Communities to provide the Basic Services Package as long as the Resident has title to a residential condominium unit in the Condominium.

(b) Communities is entitled to make available to the Resident the Additional Services, which are contracted for directly between the Resident and Communities, and the fees for which are billed to, and payable by, the Resident.

(c) In the event that the Resident does not pay to the Corporation that portion of the Common Expenses that relates to the Basic Services Package, the Resident agrees to pay a set amount to Communities in respect of the Basic Services Package that the Resident receives.

12. Residents may receive certain medical and nursing services in their unit. No further details were provided as to the nature of the services.

13. The Condominium is not a "health care facility" as that phrase is defined in section 1 of Part II of Schedule V to the ETA ^[xxi]footnote 3

14. Neither the Corporation nor Communities is a "government" or "municipality" as those terms are defined in subsection 123(1). Neither a government, nor a municipality, nor an organization administering a government or municipal program in respect of homemaker services pays an amount to any person in respect of the housekeeping services supplied by the Corporation or Communities to a Resident.

Ruling Requested

You would like confirmation that GST applies in the following manner:

1. GST does not apply to the supplies of property and services made by the Corporation to Residents in respect of the Common Expenses, other than the Basic Services Package, as the supplies are exempt under section 13 of Part I of Schedule V to the ETA. The Corporation will be responsible for the payment of the GST payable in respect of property and services acquired by the Corporation to provide these supplies of property and services to the Residents.

2. The supplies of the following property and services made by the Corporation to the Residents under the Basic Services Package are exempt under section 13 of Part I of Schedule V to the ETA:

(a) on-site management and services personnel who provide emergency and health monitoring;

(b) concierge and reception services;

(c) use of the Centre;

(d) housekeeping services, and

(e) emergency repair services.

3. The following services, listed in the Basic Services Package, are not exempt under section 13 of Part I of Schedule V to the ETA and are each a separate, taxable supply made by the Corporation:

(a) nutritional and medical counselling,

(b) scheduling of in-suite care services,

(c) social and educational programs, and

(d) transportation to shopping centres.

4. Each element of each of the Additional Services Packages is a separate supply and unless an exemption in section 6, 8, 9, or 10 of Part II of Schedule V to the ETA applies, is a taxable supply.

5. The supply of certain medical and nursing services received in a residential condominium unit in the Condominium by a Resident is exempt regardless of who makes the supply.

6. The Condominium is neither a nursing home nor a long-term care facility. Exemptions in sections 2, 3, 6, 7.1 or 11 of Part II of Schedule V to the ETA that may apply when the supply is made by or to the operator of a health care facility, or in a health care facility, do not apply in the circumstances described above.

7. The supply of housekeeping services by Communities is not exempt under section 13 of Part II of Schedule V to the ETA.

8. The supply of any meal to a Resident is not exempt under section 6.2 of Part I of Schedule V to the ETA.

Ruling Given

Based on the facts set out above, we rule that:

1. The property and services specifically identified in paragraph 4 of the Statement of Facts are separate supplies made by the Corporation to the Residents that are not incidental to each other and are exempt under section 13 of Part I of Schedule V to the ETA. The Corporation is required to pay the tax payable on any taxable supplies acquired by the Corporation from a GST/HST registrant to make the supplies identified in paragraph 4 to the Residents.

2. The following are separate supplies made by the Corporation to a Resident that are not incidental to each other and are exempt under section 13 of Part I of Schedule V to the ETA:

(a) an on site building manager,

(b) monitoring of fire, security and emergency call systems and on site personnel with emergency training to respond to security and health emergency calls at all times,

(c) daily reception and concierge services,

(d) use of the Centre,

(e) in-unit services of 1 hour per month for any combination of cleaning, dusting, vacuuming or laundry, and

(f) home handyman services for in-unit emergency repairs.

3. The following are separate supplies made by the Corporation to a Resident that are not incidental to each other and are not exempt under section 13 of Part I of Schedule V to the ETA:

(a) certain health and wellness information, consulting and counselling services,

(b) regularly scheduled transportation to local shopping areas,

(c) daily lunch and dinner available at the Centre,

(d) use of the XXXXX, and

(e) access to regularly scheduled cultural, educational, recreational and social programs.

4. The supply of each property and service in each of the Additional Services Packages is a separate supply that is not incidental to another supply and not exempt under section 13 of Part I of Schedule V to the ETA and, unless an exemption in section 6, 8, 9 or 10 of Part II of Schedule V to the ETA applies, is a taxable supply. ^[xxii]footnote 4

5. A supply of a nursing service made by Communities to a Resident that is rendered by a registered nurse, a registered nursing assistant, a licenced or registered practical nurse or a registered psychiatric nurse is exempt under section 6 of Part II of Schedule V to the ETA provided the service is rendered to the Resident in the Resident's place of residence or the service is a private-duty nursing service.

6. The Condominium is not a "health care facility" as that term is defined in section 1 of Part II of Schedule V to the ETA. Exemptions in sections 2, 3, 7.1 or 11 of Part II of Schedule V to the ETA do not apply to any supply made by or to the Condominium.

7. The supply of housekeeping services by either the Corporation or Communities is not exempt under section 13 of Part II of Schedule V to the ETA.

8. The supply of a meal to a Resident by the Corporation or Communities is not exempt under section 6.2 of Part I of Schedule V to the ETA.

These rulings are subject to the qualifications in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service. We are bound by these rulings 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 their validity, and all relevant facts and transactions have been fully disclosed.

Explanation

With respect to Ruling Request 3, section 13 of Part I of Schedule V to the ETA exempts:

A supply of property or a service, made by a corporation or syndicate established upon the registration, under the laws of a province, of a condominium or strata lot plan or description or similar plan or description, to the owner or lessee of a residential condominium unit described by that plan or description, if the property or service relates to the occupancy or use of the unit.

The property and services listed in Ruling 3 are not considered to relate to the occupancy or use of a residential condominium unit in the Condominium and accordingly, are not exempt under section 13 of Part I of Schedule V to the ETA.

However, if the Corporation is a "non-profit organization" as that term is defined in subsection 123(1), the supplies in Ruling 3 may be exempt under Part VI of Schedule V to the ETA. We were not provided with sufficient information to determine whether any exemptions in Part VI apply, but have enclosed the guide RC4081, GST/HST Information For Non-Profit Organizations, for further information in this regard. If, after reviewing the guide, you require further assistance in determining whether exemptions for supplies of property or services by a non-profit organization are exempt, we invite you to contact your local GST/HST Rulings Centre at:

XXXXX

Additional Information

If any of the property or services of the Basic Services Package are supplied by Communities to Residents (as is a possibility given the provisions of the Owner's Services Agreement), none of the supplies will be exempt under section 13 of Part I of Schedule V to the ETA, as Communities is not a corporation or syndicate established upon the registration, under the laws of a province, of a condominium or strata lot plan or description or similar plan or description.

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-954-4393.

Yours truly,

Hugh Dorward
Real Property Unit
Financial Institutions and Real Property Division
Excise and GST/HST Rulings Directorate

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