Telephone #: (613) 954-8585
Fax #: (613) 990-1233
XXXXX File #: 11680-1
XXXXX s. 142
XXXXX ss. 136(1), 165(1), 221(1), 228(2)
XXXXX June 3, 1996
Dear XXXXX
I refer to your facsimile messages of March 8, 1995, May 12, 1995, July 17, 1995, August 29, 1995, and April 22, 1996, your letter of June 7, 1995, my interim letter of July 6, 1995, Mr. Garry Ryhorchuk's facsimile message to you dated August 14, 1995, previous telephone conversations, and the meeting in XXXXX on February 15, 1996, concerning the application of the Goods and Services Tax (GST) to the supply of resort points by XXXXX[.] As you are aware, the Honourable Paul Martin, Minister of Finance, tabled a Notice of Ways and Means Motion to amend the Excise Tax Act (Act) on April 23, 1996. Therefore, a ruling is issued to cover transactions which are not affected by the Notice of Ways and Means Motion and an interpretation is issued to cover those transactions which are affected by the Notice of Ways and Means Motion.
We assume that none of the issues herein is being considered by a Revenue Canada Tax Services Office in connection with a GST return already filed and none of the issues is under objection or appeal.
Our understanding of the facts and the transactions is as follows:
Statement of Facts
1. XXXXX is a resort developer based in XXXXX. XXXXX has developed, or is developing, resort properties in XXXXX XXXXX in Canada, and XXXXX[.]
2. XXXXX is registered for GST purposes.
4. XXXXX carries on the business of, inter alia, construction of residential condominium units for sale through resort points.
5. XXXXX is registered for GST purposes.
6. XXXXX has incorporated the XXXXX, which is a XXXXX non-profit, non-stock corporation (the Club). As resort properties are developed, XXXXX will transfer title to the properties to a trustee who will hold the same in trust for the Club and its members. In exchange, the Club will give XXXXX resort points. The resort points are created and issued by the Club. XXXXX will sell the resort points to members of the public.
7. On February 15, 1996, there were XXXXX members in the Club.
8. The Club is registered for GST purposes.
9. In your letter of June 7, 1995, and during the meeting on February 15, 1996, representatives of XXXXX and XXXXX advised that the resort points currently being sold only relate to properties in XXXXX[.] The resort points, at some future date, will also relate to properties in XXXXX (when those properties become available).
10. The purchaser of the points (who may be a Canadian or XXXXX resident, or resident elsewhere in the world), upon redeeming the points, is entitled to stay in any one of the resorts in which the Club owns units. Currently all resorts in which the Club owns units are located in Canada.
11. A person must initially purchase a minimum of XXXXX resort points. As of February 15, 1996, the cost of a resort point is XXXXX[.] The minimum initial cost to a person is, therefore, XXXXX may, however, increase, decrease, bonus or discount the purchase price for resort points at its absolute discretion.
12. Persons wishing to purchase additional resort points must purchase a minimum of XXXXX points provided there are still unsold points.
13. Generally, a person can use a particular resort point once per year. However, not all resort points have to be used at the same time. For example, if a person owns enough points to reserve resort accommodation for two weeks, that person may choose to use a portion of his or her points to reserve a week's accommodation in XXXXX during the summer and use the remaining points to reserve accommodation in XXXXX in the winter.
14. The number of resort points required to reserve accommodation depends upon the season. There are currently XXXXX[.]
15. The right to use points in a year expires at the end of that year unless the points are "banked". Unused points may be banked for use in the following year. For example, if a person owns sufficient resort points for one week of accommodation per year, he or she may bank points so that in the subsequent year he or she will have enough points for two weeks of accommodation.
16. A person is entitled to use resort points to reserve exclusive use of any one of the resort properties owned by the Club at any time in the year subject to:
• the number of resort points purchased by the person;
• the number of resort points previously used by the person in that year, and
• any prior reservations of specific resort accommodations by other point owners.
Ruling Requested
Supplies of the resort points are deemed, under the provisions of section 136 of the Excise Tax Act, to be supplies of real property. Pursuant to section 133 of the Act, these supplies are deemed to be made at the time the resort points are sold to the purchasers. The resorts are to be treated as residential complexes. As a result, supplies resort of points are exempt supplies. The GST at 7% will be payable on the units in the Canadian resorts on a self-assessment basis at the time of acquisition by the Club.
