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XXXXX
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File: 11870-2, 11950-3,
XXXXX 11783-2/123(1)
XXXXX s. 190, 254, ss. 123(1), 136(2),
XXXXX 167(1), V/I/2, V/I/9
XXXXX
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Subject:
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GST APPLICATION RULING
Sale of Bed & Breakfast
XXXXX XXXXX XXXXX
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Dear XXXXX
Generally, as XXXXX stated in his explanation to XXXXX sales of used residential complexes are exempt from GST under section 2 of Part I of Schedule V to the Excise Tax Act ("Act").
However, specifically excluded from the definition of "residential complex" under subsection 123(1) of the Act is any part of a building that includes a hotel, motel, an inn, a boarding house, a lodging house or other similar premises where all or substantially all (90% or more) of the rooms that are rented out are for periods of less than sixty days. Therefore, any portion of the house that was used in the bed and breakfast operation is excluded from the definition of residential complex and is properly subject to GST.
Subsection 136(2) of the Act provides that where a supply of real property includes a residential complex and other real property (i.e. commercial use), the provision of the residential complex is treated as a separate supply. Accordingly, the sale of the residential portion of the property will be exempt from GST pursuant to section 2 of Part I of Schedule V to the Act, and the portion used in commercial activities as the bed and breakfast will be subject to GST. The value of the property should be apportioned in a fair and reasonable manner for purposes of calculating the GST due on the sale.
As well, while the purchaser, if a registrant, may be required to remit the GST by using the form GST 60 (The Goods and Services Tax Return for the acquisition of Real Property), if the purchaser decides to continue the bed & breakfast business, XXXXX and the purchaser may be entitled to file the election under subsections 167(1) and (1.1) of the Act. Policy statement P-188, The Supply of a Business or Part of a Business for the Purpose of the Election under subsection 167(1), can be used to determine the eligibility for the election.
XXXXX. If you require any further information, please do not hesitate to contact Mr. Karl P. Marten of my staff at (613) 954-4393.
John Sitka
A/Director
Financial Institutions & Real Property Division
GST Rulings & Interpretations Directorate
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