22 November 1996 GST/HST Interpretation 11870-4-2[1] - Primary Place of Residence / New Housing Rebate

                                                                        November 22, 1996

Dear XXXXX

hank you for your E-mail letter wherein you request information pertaining to the Goods and Services Tax (GST) New Housing Rebate as it applies to residences used as a primary place of residence after a few years of use as a vacation home. We apologize for the delay in responding.

Our understanding of the facts is as follows:

Statement of Facts

1. Scenario One

An individual builds a single unit residential complex (SURC) which he calls a "cabin" in the XXXXX and states that he intends to use it as his primary place of residence in two years upon his retirement. He currently uses his cabin as a recreational property.

2. Scenario Two

Same as Scenario One, except the individual intends to retire in 10 years.

3. Scenario Three

Same as Scenario One , except the SURC is not built but purchased new by the individual.

Issues

1. Does the individual qualify for a rebate under section 256 in scenarios 1 and 2? If yes, at which point in time?

2. Does the individual qualify for a rebate under section 254 in scenario 3?

GST Treatment

1. Scenarios One and Two

Section 256 requires that the individual constructs the complex "for use as the primary place of residence of the individual ...". In both scenarios, the individual uses the complex as a vacation home for two or ten years, thereby showing clearly his intention to use the complex immediately upon completion as a vacation home or secondary residence, while another residence is used as a primary place of residence. The requirement "constructs ... for use as the primary residence ..." does not allow for an intervening other use, between the construction and the use as a primary place of residence.

In either scenario, the individual does not qualify for the rebate under section 256.

2. Scenario Three

Similarly, section 254 requires that the individual "is acquiring the complex or unit for use as a primary place of residence ...". As in the two first scenarios, this requirement does not allow for an intervening other use between the time of acquisition of the complex (under an agreement of purchase and sale) and the actual use as a primary place of residence. As a consequence, the individual no longer qualifies for the rebate under section 254 after he has used the complex as a vacation house.

Should you have any further questions or require clarification, please do not hesitate to call me at 952-9587.

Yours truly,

Bao Tran
Policy Officer
Real Property
Financial Institutions and Real Property
GST Rulings and Interpretations

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