Ruling Given
1. Based on the facts (and the transactions contemplated set out above), we rule that the supply of resort points by XXXXX is a supply of intangible personal property.
2. The provisions of subsection 136(1) are not applicable because the supply of resort points is not considered to be a supply of a right to use real property by way of lease, licence or similar arrangement.
3. Resort Points supplied to a Resident
The supply of the resort points is deemed to be made in Canada under the provisions of subparagraph 142(1)(c)(i) — the supply is to a resident and the intangible personal property may be used in Canada. As the recipient of a taxable supply made in Canada, subsection 165(1) of the Act requires the resident to pay the GST at the rate of 7%. Subsection 221(1) of the Act requires XXXXX to collect the tax and subsection 228(2) of the Act requires XXXXX to remit the tax.
4. Resort Points supplied to a Registered Non-resident
The supply of the resort points is deemed to be made in Canada under the provisions of subparagraph 142(1)(c)(i) — the supply is to a registered person and the intangible personal property may be used in Canada. As the recipient of a taxable supply made in Canada, subsection 165(1) requires the non-resident to pay the GST at the rate of 7%. Subsection 221(1) requires XXXXX to collect the tax and subsection 228(2) requires XXXXX to remit the tax.
5. Resort Points supplied to an Unregistered Non-resident - Canadian Locations only
The supply of the resort points is deemed to be made in Canada under the provisions of subparagraph 142(1)(c)(ii) — the supply of the intangible personal property relates to real property situated in Canada. As the recipient of a taxable supply made in Canada, subsection 165(1) requires the non-resident to pay the GST at the rate of 7%. Subsection 221(1) requires XXXXX to collect the tax and subsection 228(2) requires XXXXX to remit the tax.
6. Resort Points supplied to an Unregistered Non-Resident - Canadian and Foreign Locations
(a) The supply of the resort points will be considered to be made in Canada when the non-resident purchases the points in Canada (i.e., the contract is concluded in Canada). As the recipient of a taxable supply made in Canada, subsection 165(1) requires the non-resident to pay the GST at the rate of 7%. Subsection 221(1) requires XXXXX to collect the tax and subsection 228(2) requires XXXXX to remit the tax.
(b) The supply of the resort points will be considered to be made outside Canada and not subject to the tax under Division II if the non-resident purchases the points outside Canada (i.e., the contract is concluded outside Canada).
This ruling is subject to the general limitations and qualifications outlined in Section 1.4 of the GST Memoranda Series. We are bound by this ruling provided that none of the above issues is currently under audit, objection or appeal, there are no relevant changes in the future to the Act, and you have fully described all necessary facts and transactions for which you requested a ruling.
The proposed amendments to the Act contained in the Notice of Ways and Means Motion dated April 23, 1996, do not affects the rulings in 1 and 2 above, and do not appear to affect the rulings contained in 3, 4 and 5 above.
Interpretation Given
The proposed amendment to subparagraph 142(1)(c)(i) affects the ruling contained in 6 above. Effective April 24, 1996, the supply of resort points to an unregistered non-resident, where the resort points relate to Canadian and foreign locations, will be deemed to be made in Canada because they may be used in whole or in part in Canada. As the recipient of a taxable supply made in Canada, subsection 165(1) requires the non-resident to pay the GST at the rate of 7%. Subsection 221(1) requires XXXXX to collect the tax and subsection 228(2) requires XXXXX to remit the tax.
The foregoing comments represent our general views with respect to the proposed amendments to the Act relating to the subject matter of your letters. These comments are not rulings and, in accordance with the guidelines set out in Section 1.4 of the GST Memoranda Series, do not bind the Department with respect to a particular situation.
If you have any questions, please contact Mr. Ryhorchuk at (613) 952-6743, Mr. Randy Nanner at (613) 952-8810 or Mr. John Bain at (613) 954-3772.
Yours sincerely,
H.L. Jones
Director
General Applications Division
GST Rulings and Interpretations
Policy and Legislation Branch
| c.c.: |
R. Nanner GAD #: 2022(GEN)
G. Ryhorchuk GAD #: 2211(GEN)
S. Bernier GAD #: 2907(GEN)
J. Bain
XXXXX |
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